Compiled by: Felix, PANews
The US cryptocurrency exchange Coinbase released its first-quarter (Q1) financial report on May 8th local time. Due to market trading cooling down compared to the post-US election surge in the previous quarter, revenue and net profit did not meet expectations.
As of March 31st, the adjusted net profit was $527 million. Earnings per share were $0.24, lower than the market's general expectation of $1.93. Total revenue was $2 billion, slightly below the expected $2.12 billion and lower than the $2.3 billion in Q4 2024. Q1 trading revenue declined 19% to $1.2 billion, with trading volume dropping 10%.
Potentially affected by this news, Coinbase (COIN) stock dropped 2.67% in after-hours trading, after rising 5% in the previous trading day. COIN has declined 16.83% since the beginning of the year.
Revenue
Q1 cryptocurrency asset volatility increased, with BTC reaching a historical high in January. However, influenced by tariff policies and macroeconomic uncertainty, cryptocurrency prices fell in sync with the overall market. Compared to the end of Q4, the total cryptocurrency market value decreased 19% to $2.7 trillion at the end of Q1.
In this context, Coinbase's revenue reached $2 billion, a 10% quarter-on-quarter decline; net income plummeted 94% to $66 million, primarily due to a $597 million pre-tax loss in crypto asset investments, mostly unrealized losses. Adjusted net profit was $527 million, with adjusted EBITDA at $930 million.
Trading Revenue
Coinbase's financial report shows trading as its primary revenue source, accounting for over 60% of total revenue. Q1 trading revenue was $1.3 billion, a 19% quarter-on-quarter decline. Coinbase's spot trading volume decreased 10% to $393.1 billion, but outperformed the global spot market, which declined 13%. In derivatives, Coinbase's trading volume reached $803.6 billion, with continuous market share growth.
In Q1, retail trading volume was $78.1 billion, a 17% quarter-on-quarter decline. Retail trading revenue was $1.1 billion, a 19% decline, closely matching the trading volume drop. For institutional trading, the volume was $315 billion, a 9% decline, with institutional trading revenue at $99 million, a 30% decline.
Besides the macro background, the second factor in revenue decline was the derivatives business. The report states that Coinbase is investing in trading rebates and incentives to build liquidity and attract customers. These rebates and rewards have been deducted from institutional trading revenue.
Other Trading Revenue
Q1 other trading revenue was $68 million, remaining flat quarter-on-quarter. Base's transaction volume grew 16% quarter-on-quarter, but average revenue per transaction declined 21%.
Subscription and Services Revenue
Q1 subscription and services revenue was $698 million, a 9% quarter-on-quarter growth, mainly due to stablecoin and Coinbase One revenue growth, with USDC market value reaching a historical high of over $60 billion. However, blockchain rewards revenue declined 9% quarter-on-quarter, partially offsetting this growth. The decline was primarily due to lower average asset prices, especially for ETH and SOL.
Q1 stablecoin revenue grew 32% quarter-on-quarter to $298 million. Coinbase stated this growth was partially offset by lower average interest rates. The average USDC holdings in Coinbase products grew 49% quarter-on-quarter to $12.3 billion.
Other subscription and services revenue was $141 million, a 5% quarter-on-quarter growth. Coinbase One subscription users reached a historical high in Q1, with Coinbase One Premium service ($300 per month) also experiencing growth.
Expenses
Q1 total operating expenses were $1.3 billion, a 7% quarter-on-quarter increase of $91 million, mainly due to increased variable expenses from early quarter market activity and losses from crypto assets held for operations. Technology and development, general and administrative, and sales and marketing expenses increased by $40 million, a 4% quarter-on-quarter rise, primarily from increased marketing spending (including performance marketing and USDC rewards) and customer support costs. At the end of the quarter, Coinbase's full-time employees grew 5% to 3,959.
Trading fees were $303 million, 15% of net income, a 4% quarter-on-quarter decline. The decline was mainly due to reduced customer trading activity and lower blockchain rewards fees related to average asset price decreases.
Technology and development expenses were $355 million, a 4% quarter-on-quarter decline. The decline was primarily due to reduced personnel-related expenses despite increased total staff. General and administrative expenses were $394 million, a 9% quarter-on-quarter growth, mainly from increased customer support and personnel-related costs. Sales and marketing expenses were $247 million, a 10% quarter-on-quarter increase.
Outlook
In April, Coinbase's total trading revenue was approximately $240 million. Coinbase expects Q2 subscription and services revenue to be between $600 million and $680 million, as anticipated stablecoin revenue growth will be offset by blockchain rewards revenue decline due to asset price drops; trading fees will remain around 15% of net income; technology and development and general and administrative expenses will be between $700 million and $750 million.
Notably, Coinbase is focusing on the derivatives market, announcing the acquisition of Deribit, the world's largest Bitcoin and Ethereum options exchange, for $2.9 billion, including $700 million in cash and 11 million Coinbase common shares, subject to customary price adjustments. The transaction is pending regulatory approvals and other customary closing conditions, expected to complete by year-end. Last year, Deribit's outstanding contracts exceeded $30 billion, with trading volume over $1 trillion.
Coinbase CFO Alesia Haas stated in the financial report call: "We expect Deribit to immediately enhance our profitability and diversify and sustain our trading revenue."
Additionally, Coinbase CEO Brian Armstrong mentioned in the investor call that this quarter, Coinbase will launch a pilot project allowing businesses to use stablecoins for payments and expenses.
