Coinbase (COIN, Financial) has reported lower-than-expected earnings for its third quarter, primarily due to a sluggish cryptocurrency market. Although the company anticipates more active trading in the fourth quarter, a recent decline in Ethereum prices may offset growth in its subscription and services segment.
In the most recent earnings report, Coinbase disclosed a total Q3 revenue of $1.21 billion. This represents a 79% year-over-year increase but a 17% drop from the previous quarter, falling short of analyst expectations of $1.26 billion. The net income attributable to common shareholders was $75.5 million, a significant improvement from the $2.27 million loss in the same period last year. Diluted earnings per share stood at $0.28, underperforming analyst forecasts of $0.40, but improving from a previous loss of $0.01 per share.
Breaking down the earnings by segment, trading revenue reached $573 million, marking a 98% increase year-over-year but a 27% sequential decline. Within this, retail trading revenue was $483 million, while institutional trading revenue was $55.3 million. Subscription and services revenue amounted to $556 million, up 66% year-over-year but down 7% from the previous quarter.
The cryptocurrency market has been largely stagnant, with Bitcoin trading within a narrow range of $55,000 to $70,000. Market participants are cautiously monitoring the U.S. presidential election, leaving Bitcoin with no significant catalysts and minimal volatility. Despite the lackluster price movement, the market capitalization of stablecoins has reached new highs, aiding Coinbase’s stablecoin revenue, which grew to $247 million in the third quarter, a 43% year-over-year and a 3% sequential increase.
Coinbase and Circle have agreed on a 50/50 revenue-sharing arrangement to split the interest income generated from supporting the reserves of USD Coin (USDC), the second-largest dollar-backed stablecoin in the market. However, declining interest rates are expected to challenge this revenue stream in the current quarter.
Coinbase also announced a $1 billion stock buyback program. Looking ahead, the company projects its subscription and services revenue for the fourth quarter to range between $505 million and $580 million. It expects this segment’s growth to level off due to a 10% decline in Ethereum prices compared with the third quarter average and anticipated interest rate cuts reflecting market expectations.
