Circle's IPO was a huge success, Coinbase's profits surged, but revenue fell short of expectations, leading to a sharp decline in stock price after hours
Coinbase's profit in the second quarter soared to $1.4 billion, with earnings per share of $5.14, mainly benefiting from the substantial investment gains brought by Circle's listing. However, core business performance was weak: total revenue was only $1.5 billion, below the expected $1.59 billion, a quarter-on-quarter drop of 26%; trading revenue fell to $764 million year-on-year, reflecting the impact of reduced market volatility
The largest cryptocurrency exchange in the United States, Coinbase, saw its profits surge to $1.4 billion in the second quarter, primarily due to substantial gains from its investment in Circle Internet Group. However, revenue fell short of Wall Street expectations, leading to an over 8% drop in stock price after hours.
On July 31, Coinbase Global released its second-quarter financial report, showing earnings per share of $5.14, significantly exceeding last year's profit of $36 million. The profit surge was mainly driven by the strong performance of stablecoin provider Circle's IPO in June, which brought Coinbase substantial pre-tax investment gains. According to a previous article from Jiemian, "the first stablecoin stock" Circle saw its stock price rise over 675% in the first 10 days after going public.
Despite the significant profit increase, Coinbase's total revenue only rose from $1.4 billion in the same period last year to $1.5 billion, falling short of analysts' expectations of $1.59 billion. Compared to the first quarter, revenue decreased by 26%, dropping from over $2 billion to the current level.
This performance highlights the challenges faced by cryptocurrency exchanges: while investment gains can boost profits, the core trading business is struggling with revenue growth, and reduced market volatility directly impacts the company's main revenue source.
Trading Revenue Under Pressure, Core Business Growth Slows
The financial report shows that Coinbase's trading revenue fell from $781 million in the same period last year to $764 million, reflecting a slump in spot cryptocurrency trading activity during the three months ending June 30.
However, the total trading volume, which is the main revenue driver for Coinbase, still grew, rising from $226 billion in the same period last year to $237 billion in the second quarter. This indicates that although trading activity has increased, the company’s revenue per transaction has declined.
The company attributed the sequential decline in revenue to reduced market volatility. Cryptocurrency market fluctuations typically stimulate more trading activity, leading to higher revenues for exchanges.
Accelerating Diversification Strategy
To drive the next phase of growth, Coinbase stated it aims to become a "full-service exchange," focusing on tokenization, which is the process of converting traditional finance and real-world assets into tradable tokens on the blockchain.
The company is also accelerating its diversification efforts, recently partnering with JP Morgan and PNC Bank to provide cryptocurrency trading services for their clients. This move helps Coinbase expand its client base among traditional financial institutions.
With Trump's friendly stance towards cryptocurrencies, Coinbase's stock price has risen 52% this year, with a market capitalization exceeding $90 billion, solidifying its position as one of the largest publicly traded cryptocurrency companies However, some analysts point out that Trump's support for cryptocurrencies is expected to intensify competition in the field of crypto products and services. As the regulatory environment becomes more favorable, more traditional financial institutions and technology companies may enter this market, posing a challenge to Coinbase's market share
