COIN Earnings Preview: Investor expectations lower as crypto regulation uncertainty looms

Coinbase Global (COIN) will release its Q3 earnings today after market close, with analysts expecting earnings per share (EPS) of $0.45 and revenue of $1.26 billion. This report will follow a period of marked volatility for both crypto assets and Coinbase’s stock, which is up over 26% year-to-date but has experienced fluctuations linked to the price of Bitcoin and other major cryptocurrencies. Investor sentiment on Coinbase has been cautious amid regulatory uncertainty and the company’s ongoing legal battles with the SEC, making today’s report and forward guidance pivotal for future stock performance.

Key metrics for this quarter will include trading volume and monthly transacting users (MTUs), both of which could impact revenue given a reported dip in trading volume by 19% quarter-over-quarter, according to third-party data. Coinbase last reported 8.2 million MTUs, and analysts will be looking for stability or growth in this figure as an indicator of user engagement. Subscription and services revenue, particularly earnings from staking and the USDC stablecoin, are also crucial to watch as Coinbase continues its push toward more diversified, predictable revenue streams amid volatile transaction-based income.

Analysts are also focused on Coinbase’s market share, which has reportedly seen some erosion this quarter, particularly in retail trading volume. The company’s ability to maintain a competitive take rate on transactions will be closely monitored, especially given Robinhood’s reported gains in market share in equities and options trading. Coinbase’s growth in areas such as subscription and services revenue has been an increasingly significant part of its strategy to mitigate dependence on transaction volume, but regulatory scrutiny on these income streams adds complexity to future growth projections.

The company’s guidance on regulatory issues and ongoing legal battles will be critical. Coinbase is one of several crypto firms engaged in litigation with the SEC, which is challenging its status as a registered securities exchange. With the 2024 U.S. presidential election potentially influencing regulatory approaches, the report could provide insights into Coinbase’s stance on the potential regulatory shift if new crypto-friendly policies emerge. An SEC-led shift in the classification of crypto assets could heavily impact Coinbase’s operations, making management’s guidance in this area highly valuable.

Coinbase’s results will set the tone for other crypto-focused companies, as competitors face similar challenges with regulatory scrutiny and user engagement volatility. Analysts will want to hear any updates on Coinbase’s initiatives to diversify revenue, such as its USDC stablecoin and recent introduction of derivatives trading for foreign customers.

Additionally, Coinbase’s stance on interest rates will be under scrutiny, as rising rates have contributed positively to its USDC income in previous quarters. However, if the Federal Reserve signals a pause or rate cut, interest earnings from stablecoins and treasury-backed assets may flatline, potentially pressuring this revenue source. Coinbase’s ability to manage these income variables will be a focal point for analysts assessing the sustainability of its broader revenue streams.

Overall, this Q3 report is expected to provide essential clarity on Coinbase’s position in a fast-evolving regulatory landscape, its efforts to stabilize revenue streams, and its competitive positioning as market share becomes increasingly fragmented. Heading into earnings, Coinbase shares have shown volatility but remain relatively stable at around $219 per share. Investors will be looking closely at the company’s commentary on regulation, future revenue diversification, and any strategies to capitalize on potential shifts in policy as a catalyst for growth in the coming quarters.

In Q2, Coinbase reported revenue of $1.45 billion, up significantly by 104.8% year-over-year and slightly above the $1.4 billion consensus. Adjusted EBITDA saw a strong boost to $596 million from $189 million last year, with the company’s subscription and services revenue reaching $599 million, a 17% quarter-over-quarter increase. The growth in this segment was driven by increased USDC on-platform balances and market capitalization, alongside higher crypto asset prices for coins like SOL and ETH.

Looking ahead, Coinbase provided guidance for Q3 subscription and services revenue to range between $530 million and $600 million, acknowledging some potential headwinds, including a recent drop in Ethereum's average price, possible September rate cuts, and increased USDC expenses aimed at advancing its global adoption. While Q2's transaction revenue reached $210 million in July, the company remains cautious about future revenue projections, especially given the volatility inherent in the crypto market and ongoing regulatory uncertainties.