Coinbase Beats Analyst Estimates for Q2, but Transaction Revenue Falls

Coinbase (COIN) beat analyst estimates for the second quarter, reporting revenues of $708 million and adjusted earnings of a loss of $0.42, ahead of analyst estimates of revenues of $628 million and earnings per share of a loss of $0.76.

But transaction revenue came in at $327 million, compared to $375 million in the first quarter, while total trading volume fell to $92 billion, compared to $145 billion in the first quarter. The company said in its shareholder letter that the poor transaction revenue results “reflects multi-year lows in crypto volatility.” Interest income fell to $201 million from $241 million in Q1. Of that interest income in Q2, $151 million came from its holdings of USDC.

Regarding its Q3 outlook, Coinbase said it had generated roughly $110 million in transaction revenue in July, and said it expected Q3 subscription and services revenue, which came in at $335 million in the second quarter, to be at least $300 million in the third quarter.

Shares of Coinbase initially rose as much as 9% after the results were announced, but were recently trading down 1.4% to $89.48. Shares of Coinbase are up about 160% this year, while the price of bitcoin has risen more than 75% over the same time period.

“Q2 was a strong quarter for Coinbase as we executed well and showed resilience in a challenging environment,” said CEO Brian Armstrong in a statement to CoinDesk. “We’ve cut costs, are operating efficiently, and remain well-positioned to build the future of the crypto economy and help drive regulatory clarity.”

Regarding the results, Berenberg analyst Mark Palmer wrote in an email that "Coinbase’s revenue beat versus consensus estimates was due in large part to interest income and staking revenue, which are two areas of the company’s business that appear to be at risk going forward given the ongoing declines in USDC’s market capitalization and the regulatory challenges to its staking programs. Interest income from USDC was down 25% sequentially.

"At the same time," Palmer added, "management’s guidance for Coinbase’s current quarter was muted, and the company’s adjusted EBITDA print included a huge adjustment for stock-based compensation – an area that management had said it would look to reduce due to negative investor feedback.

Helene Braun contributed reporting for this story.

Read more: SEC Told Coinbase to Stop Trading in All Cryptos Except Bitcoin Before Suing: FT

UPDATE (Aug. 3 20:54 UTC): Added additional background and updated stock price move.

\UPDATE (Aug. 3 22:29 UTC): Added analyst comments.