Coinbase Earnings: Break Even Results as Weak Cryptocurrency Market Conditions Depress Revenue

Key Morningstar Metrics for Coinbase Global

• Fair Value Estimate
  : $160.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Very High

What We Thought of Coinbase Global’s Earnings

Coinbase Global COIN reported weak first-quarter earnings, with revenue down 31% from last year to $1.41 billion as cryptocurrency prices fell. The drop in revenue caused Coinbase to lose $394 million, though this includes a $482 million pretax loss on cryptocurrency investments.

Why it matters: Coinbase’s shares are trading mid-single-digit percentages lower after hours on May 7. That said, our thinking on the firm is largely unchanged following the release, as cyclically weak cryptocurrency conditions were a major factor in Coinbase’s difficulties.

• Coinbase’s revenue is highly correlated with cryptocurrency prices, which collapsed by around 30% in the first quarter compared with the start of the year. Weak market conditions drove a 40% year-over-year decrease in trading revenue to $755 million and created headwinds for the firm’s custody and staking businesses.
• However, we were aware of these headwinds going into the earnings release and expected trading revenue to decline. Additionally, we typically caution that cryptocurrency prices are inherently volatile and that investors should be wary of extrapolating strength or weakness from Coinbase’s quarterly earnings.

The bottom line: As we incorporate first-quarter earnings, we expect to raise our $160 fair value estimate for no-moat Coinbase by about a mid- to high-single-digit percentage. Despite the increase, we will likely still see the shares as modestly overvalued at the current price.

• Coinbase recently announced it will reduce its workforce by around 12% in response to weakness in the cryptocurrency market and increased adoption of artificial intelligence tools. Excessive spending was a major factor in Coinbase’s problems during the last cryptocurrency winter, so we are glad to see the firm is taking a more responsive approach now.
• Our projections call for a modest 2.5% increase in operating costs in 2026, but there is room for Coinbase to outperform our expectations, given its workforce reduction plans.