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Coinbase Profit Is Mostly Crypto Gains: Rapid Earnings Reaction
Key Points
Coinbase reported third-quarter net income of $719 million, but a $715 million gain on crypto it holds as an investment drove nearly all of it.
The core business earned far less even as Coinbase gained share.
Coinbase Global (NASDAQ:COIN) reported third-quarter net income of $719 million, driven by a $715 million gain on crypto it holds as an investment. Shares fell about 2% in after-hours trading. Strip out that markup, and the core business earned far less than a year ago, even as it gained share.
Key Numbers
- Adjusted EBITDA: $333 million, up 60% from Q2 but down 58% from $801 million a year ago.
- Subscription and services revenue: 49% of net revenue.
- Crypto trading volume market share: 10.7%, its fourth straight quarterly gain.
- Average USDC held in Coinbase products: $22 billion, up 49% from a year ago.
What It Means
The headline profit is a price move, not an operating result. Coinbase marks the crypto it owns to market each quarter, so its bottom line swings with coin prices. Without those gains and other investment gains, adjusted net income was $78 million.
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The drop points to trading. Transaction fees rise and fall with prices and activity, and the release calls the market softer. Coinbase won a bigger slice of a smaller pie, which helps but can't make up the gap. The release gives no net revenue figure, so readers can't size the decline.
The push beyond trading is real, but it isn't a full hedge yet. Much of subscription and services revenue comes from interest on stablecoin reserves, which depends on rates rather than trading. Prediction markets topped $200 million in annualized revenue, and the CFO says they're less tied to crypto swings. It's a promising line, but still a small one.
What to Watch Next
Watch whether adjusted EBITDA keeps recovering without help from crypto prices. Also watch whether prediction markets keep growing now that the slower summer sports months are over.
David Kretzmann has positions in Coinbase Global. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.