Coinbase Q3 earnings fall short of analysts’ forecasts after drop in trading volume

Coinbase has released its Q3 earnings report showing a $1.31B revenue, less than the $1.57B analysts estimated.
Stock prices have been trading above $300 since October, but dropped 13 percent in extended trading following news of the earnings report.

Coinbase, the largest cryptocurrency exchange in the US by daily traded volume, has reported Q3 earnings that missed analysts’ revenue forecasts. The company had $1.62 earnings per share and revenue of $1.31 billion, in contrast to the $1.57 billion consensus estimate per Refinitiv.

Other than earnings, Coinbase said its monthly transacting users have dropped from 8.8 million in Q2 to 7.4 million in Q3. The figure is nonetheless, up from the 6.1 million reported a year ago. Trading volumes also dropped to $327 billion from Q2’s $462 billion. Bitcoin accounted for 19 percent of total trading volume, while Ethereum took up 22 percent. The remaining 59 percent resulted from other crypto assets, a 9 percent increase from Q2’s records.

Coinbase Q3 earnings report and stock reaction

Notably, much of the company’s wellbeing is linked to the performance of digital assets such as Bitcoin. With the May dip in crypto assets prices, Coinbase announced in August that it expected lower trading volumes and fewer monthly transacting users in Q3.

“As our year-to-date results have demonstrated, our business is volatile,” the company said in its shareholder letter.

Coinbase is not a quarter-to-quarter investment, but rather a long-term investment in the growth of the crypto-economy and our ability to serve users through our products and services. We encourage our investors to take this point of view.

Compared to the end of June, assets on the exchange have risen from $180 billion to $255 billion. 55 percent of this chunk comes from institutional investors and the rest from retail.

Net revenue, on the other hand, has more than quadrupled from a year before to $1.23 billion. However, it is down from $2 billion registered in Q2.

The earnings report was released after the bell on Tuesday when COIN stock closed at $357.39. During extended trading, shares dropped 13 percent to trade at $310.06, based on data from MarketWatch. In April, Coinbase became the very first crypto exchange to list its shares on the stock market. At the debut, prices were $381 per share, but this sank to $221 in July. The past month has, however, seen the stock rise above the $300 mark.

Developments and expectations for Q4

Coinbase had to scrape off plans to launch a crypto lending product in September after lawsuit threats by the SEC. In the same month, the company revealed plans to launch a non-fungible tokens (NFTs) marketplace. In October, the company allowed customers to directly deposit their paychecks into their exchange accounts. Additionally, Facebook – now Meta Platforms – recently announced hiring Coinbase to cater for its crypto wallet logistics.

For the present Q4, Coinbase says it expects an increase in retail monthly transacting users and total trading volume from Q3.

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