Coinbase Stock Drops as Crypto Trading Slowdown Hits Q3 Earnings

Coinbase on Wednesday reported weaker-than-expected Q3 earnings, affected by subdued trading activity in the cryptocurrency market. Following the news, the exchange’s stock dropped 4.8% in after-hours trading to $201.50 per share.

The crypto exchange reported $1.2b in quarterly total revenue, missing FactSet’s $1.26b forecast. Earnings per share reached $0.28, falling short of the projected $0.45. Coinbase’s adjusted EBITDA was also lower than expected, at $449m compared to $469.2m.

Transaction revenue dropped 27% from the previous quarter to $573m. Subscription and services revenue fell 7% quarter-over-quarter to $556m, mainly due to declining average crypto asset prices.

On a positive note, stablecoin revenue rose 3% quarter-over-quarter, reaching $247m. This increase was largely driven by higher average USDC balances on the platform.

Our Q3 2024 earnings report is now live onchain.

Mint the latest $COIN Earnings NFT to celebrate another quarter's worth of building.

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— Coinbase 🛡️ (@coinbase) October 30, 2024

Coinbase Highlights Diversified Revenue Shift

In its shareholder letter, the company admitted to facing “softer” market conditions. Nonetheless, it saw growth in staking, on-platform USDC, and custody sectors.

“We’ve made a big effort to diversify our revenue over the years away from transaction fee revenue, which is more volatile, it’s not as predictable, it’s more market dependent,” Coinbase CEO Brian Armstrong said during the earnings call. “We’ve shifted more of that to subscription and services revenue over time.”

By the end of Q3, the company held $8.2b in cash, cash equivalents, and USDC, marking a $417m increase from the prior quarter. Additionally, Coinbase announced a $1 billion stock repurchase program.

Coinbase Projects Q4 Growth in Subscription Revenue

The company expects a more active fourth quarter, forecasting subscription and services revenue between $505-$580 million. However, the Q4 outlook considers obstacles like a 10% drop in Ethereum’s average price in October compared to Q3, along with anticipated interest rate changes.

Recently, Base, Coinbase’s Ethereum layer-2 network, briefly took the lead among all blockchains in stablecoin volume, achieving this on the same day it set a new transaction count record.
Earlier this week, Armstrong sharply criticized the US SEC, calling for significant changes in its leadership. He suggested that the next SEC chair should drop “frivolous” lawsuits and issue a public apology for the harm the agency’s regulations have caused to the US crypto industry.