Coinbase, the second-largest cryptocurrency exchange by trading volume, announced its Q3 2023 earnings report, surpassing revenue expectations. However, despite this positive news, the company’s stock experienced a 5.5% decline in after-hours trading due to underwhelming growth prospects.
Key Takeaway
Despite Coinbase’s Q3 revenue beating expectations, the company’s stock saw a decline due to concerns regarding its growth prospects. While trading revenues decreased, Coinbase’s interest-based incomes helped drive overall growth. These results highlight the evolving nature of the cryptocurrency market and emphasize the importance of diversified revenue streams for crypto exchanges.
Q3 Revenue and Financial Performance
In the third quarter of 2023, Coinbase generated a total revenue of $674 million, slightly down from $707.9 million in the previous quarter. The company’s net revenue stood at $623 million, a 6% decrease from Q2 2023 but an improvement from $576 million the previous year. Coinbase reported a minimal net loss of $2 million on a GAAP basis, equivalent to -$0.01 per share. Additionally, the company’s adjusted EBITDA result was $181 million.
Despite the recent crypto market upswing, analysts had conservative estimates for Coinbase’s earnings. Messari analysts projected a 7% decrease to $616 million, below the consensus expectation of $650 million. The Zacks-Consensus-Estimate anticipated revenue of $650.8 million and earnings per share of negative 54 cents.
Stock Performance and Market Capitalization
Prior to the release of its Q3 earnings, Coinbase’s stock had risen by an impressive 148% year-to-date. However, even with this significant rally in a bear market, the company’s stock value was still 27% lower than its 52-week high of $114.43.
Although the overall crypto market capitalization has grown by 62% since the beginning of the year to $1.28 trillion, Coinbase’s Q3 numbers did not reflect the same level of success. Despite the increased value of crypto assets and rising trading volume, the trading revenues at Coinbase declined.
Exploring Revenue Sources
While trading revenues saw a decline in Q3, Coinbase managed to post growth compared to the year-ago period due to interest-based incomes. The company’s subscription and services revenue, which had an initial estimate of “at least $300 million” in August, exceeded expectations with a final result of $334.4 million. Although this figure was slightly lower than the preceding quarter’s $335.4 million, it still demonstrated notable growth.
