Coinbase Global Inc. (Coinbase) had a big earnings miss late Thursday, reporting a big drop in revenue and a quarterly loss as the cryptocurrency market fell further into bear territory. Even though the miss happened, shares bounced back in early Friday trading after falling at first.
The results show that the digital asset sector is under a lot of pressure as bitcoin and other cryptocurrencies continue to struggle in a weak market.
Profits Turn into Losses
Coinbase lost $2.49 per share in the fourth quarter, a big drop from the $4.68 per share it made a year ago. FactSet expected the loss to be $1 per share, but it wasn’t. Adjusted earnings were 66 cents per share, which was better than the 56 cents that analysts had predicted.
The company’s revenue fell 22% from the previous year to $1.78 billion, which is slightly less than the $1.8 billion that most people expected. The report shows that online trading has slowed down a lot because crypto prices are falling and investors are less interested.
Transaction Revenue Drops a Lot
Transaction revenue, which used to be Coinbase’s main source of income, dropped to $983 million because retail activity dropped sharply. Analysts had expected $741 million in consumer transaction revenue, but it fell 45% to $733.9 million. Analysts had predicted a 36% drop in transaction revenue to $998 million, which means that the drop in consumer spending was bigger than expected.
Institutional transaction revenue fell 5%, which is much less than the 15% growth that was expected year over year. The data shows that both the retail and institutional sectors are generally weak because market volatility and falling asset prices are making people less likely to participate.
Subscription Revenue Helps a Little
Coinbase‘s efforts to diversify didn’t always work out.
Revenue from subscriptions and services went up 13% to $727.1 million, mostly because revenue from stablecoins went up 61%. Still, the segment didn’t meet expectations of $753 million.
During the earnings call, CEO Brian Armstrong stayed positive and talked about how the company is growing beyond just making money from crypto trading.
Armstrong said, “We’ve been through cycles like this many times at Coinbase.” “Adoption keeps going up, and I’m more optimistic than ever because rules are becoming clearer.”
He talked about how stablecoins and subscription services are becoming more important, as well as how the company is expanding into other asset classes like stocks, prediction markets, and commodities. Armstrong says that this diversification makes Coinbase less dependent on changes in the price of cryptocurrencies.
Soft Guidance for the First Quarter
In the first quarter, Coinbase expects subscription and service revenue to be between $550 million and $630 million. This is much lower than FactSet’s estimate of $747 million. The outlook backs up the idea that things may stay hard for a while.
Analysts Get Careful
Before the report came out, Monness Crespi cut its rating on Coinbase shares from buy to sell. Gus Gala, an analyst, said that earlier predictions of a steady recovery through 2026 now seem “foolish” because crypto bear markets have lasted so long and been so bad in the past. The company now thinks that things will stay weak at least through the first half of the year, and it lowered its projections for 2026 and 2027 below what most people thought they would be.
The stock’s price target was set at $120 by Monness Crespi. H.C. Wainwright, on the other hand, lowered its price target from 425 to 350 but kept its buy rating, saying that there could be more upside if weakness creates a buying opportunity. The company said the setup was “not ideal,” but they still think the long-term risk-reward situation is good.
Benchmark also lowered its goal from 421 to 267, but it still has a positive outlook. Analysts said that the long-term positives include a doubling of trading volume and market share in 2025, an increase in derivatives trading, and more people using stablecoins.
Tensions with Regulators Make Things Less Clear
Changes in regulations are still a big factor. The Clarity Act, which would change the structure of the crypto market, has stalled because Coinbase and Armstrong pulled their support because they didn’t like the parts about stablecoin rewards.
Banking groups say that stablecoin rewards, which are like interest payments for holding digital dollars, could cause people to move their money away from community banks and make it harder for them to lend. Crypto supporters say that these kinds of incentives are necessary to stay competitive with global markets.
Reports say that the White House has told both sides to come to an agreement by the end of the month. People have long thought that clearer rules could help the sector, but more delays could make people feel worse.
What the Stock Did
Shares of Coinbase fell 8% on Thursday, continuing a trend that has been going on since October. But on Friday morning, the stock shot up almost 9% in premarket trading. Even though it went up, Coinbase is still down more than 37% this year. The larger crypto market is still having a hard time. Bitcoin was trading at about $67,200 early on Friday. This is about 47% less than its record high of about $126,200 in October.
Another Crypto Cycle in the Big Picture?
Coinbase’s results show that the crypto industry goes through cycles. When prices go up, retail trading goes up, and revenue goes up quickly. When people’s feelings change, the number of transactions drops sharply.
The company is trying to smooth out these cycles by diversifying, focusing on stablecoins, derivatives, and non-crypto asset classes. But for now, trading is still the main way to make money. In the next few quarters, we’ll find out if Coinbase’s change in strategy can make up for the long-term weakness in crypto, or if earnings will still be tied to digital asset prices.
Investors should know that Coinbase is still a high-beta proxy for the crypto market and as the last quarter showed, when bitcoin goes down, earnings can go down even faster.
