Wall Street analysts offered mixed reactions to Coinbase (COIN) following its earnings miss for the first quarter and the announcement of a $2.9 billion acquisition, with some downgrading their short-term forecasts while others emphasized the company’s long-term strategic positioning.
“Q1 results fell slightly short of expectations, and forward guidance for [subscription and service] revenues, as well as April [transaction] volumes, were impacted by softer crypto market conditions and adjustments to mix/rebates,” wrote Benjamin Buddish from Barclays, who maintained an “equal weight” rating on the stock. “Nevertheless, COIN achieved impressive market share gains in both spot and futures trading, and its outlook remains largely optimistic.”
Coinbase reported a 12% decline in quarterly revenue, bringing in $2.03 billion, which was lower than expectations. Transaction revenue, in particular, fell nearly 19% to $1.3 billion, sparking concerns about the current quarter. Analysts at firms like Keefe, Bruyette & Woods and JPMorgan revised their second-quarter and full-year revenue projections downwards, citing a reduction in fee rates and a slowdown in institutional trading.
Retail trading volumes remained stable, but institutional revenue took a significant hit. JPMorgan pointed out a 30% quarter-over-quarter decline in institutional volume and a reduction in institutional fees, from 4.1 to 3.1 basis points, which they attributed to increased rebates, incentives, and the growing presence of high-frequency traders in the market.
Despite the trading revenue dip, Coinbase’s $2.9 billion acquisition of Deribit, the leading global crypto derivatives exchange, stood out as a strategic move for the company’s future. The deal, which is expected to close by the end of the year, has been well-received by some analysts. Bernstein gave the acquisition an outperform rating, calling the valuation fair given Deribit’s $1.2 trillion annual volume and $30 billion in open interest. Canaccord Genuity (buy rating) noted that the acquisition strengthens Coinbase’s international presence and positions it for future U.S. regulatory approval for crypto options.
While trading revenue has slowed, Coinbase is turning to other growth avenues. Subscription and services revenue rose 9% to $698 million, largely driven by the increasing adoption of stablecoins. USDC balances on Coinbase surged by nearly 50% to $12.3 billion, with off-platform balances rising 39% to $42 billion. Canaccord highlighted that average balances per user have tripled since June 2023, underscoring growth in non-transactional revenue streams.
The company is also expanding its “Coinbase as a Service” offering, which provides white-label infrastructure for institutional clients looking to enter the crypto market. Canaccord analysts believe this could become a major source of revenue, helping to smooth out fluctuations in trading volumes and providing a hedge against market volatility.
“We’ve heard from both traditional finance (TradFi) and crypto-native infrastructure players that a ‘buy vs. build’ strategy is increasingly likely as the industry evolves rapidly,” Canaccord analysts noted. “Revenue from such infrastructure services would help reduce quarterly revenue variability, further solidifying Coinbase’s position in the market.”
Oppenheimer (outperform) and Barclays raised concerns over macroeconomic risks, such as tariff-related uncertainty and weak market sentiment that contributed to reduced trading volumes in April and early May. Additionally, hopes for regulatory clarity were dampened when the GENIUS Act—a Senate bill focused on stablecoins—was blocked earlier in the week. However, JPMorgan remains optimistic that progress on crypto regulation could resume before the August recess.
Despite the short-term challenges, Coinbase maintains its role as a central player in the evolving crypto ecosystem. Analysts agree that the company’s expanding product suite, dominant position in the U.S. market, and early-mover advantage in derivatives and infrastructure position it well for long-term success.
As Canaccord put it, Coinbase remains the “gold standard” for both institutional and retail entry into digital assets, even as it navigates the challenges of a difficult market in the near term.
