Coinbase Outperforms Analyst Expectations in Q3 Despite Loss

Coinbase, the cryptocurrency exchange headquartered in San Francisco, has once again surpassed Wall Street’s financial forecasts, marking their third consecutive quarter of doing so this year. Despite posting a $2.2 million loss in the third quarter, Coinbase’s financial outcomes were more favorable than anticipated.

The company’s revenue for the quarter reached $674 million, against an anticipated $670 million by analysts, who had forecasted a loss of $0.70 per share. However, Coinbase recorded a loss of just $0.01 per share. Following the announcement, the exchange’s stock price, listed under the COIN ticker on Nasdaq, saw a 4% drop to $81 in after-hours trading.

This latest financial report indicates a significant improvement compared to the same period last year when Coinbase faced a steep $545 million loss. This downturn was attributed to decreased cryptocurrency values and a fall in transaction revenue on the platform. However, current trends suggest a renewed interest in cryptocurrencies, signaling a possible shift away from the recent downturn in the market, often referred to as the “Crypto Winter.”

Brian Armstrong, Coinbase’s CEO, in an earnings call, likened the evolution of blockchain companies to the early internet era, stating, “If we look back to the early years of the internet, the companies that ignored the noise and built for the future of the internet now stand as tech giants. The on-chain companies of today will be the tech giants of tomorrow.”

Coinbase’s financial success is also evident in their transaction revenue, which, although lower at $289 million in the third quarter compared to $327 million in the previous quarter, still reflects a robust performance. The firm attributed this to the growing anticipation for a spot Bitcoin ETF on Wall Street, with the recent surge in Bitcoin prices to around $35,000. Moreover, leading asset managers like BlackRock have selected Coinbase as a custodian in various spot Bitcoin ETF proposals.

The company, in its shareholder letter, expressed cautious optimism, advising against overly relying on the $105 million transaction revenue generated in October. Additionally, Coinbase underscored the potential of its newly launched Ethereum layer-2 network, Base, which already boasts $500 million in assets. This optimism is grounded in the belief that Base will significantly contribute to the company’s growth.

Coinbase’s business model has evolved, with a notable increase in income from subscriptions and services, including staking products and interests on USDC stablecoin reserves. In the latest quarter, the revenue from these sources slightly declined from $335 million to $334 million, yet it surpassed transaction revenue, positioning itself as the company’s leading revenue generator.

This week Coinbase also announced crypto future trading for its US customers.