Coinbase, the second largest crypto exchange by trading volume released third-quarter 2023 earnings on Thursday, giving shareholders and market participants a chance to see what’s happening under the hood. In response to the report, the company’s shares fell about 5.5% in after-hours trading.
In the third quarter of 2023, Coinbase generated total revenue of $674 million, compared to $707.9 million in the previous quarter. The company’s net sales were $623 million, down 6% from the second quarter of 2023, but up from $576 million a year ago. The company’s net loss in the three-month period on a GAAP basis was just under $2 million, worth -$0.01 per share. The company also reported adjusted EBITDA results of $181 million.
Analysts have been cautious with estimates even during a recent crypto market boom. Messari analysts estimate that Coinbase will report $616 million, down 7% from the previous quarter, lower than the consensus estimate of $650 million.
The Zacks Consensus Estimate expected Coinbase to report revenue and earnings per share of negative 54 cents per share of $650.8 million, according to a report from Yahoo Finance.
Before reporting its third-quarter results, Coinbase shares were up 148% this year. While that’s a pretty big rally in a bear market, Coinbase’s stock value was still 27% lower than its 52-week high of $114.43.
The total market capitalization of cryptocurrencies has increased by about 62% since the beginning of the year to $1.28 trillion, compared to $1 trillion a year ago. However, the recent rise in crypto asset values and a substantial increase in trading volume did not mean that Coinbase’s Q3 numbers were impressive when looking at trading-based revenue.
In the third quarter, Coinbase generated $288.6 million in trading revenue, of which $274.5 million came from consumer business and another $14.1 million from institutional merchants. These figures were down from $310 million and $17.1 million, respectively, in the second quarter of 2023, and $346.1 million and $19.8 million in the same period a year ago.
If trading revenues at Coinbase fell, how did the company manage to achieve growth compared to the year-ago period? The answer is: interest-based income.
Other sources of income
Coinbase forecast “at least $300 million” for subscription and services revenue in August, and exceeded that estimate by $34 million in the third quarter, with a final result of $334.4 million. That figure was slightly lower than the $335.4 million it reported in the following quarter.