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Coinbase earnings: Revenue, losses beat expectations as volumes plunge to cap 2022

Coinbase Global (COIN) reported fourth quarter results Tuesday afternoon that beat Wall Street expectations as revenue unexpectedly rose and losses for the full year were narrower than feared.

After these earnings shares rallied as much as 6% before settling flat in after hours trading.

Here are Coinbase’s key fourth quarter results against Wall Street expectations, according to data from Bloomberg:

  • Revenue: $629 million vs. $581.2 expected

  • Adjusted earnings per share: ($2.46) vs. ($2.44) expected

  • Adjusted EBITDA: ($124 million) vs. ($201.8 million) expected

  • Monthly transacting users (MTUs): 8.3 million versus expected 8.4 million

"In Q4, we improved net revenue, by continuing to grow Subscription & Services revenue, we gained trading market share, and we took key steps to reduce our expense base and position the company to improve Adjusted EBITDA in 2023," Coinbase chief financial officer Aleisa Haas said in a statement.

Transaction fee revenue came in at $322 million, just shy of estimates for $326 million. The platform's total customer assets fell to $80 billion, its lowest amount over the prior two years and shy of expectations for $88.8 billion.

Retail transaction volume shrank by 88% over the prior year while institutional transaction volumes fell by 66%. The company also disclosed a $14 million loss from counterparty exposure to FTX.

"Despite the market turmoil, our retail customers largely continued to 'hodl' on Coinbase at levels similar to Q3," the company said. "We believe this indicates that retail customers, on average, maintained long-term conviction in crypto and, assuming history repeats itself, are likely to become more active when market conditions improve."

For the full year, Coinbase reported an adjusted EBITDA loss of $371 million, narrower than the $500 million loss the company had tagged as the high-end of its estimated range. In 2023, the company said it plans, "to improve full-year Adjusted EBITDA in absolute dollar terms on a year over year basis."

Services revenue grows

The major U.S. based exchange leaned heavier into its subscriptions and services revenue during the fourth quarter. This non-trading side of the business came in at $283 million, above expectations and accounted for roughly half (44%) of the platform's total revenue in Q4.

Though nothing in Coinbase's operations have changed, recent enforcement actions from the SEC have raised concerns the subscriptions and services revenue, particularly its staking, custody, and stablecoin revenue driving interest income could come under threat.

"Disappointingly, we are not seeing regulators necessarily welcoming transparency and public participation in their rule-making. United States' agencies, in particular, are demonstrating a disjointed stance regarding crypto that is pushing the industry overseas," Coinbase said.

Driven by Treasury yields, interest income rose by 44% to $182 million over the fourth quarter. Crypto staking rose 1% to $62 million. Custodial fees were down 21% to $11.4 million for the same period.

People watch as the logo for Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, is displayed on the Nasdaq MarketSite jumbotron at Times Square in New York, U.S., April 14, 2021. REUTERS/Shannon Stapleton
People watch as the logo for Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, is displayed on the Nasdaq MarketSite jumbotron at Times Square in New York, U.S., April 14, 2021. REUTERS/Shannon Stapleton (Shannon Stapleton / reuters)

After spending over $1 billion in the first half of 2022, Coinbase has laid off 2,110 workers since June 2022, according to Yahoo Finance's tally. A month ahead of Tuesday’s results, the company also said in an SEC filing it projects cutting operating expenses 25% by the end of next quarter.

In recent weeks, the company halted its Japan operations and new creator drops for its NFT marketplace. It did not offer further guidance on either division’s future.

Cash and equivalents fell 38% through 2022 from $7.1 billion to $4.4 billion. 

Looking ahead, the exchange offered upbeat guidance for 2023, saying it generated $120 million in transaction revenue over January. It also has an added $1.1 billion in cash resources that includes stablecoins.

“Crypto remains volatile and we have limited ability to forecast our transaction revenues which remain correlated with crypto market capitalization and crypto asset volatility. As such, we are prepared to manage our business through a wide range of transaction revenue scenarios in 2023, which include possible increases, decreases or stabilization of crypto market capitalization and crypto asset volatility compared to levels at the end of 2022,” the company said.

"We feel confident that we have a more durable cost structure, which combined with our strong balance sheet, positions our expenses to better align with the range of scenarios we are currently forecasting," the company added.

Coinbase stock has rallied sharply to start 2023, rising more than 75% through Tuesday's close. Over the last year, however, the stock has lost around two-thirds of its value.

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