Coinbase narrows loss to $97 million in the second quarter

Coinbase’s net loss in the second quarter of 2023, Coinbase, amounted to $97 million or $0.42 per share, which was significantly better than analysts’ expectations ($0.76). In after-hours trading, shares fell 1%.

Initially, quotes reacted with a rise of 9.1%. Since the start of the year, Coinbase’s shares have climbed 156.4%.

For the same period in 2022, the company recorded net loss of $1.1 billion, in Q1 2023 — $78.9 million. The negative trend continued for the sixth quarter in a row.

The reduction of negative financial results was driven by cost-cutting measures — total operating expenses declined 47.6% year-on-year (from $1.48 billion to $773 million) and by 13% quarter-on-quarter thanks to optimisation of investments and layoffs of staff.

Net revenue in April-June declined from $808.3 million to $707.9 million, versus a forecast of $628 million. Compared with the previous three months ($772.5 million), the metric also fell by 8.4%.

The previous driver — subscriptions and services — interrupted its steady growth. Fees stood at $335.4 million versus $361.7 million in the prior quarter and $147.4 million a year ago. The reason — the decline in interest income from $240.8 million to $201.4 million. Earlier the company warned that the dynamics would be driven by a reduction in circulating supply of USDC in recent months.

Decline in market share Coinbase in Ethereum staking after the SEC lawsuit did not slow the revenue growth in this segment — receipts rose from $73.7 million in January–March to $87.6 million. The impact of the suspension of the service in several US states will be reflected in the next quarterly report.

Trading commissions fell by 12.7% — from $374.7 million to $327.1 million, versus a forecast of $284.7 million. By comparison, in the second quarter of 2022 they were twice as high ($655.2 million).

Trading volume declined 37% quarter-on-quarter — from $145 billion to $92 billion, versus a forecast of $99.7 billion. The result was partly offset by higher trading fees after revising the pricing policy and increased activity for the Coinbase Prime product.

Earlier the company canceled discounts for certain categories of institutional clients and widened the spread on standard trades for retail investors.

In the third quarter, management expects to sustain the trend of improving profitability, despite an anticipated decline in subscription and services revenue at least to $300 million.

In the ongoing frictions with regulators, Coinbase sees an opportunity to bring greater regulatory clarity to the industry. The company welcomed recent initiatives by US lawmakers to build a market structure for crypto firms, as well as EU approval of the MiCA law.

The full launch of Coinbase’s second-layer solution Base from Coinbase will take place on August 9.

Base is built on the OP Stack from Optimism. It operates as an Ethereum rollups network and aims to reduce transaction fees for participants in the Coinbase ecosystem and the DeFi-segment.

Earlier JPMorgan analysts described the Ripple court ruling as a ‘win’ for Coinbase.