Key Points
- Coinbase reported $1.5 billion in Q2 revenue, which missed Wall Street’s $1.59 billion estimate.
- COIN stock fell over 7% as weak trading volumes dragged earnings.
- Subscriptions and stablecoin revenue rose but failed to offset the falling transaction income.
Coinbase stock (COIN) took a massive hit after the company posted weaker-than-expected results for the year’s second quarter. While crypto prices climbed during the quarter, Coinbase struggled to convert that into higher trading activity and revenue.
The result resulted in a 7% drop in the stock price of COIN during after-hours trading. This happened amid caution around centralized crypto exchanges.
Coinbase Stock Drops on Weaker Trading Activity
Coinbase reported total revenue of $1.5 billion for Q2. This slightly increased from $1.45 billion in the same quarter last year. However, according to FactSet, it missed analysts’ expectations of $1.59 billion.
This difference in expectations versus reality shows the ongoing slowdown in speculative trading across crypto platforms during the quarter. Adjusted EBITDA reached $512 million, down from $596 million in Q2.
The 39% decline in transaction revenue was even more disturbing, as it fell to $764 million from the last quarter. This is despite Bitcoin and Ethereum hitting yearly highs during the same timeframe.
COIN Share Prices Drop Despite Net Income Jump
COIN price per share (EPS) for the quarter rose to $5.14, largely thanks to one-off investment gains. Net income soared to $1.43 billion, compared to just $36 million in the same period a year ago.
However, the company earned only $1.96 per share on an adjusted basis. This slightly beat expectations of $1.26 as reported by LSEG. However, that wasn’t enough to calm investor nerves as the crypto trading aspect of the business saw a substantial weakening.
The reaction was almost immediate. Coinbase shares fell by 7% in post-market trading and extended the ongoing volatility spell for the stock.
Crypto Trading Service of Coinbase Faces Headwinds
The real challenge, however, lies in the crypto trading service of Coinbase. Even though the company is still dominant among crypto retailers and institutional investors, activity levels have been soft so far.
For example, retail trading volume hit $43 billion. It is up 16% year-over-year. However, it was still below the expected $48 billion. The crypto market is cooling after a strong Q1. Many traders are cautiously approaching the market amid fears of the U.S. tariffs and interest rate decisions.
Another interesting aspect of this report is that Coinbase’s main competitor, Robinhood (HOOD), reported far better numbers. The platform processed $28.3 billion in crypto trading volume and beat its revenue targets. This further showed Coinbase’s struggle to hold its market share.
Subscription and Stablecoin Revenue Offers Some Relief
Not everything in Coinbase’s report was gloomy, though. The company’s subscriptions and services revenue climbed to $655.8 million, up 9% year-over-year. This includes income from staking, stablecoins, custody, and interest.
Notably, a massive portion of this came from stablecoins, especially USDC. Coinbase has a revenue-sharing agreement with Circle and earned $332.5 million from stablecoin-related revenue. This earnings report was up 38% year-over-year.
Overall, Circle’s high-profile IPO in June partly drove the stablecoin boom. Investors were interested in USDC and similar products, which gave Coinbase a slight lift in non-trading income.
Expansion Plans and New Products in the Pipeline
Despite the Q2 miss, Coinbase is pushing ahead with its growth plans. The company is expanding into other aspects like tokenized real-world assets, derivatives, prediction markets, and early-stage token sales.
These services will be rolled out to US users via the Coinbase app. In addition, Coinbase is still actively working on its Base layer-2 network. It is expanding its custody services for spot Bitcoin ETFs.
“In Q2, Coinbase made significant strides in bringing the financial system onchain,” the company stated in its earnings release.
