Coinbase falls after revenue misses estimates on lower volumes

(Bloomberg/Olga Kharif) — Shares of Coinbase Global Inc. fell after the largest US crypto exchange reported lower-than-estimated second-quarter revenue amid a drop in digital-asset market volatility.

While revenue increased 3.3% year over year to $1.5 billion, that was still lower than analysts’ estimates of $1.59 billion and down from $2 billion in the first three months of the year. Net income jumped to $1.43 billion after an unrealized gain to account for the increase in the value of its crypto holdings and from strategic investments such as Coinbase’s minority stake in Circle Internet Group Inc.

Spot trading volumes were down both globally and in the US “against a market backdrop where we saw average crypto market capitalization approximately flat Q/Q,” the company said in shareholder letter Thursday.

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“Where they missed on the Street consensus was the mix shift in volume with retail trading being” much weaker than the market’s expectation, said John Todaro, senior analyst at Needham & Company, LLC.

Brian Armstrong, the co-founder and chief executive officer of San Francisco-based Coinbase, has been diversifying into new businesses and services to lessen the correlation of revenue to crypto trading volume. Coinbase was added to the Standard & Poor’s 500 Index in May, the first crypto company to be included in the bellwether index.

Coinbase’s shares fell about 12% in pre-market trading on Friday. The stock has rallied 52% in the first seven months of the year, reaching a all-time closing high of $419.78 on July 18.

Coinbase is looking to expand further, and said it’s actively building and testing trading traditional stocks, prediction markets, FX, treasuries, commodities, and other assets. Rivals like Kraken have already made equities available to some customers.

“We’ve always believed that every asset class will move onchain,” Alesia Haas, Coinbase’s chief financial officer, said in an interview on Thursday. “We are now at an inflection point,” in terms of technology being ready, and increased regulatory clarity.

Haas said equities could be made available to customers either through a partnership with a broker or via linking shares to a blockchain.

“It’s a multi-quarter build,” she said. “It’s too early to talk about economics of this opportunity.”

Haas said the company, which acquired options exchange Deribit earlier this year, will continue to be acquisitive.

Haas said she believes the company has already recorded the majority of charges relating to a security incident involving its customers that was disclosed in May. The company recorded $307 million in expenses related to the incident in the second quarter.

The firm has benefited from a revenue sharing agreement with Circle, the US stablecoin issuer that went public in June. During the recent quarter, stablecoin revenue rose to $332 million.

Cryptocurrencies rallied through the second quarter and into July, buoyed by President Donald Trump’s signing a bill on stablecoin regulation into law, the first crypto-specific legislation approved by US lawmakers.

–With assistance from Jayna Rohslau and Muyao Shen.

(Updates with pre-market trading.)

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