Coinbase Q4 Revenue and Earnings Beat Expectations, but Transaction Volume Falls 12% From Q3

Crypto exchange Coinbase (COIN) reported fourth-quarter net revenue of $605 million, ahead of analyst estimates of $588 million, and up 5% from $590 million in the third quarter. Its adjusted loss of $2.46 per share for the quarter also beat estimates for a loss of $2.52 a share, according to FactSet. But its transaction volume fell 12% quarter over quarter to $322 million on lower overall trading volume.

Shares of Coinbase were up about 0.9% to $62.60 in after-hours trading Tuesday. Alongside the rise in bitcoin prices, Coinbase shares have risen significantly in 2023 so far, up 78%, but they are still down 67% over the last 12 months.

Subscription and service revenues, an area of focus by the company, grew 34% quarter over quarter to $283 million in Q4. Subscriptions and services accounted for nearly 50% of overall revenue in Q4, mostly thanks to interest income, which came in at $162.2 million.

Coinbase said in its shareholder letter that crypto markets have improved so far in Q1 compared to Q4, leading the company to generate $120 million in transaction revenue in January 2023. But the company cautioned investors not to extrapolate those results forward since last year showed quickly the market can change.

The company also said that it expects more crypto regulation in the coming year both in the U.S. and abroad, and it expects to be able to benefit from this. As evidence of progress, it pointed to the finalization of the European Union’s MiCA regulatory framework, as well as other countries such as Brazil, the U.K. and India that have drafted specific and clear legislation for regulating crypto. It criticized the U.S. for its “disjointed approach” to regulating crypto, but said it continues to work for more consistent and clearer crypto policy.

"Policy is my top priority this year," Coinbase CEO Brian Armstrong said during an earnings call with analysts, adding that he's been spending a lot of time in Washington, D.C. "There is a lot of excitement about the potential of this technology and there is a lot of desire for people to have this built here in America."

In recent weeks, regulatory actions by the U.S. government – including the Securities and Exchange Commission’s (SEC) shutdown of Kraken’s staking service in the U.S. as well as the Commission’s plan to sue Paxos for allegedly selling BUSD as an unregistered security – have generated uncertainty for Coinbase, which has its own retail staking business as well as a stablecoin, USDC, that it is a co-founder of along with Circle.

UPDATE (Feb. 21, 21:52 UTC): Updated headline and added information throughout.

UPDATE (Feb. 21, 22:43 UTC): Added additional comments from Coinbase about crypto regulation.

UPDATE (Feb. 21, 23:25 UTC): Added additional comments from Coinbase CEO Brian Armstrong.