coindesk.com
Coinbase's (COIN) second-quarter earnings did little to change Wall Street's long-term view. Most analysts blamed one of the weakest crypto trading environments in recent years rather than company-specific issues. The debate is over what comes next.
The company missed expectations across nearly every major financial metric, reporting $1.22 billion in revenue and $208 million in adjusted EBITDA as lower crypto prices and subdued trading volumes weighed on both transaction revenue and its growing subscription business.
Guidance for the third quarter also came in below consensus, prompting several firms to cut estimates and price targets.
Shares are lower by 6% just before the market open.
Even bullish analysts acknowledged the quarter was soft. Cantor Fitzgerald called it "another soft quarter" driven by depressed crypto prices and weaker spot trading volumes, while Oppenheimer said the miss stemmed from broader market weakness rather than operational problems.
Benchmark struck a similar tone, arguing the headline numbers obscured progress in Coinbase's long-term strategy to diversify beyond retail trading fees. William Blair likewise said investors should view the post-earnings selloff as a buying opportunity, arguing Coinbase remains the largest beneficiary of any eventual crypto market recovery.
Market share continues to grow
The strongest point of agreement across bullish firms was that Coinbase continued taking market share even as the industry contracted.
Coinbase said it captured a record 10.3% share of global crypto trading volume during the quarter, its third consecutive quarterly gain. Analysts at Benchmark, Oppenheimer, Clear Street and Cantor all highlighted the figure as evidence that trading activity is consolidating onto larger regulated exchanges during periods of market stress.
Several also pointed to derivatives, where Coinbase reported flat trading volumes despite management saying the broader derivatives market declined by double digits.
Diversification shows progress, but isn't enough
Analysts viewed Coinbase's push beyond spot trading as encouraging, even though the newer businesses remain too small to offset weakness in core trading revenue.
The company is trying to diversify through prediction markets, derivatives, subscriptions, stablecoins and its Base blockchain. Prediction markets surpassed a $100 million annualized revenue run rate, while Coinbase One topped one million paid subscribers. Its Circle partnership for USDC also renewed on existing terms, removing a key concern for investors.
Still, there was broad agreement that diversification has not yet become large enough to replace lost trading revenue.
Clear Street noted new businesses continue gaining traction but remain "optionality" rather than meaningful earnings contributors. Barclays was more critical, arguing prediction markets and retail derivatives "did not" provide the boost they offered last quarter. Compass Point similarly said emerging businesses "barely moved the needle."