Coinbase reported weaker-than-expected results in the first quarter due to falling crypto prices, weighing on spot trading of digital assets, one of the company’s main revenue drivers.
Here’s how to do it coinbase Based on a survey of analysts by LSEG, results for the quarter ended March 31 compared to Wall Street expectations:
Earnings per share: $1.49 loss, expected 27 cents Earnings: $1.41 billion, expected $1.52 billion
Coinbase stock fell 4% in after-hours trading.
The company, which operates the largest U.S. cryptocurrency market, posted trading revenue of $755.8 million, compared to analysts’ expectations of $805.2 million. Subscription revenue was $583.5 million compared to an estimated $619.3 million.
sudden deceleration
Investors were bracing for a sharp slowdown in trading volumes following a slump in crypto prices at the beginning of the year. Bitcoin It increased by 12% in March, but fell by 22% in the first quarter.
Coinbase’s net income is often distorted by accounting rules that require it to value its large holdings of cryptocurrencies based on quarter-end prices, causing wide fluctuations in reported revenue even when no assets are sold.
Coinbase, primarily known for its crypto trading platform, is looking to diversify its revenue streams through subscription and services businesses, including revenue from stablecoins and staking.
Stablecoin revenue totaled $305 million, up from $274 million last year, due to increased USDC stablecoin market capitalization and record average USDC held in Coinbase products.
The days of easy crypto moonshots and hype-driven returns are fading as exchanges increasingly move towards more diversified trading revenue derived from prediction markets and tokenized real-world assets, rather than relying on more speculative investments.
“We’re trying to diversify what people can trade so that even as markets change and different behaviors change, we’re always offering people what they want to trade,” Coinbase Chief Financial Officer Alecia Haas told CNBC. “That diversification will help reduce some of the volatility seen in pure crypto-only trading.”
Investors are looking for signs that Coinbase can still turn a profit despite a pullback in crypto trading. Crucial to that effort is Coinbase’s success in ramping up its non-trading business to offset the cyclicality of trading fees during economic downturns.
Beyond cryptocurrencies
Although revenue and bottom line fell short of expectations, Coinbase achieved promising growth in its diverse services, including event contracts and support for trading crypto derivatives and tokenized real-world assets.
The company’s first quarter derivatives trading volume was approximately $4.2 billion, an increase of 169% from the same period last year. Despite the slump in crypto prices this year, the exchange has expanded its share in both spot and derivatives trading worldwide, reaching an all-time high of 8.6% in cryptocurrency trading volume market share.
Coinbase also projects that its prediction markets business will generate $100 million in annual revenue by the end of this year. The business unit was launched in late January in partnership with Kalsi.
The move to diversify away from cryptocurrencies underscores Coinbase’s efforts to create an “everything exchange.” The initiative was announced by CEO Brian Armstrong a year ago to reduce dependence on trading tokens such as Bitcoin, Ether and XRP.
Investors tuned in for an update on the trading platform’s margins and operating discipline during a call between analysts and Coinbase management at 5:30pm ET on Thursday, following Coinbase’s announcement this week that it would cut about 14% of its workforce, or 700 people. Coinbase noted that the job cuts are part of a broader AI-powered restructuring effort, citing the cryptocurrency downturn as a catalyst.
The layoffs confirmed Wall Street’s expectations that weak trading conditions could continue into the second quarter.
Read the full Coinbase shareholder slide here.
Correction: This article has been corrected to reflect that Coinbase’s CEO is Brian Armstrong. A previous version misspelled his name.
