Coinbase Q2 2024 Earnings Report Interpretation: Revenue of $1.45 billion, Net Profit Down 97% Quarter-over-Quarter
Coinbase has achieved positive revenue growth for four consecutive quarters.Author: Nianqing, ChainCatcher
Coinbase announced its Q2 financial report today, with revenue of $1.45 billion, a decrease of 11% quarter-over-quarter, and an increase of over 100% year-over-year, nearly in line with analysts' expectations of $1.37 billion. Net income was $36 million, down 97% quarter-over-quarter. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was $596 million. Coinbase has achieved positive revenue growth for four consecutive quarters.
In Q2, Coinbase's total trading volume was $226 billion, a decrease of 28% from Q1, with trading revenue of $781 million, down 27% quarter-over-quarter. Subscription and service revenue grew by 17% to $599 million. Total operating expenses were $1.1 billion, an increase of 26% quarter-over-quarter. Coinbase made good progress in revenue diversification in Q2, with subscription and service revenue reaching nearly $600 million. The balance sheet increased to $7.8 billion.
Notably, Coinbase's custody fee revenue in Q2 was $35 million, an increase of 7% quarter-over-quarter. The main driver was the average cryptocurrency asset price in Q2 being higher than in Q1, benefiting from related inflows as a custodian for BTC ETF products. Additionally, Coinbase generated $240 million in interest income from USDC stablecoins in Q2, a 22% increase quarter-over-quarter.
Coinbase also highlighted significant improvements in performance for Base in its Q2 report: reduced costs and increased speed—base fees below 1 cent and processing times under 1 second. Base's transaction volume grew by 300% in Q2. Furthermore, Coinbase launched an upgraded version of the self-custody wallet, Smart Wallet, in Q2 to simplify the user experience.
Revenue Diversification: Decline in Trading Fee Revenue, Increase in Subscription and Service Revenue
Overall, Coinbase made good progress in revenue diversification in Q2. Total trading volume was $226 billion, down 28% quarter-over-quarter. Total trading fee revenue was $780 million, down 27% quarter-over-quarter, but up 138% year-over-year. The revenue share decreased from 65% in Q1 to 54%, but it remains the primary source of revenue. Subscription and service revenue reached nearly $600 million, an increase of 17% quarter-over-quarter. Interest and other income amounted to $69.7 million, up 40% quarter-over-quarter.
- Retail Trading Fee Revenue
In Q2 2024, retail trading fee revenue was $665 million, down 29% quarter-over-quarter, and up 130% year-over-year. Q2 retail trading volume was $37 billion, down 34% quarter-over-quarter. Coinbase's trading fees are directly affected by the cryptocurrency market conditions, and the cryptocurrency spot market was weaker in Q2 compared to Q1, especially in the U.S.
- Institutional Trading Fee Revenue
Institutional trading slowed down in Q2 compared to Q1. Q2 institutional trading revenue was $64 million, down 25% quarter-over-quarter, and up 272% year-over-year. The institutional trading volume in Q2 was $189 billion, down 26% quarter-over-quarter.
In Q1, Coinbase attracted a significant influx of institutional investors due to the approval of the Bitcoin ETF in January 2024, with record highs in trading volume and active customers on the institutional platform Coinbase Prime. Despite the decline in trading revenue in Q2, in July, the Ethereum spot ETF was officially approved, and Coinbase was authorized as a custodian for 8 out of 9 products, continuing to benefit from the listing of cryptocurrency ETFs.
Subscription and Service Revenue
Coinbase's subscription and service revenue in Q2 was $599 million, a 17% year-over-year increase. Subscription and service revenue benefited from higher average USDC platform balances and market capitalization, as well as higher average cryptocurrency asset prices, particularly for SOL and ETH.
- Stablecoin Revenue was $240 million, a 22% increase quarter-over-quarter. The main driver was higher average USDC platform balances and market capitalization. The value of USDC on the platform was $5.7 billion, only a 2% increase from $5.5 billion at the end of Q1.
- Blockchain Rewards Revenue was $185 million, a 23% increase quarter-over-quarter. The main driver of growth was higher average prices for SOL and ETH.
- Interest and Financial Fee Revenue was $69 million, a 4% increase quarter-over-quarter. The main driver of growth was higher average custodial fiat balances.
- Custody Fee Revenue was $35 million, a 7% increase quarter-over-quarter. The growth in Q2 was primarily driven by higher average cryptocurrency asset prices compared to Q1. Additionally, the growth in custody fee revenue also benefited from related inflows as a custodian for BTC ETF products.
- Other Subscription and Service Revenue was $70 million, a 9% year-over-year increase, primarily driven by growth in Coinbase One revenue.
Balance Sheet
As of Q2, Coinbase held $7.8 billion in assets, a 10% increase quarter-over-quarter, which is an increase of $733 million, as detailed in the chart below.
Q3 Outlook
Coinbase's subscription and service revenue in Q3 is expected to be between $530 million and $600 million. In July 2024, Coinbase generated approximately $210 million in total trading revenue, indicating continued progress toward its goals.
Additionally, Coinbase will continue to promote the global adoption of USDC in Q3, making it the most compliant stablecoin. Therefore, USDC-related expenses will increase in Q3. As of Q2, Coinbase had 3,486 full-time employees, a 2% increase. In the next six months, Coinbase will continue to hire more employees to support product development and international expansion.
