Coinbase Posts $719 Million Profit on $715 Million Crypto Gain, With Revenue Down 35%

Coinbase (NASDAQ: $COIN) reported third-quarter net income of $719 million, or $2.51 per diluted share, on Thursday, but nearly all of it came from a $715 million gain on crypto it holds as an investment. Revenue fell 35% from a year earlier to $1.22 billion, according to the company’s earnings release and quarterly filing.

The results show Coinbase leaning on businesses other than trading as volatility sits near multiyear lows. Subscription and services revenue made up 49% of net revenue, and the company said its prediction markets passed $200 million in annualized revenue only months after launching in February. Analysts had expected roughly breakeven or a small loss per share, with estimates ranging from a loss of about $0.15 to $0.26. Revenue was roughly in line with forecasts of about $1.2 billion. Shares fell in after-hours trading.

Stripping out the investment gain, the picture was softer. Adjusted net income was $78 million, and adjusted EBITDA was $333 million, down from $801 million a year earlier, though it marked a 15th straight quarter of positive adjusted EBITDA.

Transaction revenue was $590 million, down 44% from a year earlier and 1% from the second quarter. Spot trading volume fell about 10% from the previous quarter, according to the earnings call. Coinbase said its share of crypto trading volume rose to 10.7%, the fourth straight quarterly gain. Assets on the platform were $377 billion at the end of September, down from $516 billion a year earlier, mostly on lower crypto prices, the filing showed.

Subscription and services revenue rose 3% from the second quarter to $570 million but was down 20% from a year earlier. It was supported by record average balances of the USDC (CRYPTO: $USDC) stablecoin. Daily prediction market traders rose more than 60% from the second quarter, and Coinbase One, its subscription program, reached an all-time high in subscribers.

For the fourth quarter, Coinbase guided to subscription and services revenue of $550 million to $630 million, and it lowered and narrowed its full-year adjusted expense outlook. Transaction revenue totaled about $165 million so far in the quarter, the company said, as it cautioned against extrapolating from partial-quarter results.

The company has missed revenue expectations in recent quarters. Second-quarter revenue of $1.22 billion fell short of a $1.29 billion consensus, and it posted a larger GAAP loss that quarter. Coinbase announced a restructuring plan in May. Its shares were down about 31% this year ahead of the report.

Shares of Coinbase (NASDAQ: COIN) are currently trading at $160.59, down from a 52 week high of $361.40.