Coinbase Global Inc. has returned to profitability for the first time in a year, even as it reported a quarterly drop in revenue, highlighting how tightly the fortunes of the largest US digital-asset platform remain tied to crypto markets.
Third-quarter revenue came in at $1.22 billion, down roughly 35% from the same period a year earlier. That matched the expectations of analysts surveyed by Bloomberg. Net income surged by about 66% to $719 million, or $2.51 per share, driven by an unrealized gain on the value of its crypto holdings. Coinbase had reported losses in each of the prior three quarters.
These dramatic swings in results underscore the volatility of token prices that Chief Executive Officer Brian Armstrong has been trying to shield Coinbase from by expanding its range of products and services. Subscription and services made up 49% of revenue. Annualized revenue from prediction markets exceeded $200 million. Some analysts view these gains as a sign of transformation.
"Here's the real story. Prediction markets have exploded past $200 million in annualized revenue, while subscriptions and services now account for 49% of net revenue," said David Bartosiak, a stock strategist at Zacks Investment Research. "Coinbase isn't just riding the crypto wave anymore, it's building the exchange that wants to own the entire ocean."
Coinbase's stock price has also mirrored this volatility. Market bellwether Bitcoin jumped more than 40% in the three months ended Sept. 30, following three straight quarterly declines. The share rallied more than 25% in the third quarter, trimming its year-to-date loss to around 30%. The stock fell as much as 3.6% in after-hours trading.
Adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, was $333 million. That's a measure used to evaluate operating profitability by stripping away costs not directly related to day-to-day operations, the company said in a statement Thursday.
"We are really pleased to return to growth," Alesia Haas, the chief financial officer of Coinbase, said in an interview. "While the revenue was roughly flat, the composition of revenue is more diversified. We saw growth in prediction markets, we grew share in spot and derivatives. We continue to get diversified."
While the crypto market is beginning to slowly recover from the slump that started a year ago, volatility — which tends to drive crypto exchanges' trading volumes and revenues — remains muted. Drivers for a new bull market remain unclear, and broader macroeconomic uncertainty weighs on the sector.
"We don't expect a V-shaped recovery in 2027," analysts at Compass Point Research & Trading said in a recent note.
Meanwhile, competition from low-fee providers like Robinhood Markets Inc. has been rising. In September, Coinbase lowered fees for many active traders, reviving worries that fees for all crypto exchanges are on the road to zero.
"Everyone wants to know if it's going to be the beginning of a take-rate decline," Dan Dolev, an analyst at Mizuho Securities USA, said in an interview.
In the past, Coinbase has been able to keep its overall trading revenues steady or even increase them by tweaking its fees up and down for various categories of traders.
Coinbase strives to become an "everything exchange," offering a slew of products designed to offset the revenue swings driven by changes in market sentiment. Traction in other products, like derivatives, tokenized assets — represented by tokens on a blockchain — and prediction markets should keep helping prop up the business while spot trading volumes remain depressed.
Several of these businesses stand to benefit thanks to new rulemaking coming out of the Securities and Exchange Commission and the Commodities Futures Trading Commission.
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