Coinbase, a leading cryptocurrency exchange platform, reported better-than-expected revenue in its first-quarter earnings report on Thursday, despite the stock price dipping slightly in after-hours trading.
The company’s performance surpassed analyst predictions. Coinbase reported earnings of $4.40 per share, exceeding the average analyst estimate of $1.09 per share according to LSEG data. Revenue also came in higher than expected, reaching $1.64 billion compared to the anticipated $1.34 billion.
Coinbase’s net income surged significantly year-over-year, reaching $1.18 billion or $4.40 per share. This marks a stark contrast to the net loss of $78.9 million or $0.34 per share reported in the first quarter of 2023. Notably, a $650 million mark-to-market gain on crypto assets held for investment, related to the adoption of updated accounting standards, contributed to the company’s profit.
Transaction revenue, a historically primary driver for Coinbase, witnessed significant growth. Consumer transaction revenue skyrocketed over 100% year-over-year to $935 million, while total transaction revenue nearly tripled to $1.08 billion in the quarter. Subscription and services revenue also grew considerably, reaching $511 million for the quarter.
The positive earnings report comes after Coinbase’s stock price climbed almost 9% on Thursday in anticipation of the results. Year-to-date, the stock has gained roughly 32%, following a spectacular nearly fivefold increase in 2023. This upward trend is often linked to surges in Bitcoin prices, as significant rallies lead to increased trading volumes and demand for Coinbase’s services.
The first quarter witnessed a new all-time high for Bitcoin, surpassing $73,000 in March. Additionally, Ethereum, the second-largest digital asset, underwent its first major upgrade in over a year during this period.
The industry has also observed an influx of institutional investors, fueled by the Securities and Exchange Commission’s approval of several new U.S. spot Bitcoin exchange-traded funds (ETFs). Many of these ETFs have partnered with Coinbase as their custody partner, collectively attracting over $50 billion by the end of the first quarter.
However, analysts at Raymond James point out that cumulative net inflows peaked on April 8th and have since declined alongside a decrease in Bitcoin’s value. They noted in a recent report that “The price of Bitcoin peaked as the pace of inflows moderated, and has been drifting modestly lower since mid-March.” This decline has also been reflected in a decrease in trading volumes on Coinbase’s platform.
Coinbase also faces ongoing legal challenges from the SEC. In March, a judge ruled that the SEC’s claim that the exchange engaged in unregistered sales of securities could proceed to a jury trial. Additionally, competition from Crypto.com regaining market share in recent months poses another potential headwind for Coinbase.