Coinbase disclosed that its revenue and profits continued to be under pressure due to weaker crypto trading activity in the second quarter. Following the earnings release, the US crypto exchange's stock price fell in after-hours trading.
Three consecutive quarters below expectations
According to the company's disclosure, Coinbase's revenue for the quarter ended June 30 was $1.2 billion, down from $1.5 billion in the same period last year; the company reported a net loss of $359.5 million, or $1.36 per share, for the quarter, compared with a net profit of $1.43 billion, or $5.14 per share, in the same period last year.
This marks the third consecutive quarter that Coinbase's revenue and earnings have missed Wall Street expectations. According to an analyst survey compiled by LSEG and cited by CNBC, the market had anticipated a better performance from the company this quarter.
Transaction and subscription revenue declined
Looking at the revenue structure, the subscription business continued to increase its share of total revenue, becoming one of the few relatively positive signs this quarter. However, both core revenue streams fell short of market expectations and declined compared to the same period last year.
- Subscription revenue was $555 million.
- The transaction revenue was $599 million.
- Both business segments fell short of Wall Street expectations.
Coinbase stated that net profit figures are susceptible to accounting treatment. Because the company holds a large amount of crypto assets, measuring at quarter-end prices amplifies book volatility, meaning profit figures can fluctuate significantly even if the assets are not sold.
The market environment was weak in the second quarter.
The report noted that Bitcoin prices remained range-bound for most of the second quarter. While this was an improvement from the weakness of the previous quarter, Bitcoin ETFs saw continued outflows, and high interest rates and broader market volatility also dampened investor risk appetite.
This puts direct pressure on Coinbase, whose core business is trading. In recent years, the company has been trying to reduce its reliance on spot trading volume and bet more growth on subscription products in order to reduce the significant fluctuations in performance due to market volatility.
Additional information:In the earnings report, CEO Brian Armstrong stated that Coinbase should not be viewed solely as a company betting on Bitcoin prices, and emphasized that financial services such as trading, payments, and lending are being reshaped by crypto technology.
