Coinbase Q2 earnings exceed estimates: Here's what it means

Coinbase’s Q3 revenue beat expectations, but its shares fell as growth prospects underwhelmed

Coinbase, the second-largest crypto exchange by trading volume, released its Q3 2023 earnings on Thursday, giving shareholders and market participants an opportunity to see what’s going on under the hood. In response to the report, the company’s stock is down about 5.5% in after-hours trading.

In the third quarter of 2023, Coinbase generated $674 million in total revenue, down from $707.9 million in the previous quarter. The company’s net revenue was $623 million, down 6% from Q2 2023, but up from $576 million one year ago. The company’s net loss totaled a slim $2 million in the three-month period on a GAAP basis, worth –$0.01 per share. The company also reported an adjusted EBITDA result of $181 million.

Analysts were hesitant with estimates even amid a recent crypto market upswing. Messari analysts estimated Coinbase to report $616 million, a 7% decrease from the previous quarter, lower than the consensus expectation of $650 million.

The Zacks-Consensus-Estimate expected Coinbase to report $650.8 million in revenue and earnings per share of negative 54 cents per share, according to a report provided by Yahoo Finance.

Before its Q3 earnings were released, Coinbase’s stock had risen 148% year-to-date. While that’s a pretty large rally in a bear market, the value of Coinbase’s stock was still down 27% from the 52-week high of $114.43.

Overall crypto market capitalization has risen about 62% to $1.28 trillion since the beginning of the year and is up from $1 trillion one year ago. However, recent gains to the value of crypto assets and a constituent rise in trading volume did not mean that Coinbase’s Q3 numbers were impressive when we consider trade-based revenues.

In the third quarter, Coinbase generated $288.6 million worth of trading revenue, with $274.5 million coming from consumer activity and another $14.1 million from institutional traders. Those figures were down from $310 million and $17.1 million in the second quarter of 2023, and $346.1 million and $19.8 million, respectively, in the year-ago period.

If trading top line was down at Coinbase, how did the company manage to post growth compared to the year-ago period? The answer is: interest-based incomes.

Other revenue sources

Coinbase had an outlook of “at least $300 million” in August for its subscription and services revenue, and exceeded that estimate by $34 million in Q3 with a final result of $334.4 million. That figure was down slightly from the $335.4 million it reported in its sequentially preceding quarter.

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