Coinbase Q2 earnings miss as trading revenue falls 22%

Coinbase Q2 earnings came in below Wall Street expectations, sending shares of Coinbase Global Inc. down more than 5% in extended trading. The crypto exchange reported lower revenue and a wider loss as weaker token prices and low volatility reduced trading activity, even while the company said its share of global crypto trading reached a record high.

For the quarter ended June 30, Coinbase posted revenue of $1.22 billion, down 19% from a year earlier. Analysts had expected $1.32 billion, according to Benzinga. The company reported an adjusted loss of 40 cents per share, compared with adjusted earnings of 12 cents per share a year earlier and analyst expectations for an 11-cent loss.

On a GAAP basis, Coinbase lost $359.5 million, or $1.36 per share. In the same quarter last year, it reported net income of $1.43 billion, or $5.14 per diluted share.

Why did Coinbase miss earnings?

The main drag was trading. Transaction revenue fell to $599 million, down 21% from the prior quarter and 22% from a year earlier. Consumer transaction revenue declined 20% to $452 million as consumer spot trading volume fell 24%. Institutional transaction revenue dropped 26% to $100 million.

The broader market did not help. Coinbase said total crypto spot trading volume fell 25% quarter over quarter, while total crypto market capitalization declined 11%. Bitcoin, Ether and Solana all posted double-digit price declines in the period.

Subscription and services revenue was less volatile, but still came in light. The segment produced $555 million, down 5% sequentially and below Coinbase’s May guidance range of $565 million to $645 million. It represented 48% of net revenue. Stablecoin revenue was $292 million, blockchain rewards generated $83 million, and interest and finance fee income contributed $66 million.

Chief Financial Officer Alesia Haas attributed the services miss to two factors: USDC deals on Coinbase’s platform closed later in the quarter than expected, and crypto asset prices fell more than anticipated, reducing staking revenue.

Market share improved, but assets fell

Coinbase said its share of global crypto trading volume rose to 10.3%, up from 9.1% in the first quarter. The company called it an all-time high and its third straight quarter of share gains. Prediction markets revenue more than doubled sequentially, rising 106% to more than $100 million on an annualized basis.

The USDC business also grew. Coinbase said average USDC held in its products reached $20 billion, up 44% from a year earlier and equal to more than 30% of USDC in circulation. The company said its revenue-sharing agreement with Circle Internet Group Inc. will renew automatically in August on unchanged terms because the required conditions have already been met.

Assets on the platform fell to $246 billion from $294 billion in the first quarter. Coinbase attributed most of that decline to bitcoin exchange-traded fund outflows, given its role as a primary custodian. Excluding ETFs, the company said native units on the platform increased sequentially.

Coinbase Chief Executive Brian Armstrong told investors the company’s revenue mix is becoming less dependent on bitcoin spot trading, saying 88% of net revenue now comes from other sources. Recent launches include stock trading, prediction markets, equity and pre-IPO perpetual futures, and Coinbase for Agents, a June product that lets AI assistants such as Claude and ChatGPT trade crypto and move money under user-set spending limits.

Costs are lower, guidance stays cautious

Adjusted expenses fell 9% from the prior quarter to $1.03 billion after Coinbase cut headcount by 14% in May. Staffing fell to 4,321 employees from 4,988 at the end of March, and the restructuring cost $52.4 million. Adjusted EBITDA was $208 million, down 59% from a year earlier, extending Coinbase’s run of positive adjusted EBITDA quarters to 14.

Coinbase repaid a $1.3 billion convertible note due June 1 and ended the quarter with $8.6 billion in cash and equivalents. The company has bought back nearly 7 million shares this year for $1.2 billion, with about $2 billion remaining under its authorization.

The third-quarter setup does not show a clear trading recovery. Coinbase said transaction revenue was about $130 million through July 26. It guided subscription and services revenue to $500 million to $580 million and lowered the midpoint of its full-year adjusted expense outlook by $100 million to a narrowed range of $4.2 billion to $4.45 billion.

Oppenheimer & Co. had already cut its second-quarter trading volume estimate by 13% on July 16, citing a crypto selloff tied to macro concerns and ETF outflows. Zacks Investment Research stock strategist David Bartosiak said in commentary provided to SiliconANGLE that Coinbase is becoming more of a diversified financial infrastructure company than a cyclical exchange, with possible growth tied to trading, payments, lending and stablecoins if crypto adoption broadens.

This story draws on original reporting from SiliconANGLE.