Coinbase’s revenue fell 35% year over year in the third quarter, while net income rose 66% to $719 million, with gains on crypto assets held for investment standing out in the results.
According to balance sheet data reported by The Block, the U.S. crypto exchange generated $1.22 billion in total revenue in the third quarter. Revenue was largely flat compared with the previous quarter but declined from the same period last year. Net income, meanwhile, rose from $433 million to $719 million year over year.
$715 million in crypto gains featured in profit figures
The results included $715 million in gains from crypto assets the company holds for investment. That figure was $424 million in the same quarter last year. Therefore, the increase in net income cannot be explained solely by stronger trading activity on the exchange.
Indeed, Coinbase’s spot trading volume fell 8% from the previous quarter to $135 billion. The company said it continued to gain market share despite the decline. Derivatives trading volume also fell 7% to about $986 billion, while the industry-wide decline cited by Bernstein was 11%.
Revenue run rate in prediction markets doubles
Coinbase’s prediction markets business reached an annualized revenue run rate of more than $200 million. The measure, which was about $100 million in the previous quarter, represents the amount the business would generate over a year if its current revenue pace continued.
CEO Brian Armstrong said prediction markets were among the fastest-growing products in Coinbase’s history. According to Armstrong, crypto contracts also supported growth in months when contracts based on sporting events were slower.
Bernstein analysts estimated that prediction markets and derivatives trading together account for about 25% of transaction revenue and approximately 12% of total revenue.
Stablecoin revenue reaches $328 million
The company’s stablecoin revenue rose 3% quarter over quarter to $328 million. Of that amount, $21 million came from USDC held on Coinbase’s own balance sheet.
Subscription and services revenue also grew from the previous quarter, reaching nearly half of net revenue. Chief Financial Officer Alesia Haas said the company’s diverse revenue sources make it more resilient to market cycles, while prediction markets add a revenue stream that is less correlated with crypto volatility.
Analysts maintain their views on Coinbase stock
Following the earnings report, Bernstein and William Blair maintained their outperform ratings on Coinbase. Bernstein kept its $250 price target, while William Blair’s valuation analysis pointed to approximately $240 per share. Coinbase stock had closed Thursday down 1.07% at $160.59.
Not investment advice.