Coinbase Posts Mixed Q3 Earnings

The past few weeks have been Q3 earnings report season for many of the major tech companies, and last Thursday was Coinbase’s (COIN) turn.

Let’s go over the good, the bad, and the hopeful for Coinbase’s third-quarter earnings report.

The Good

Although crypto is in a brutal bear market, there are areas of Coinbase’s business that are doing quite well.

Chief among these are their subscription and service programs. Revenue in these programs grew 43% (to $211 million) from Q2, which would have been 82% had crypto prices held constant.

This is a dramatic increase, due to rising interest rates. With rates not looking to be slowing down any time soon we expect this number to continue to grow.

Coinbase also did an excellent job cutting costs in Q3, as total operating expenses declined 38% from Q2. This allowed Coinbase to end the quarter with $5.6 billion in cash and $483 million in crypto, a more than sturdy rainy-day fund for the remainder of this bear market.

The Bad

Make no mistake about it; the bear market is definitely taking its toll on Coinbase.

This is primarily seen in people trading less, resulting in lower transaction revenues (down 44%) and net revenues (down 28%), both of which missed analysts’ expectations.

The result was a total Q3 loss of $545 million.

For Coinbase to become profitable, the macro environment will have to flip bullish again.

The Hopeful

Overall, not the worst earnings report for Coinbase.

The company is still in a strong spot cash-wise, is printing money with its service and subscription business, has onboarded roughly 25% of the 100 largest hedge funds, and has formed a close relationship with USDC, the dominant U.S. stablecoin.

Should the bear market end and people start trading actively again, it is almost certain that Coinbase will become profitable again very quickly. Not to mention, they’re onboarding waves of new users/traders as we speak – all thanks to FTX virtually disappearing overnight.