Coinbase Q2: Trading Took a Beating, So Did the Stock 📉

Coinbase reported $1.22 billion in second-quarter revenue on Thursday, down 14% from the prior quarter and 19% year earlier, missing Wall Street expectations of $1.29 billion and producing a net loss of $359 million, or $1.36 per share. Shares of Coinbase (COIN) fell roughly 5% in after-hours trading and were lower by 6% before the next market open. Transaction revenue came in at $599 million against estimates of $628 million, while subscription and services revenue totaled $555 million, below the $565 million to $645 million range Coinbase had previously forecast and short of the $599 million consensus. Total crypto spot trading volume declined more than 20% from the previous quarter, the company said, as digital asset prices fell and market volatility reached multi-year lows.

Bitcoin ($BTC) was trading at $64,714.55 after falling roughly 14% during the quarter, while ether ($ETH) lost about 25%, dragging both volumes and volatility across spot markets. The company added 819 BTC to its balance sheet during the quarter, bringing total holdings to 17,211 BTC, an increase of 5% quarter-over-quarter. Coinbase ended the period with $8.6 billion in cash and cash equivalents and $10 billion in total available resources, and repurchased 814,000 Class A shares during the quarter, bringing year-to-date buybacks to nearly 7 million shares for $1.2 billion, with about $2 billion remaining under its repurchase authorization.

Coinbase highlighted several metrics it characterized as progress beyond spot trading. The platform said it captured a record 10.3% share of global crypto trading volume during the quarter, its third consecutive quarter of market share gains, and that 88% of net revenue came from sources other than Bitcoin spot trading, compared with 45% in the second quarter of 2020. Stablecoin revenue totaled $292 million, with average USDC held across Coinbase products reaching a record $20 billion, more than 30% of USDC in circulation at quarter-end. Prediction-market contracts and revenue grew 106% from the previous quarter and exceeded a $100 million annualized net revenue run rate. Coinbase said conditions for the automatic renewal in August of its commercial agreement with Circle were met. Average Borrow/Lend balances increased by more than $1 billion from a year earlier to $1.49 billion.

In a post on X, CEO Brian Armstrong pointed to growth in stablecoins, Base and prediction markets, citing the record trading-volume share. CFO Alesia Haas struck a more measured tone, saying crypto market conditions were challenging as industry spot trading volumes fell more than 20% and total crypto market capitalization declined by double digits, contributing to a 14% quarter-over-quarter decline in total revenue. She said subscription and services revenue missed its prior range because certain USDC-related commercial agreements closed later than expected and lower crypto asset prices reduced staking revenue.

Several Wall Street firms lowered estimates ahead of the print, and analysts broadly attributed the miss to weak crypto markets rather than execution issues. Cantor Fitzgerald called it "another soft quarter" driven by depressed crypto prices and weaker spot trading volumes, while Oppenheimer said the miss stemmed from broader market weakness rather than operational problems. Benchmark argued the headline numbers obscured progress in Coinbase's long-term diversification strategy, and William Blair said investors should view the post-earnings selloff as a buying opportunity. Coinbase guided to Q3 transaction revenue of approximately $130 million through July 26 and subscription and services revenue between $500 million and $580 million, and said it lowered its full-year expense outlook while extending a 14-quarter streak of positive adjusted EBITDA. The company did not provide full Q3 guidance figures in the materials cited.