Wall Street analysts made a mixed judgment at Coinbase (Coin) after a first quarter revenue error and a $2.9 billion acquisition, pointing to short-term forecasts and long-term strategic victory for several downgrades.
“The Q1 results fell a little below expectations, with positive guidance (subscription and services) revenues and April (transaction) volume affected by softer crypto markets and mix/rebates,” Benjamin Budd, who maintained Berkeley’s “equal weight” rating, wrote in the report. “Otherwise, Coin will remain very optimistic, seeing great trading share profits in both the first quarter spot and the future.”
US-based Crypto Exchange achieved $2.03 billion, down more than 12% from the last quarter in revenue. Transaction revenue fell almost 19% to $1.3 billion, raising the red flag for the current period. Several analysts, including Keefe, Bruyette & Woods and JPMorgan, lowered their two-quarter and full-year revenue forecasts, citing falling fees and lighter institutional activity.
Retail transactions remained stable, but institutional revenues were hit hard. JPMorgan flagged a decline in revenue from quarterly quarterly 30% facility volume driven by the heavier presence of incentives, rebates and high frequency traders, as well as a decline in facility costs between 4.1 and 3.1 basis points.
Still, the $2.9 billion acquisition of Derivit, a major global crypto derivatives exchange, stood out as a bold bet on the future of derivatives.
The deal is expected to end by the end of the year, drawing praise from Bernstein (the outperform rating). Canaccord Genuity (Buy Rating) said the acquisition gives Coinbase international strength and is finally applying it for clearance of US regulators’ crypto options.
Exchanges have leaned towards other growth levers while revenue transactions are sluggish. Subscription and service revenues rose 9% to $698 million, boosted by the adoption of Stablecoin. Coinbase’s USDC balance jumped nearly 50% to $12.3 billion, while off-platform balances went from 39% to $42 billion. According to Canaccord, the average balance per user has tripled since June 2023.
The company’s strategy includes expanding its “Coinbase as a Service” model. This is a white-label infrastructure for institutions looking to enter the crypto market. Canaccord analysts say this could become a key pillar of revenue and provide hedges against unstable trading cycles.
“At this point, we’ve heard a lot of anecdote data points from the infrastructure players at Tradfi and Crypto-Native that the industry’s build strategy is the most likely scenario if the industry evolves rapidly,” says analysts at Canaccord. “Revenue from such types of infrastructure as a service helps smooth quarterly transaction volatility while at the same time further solidifying cornerstone positioning in the market.”
Oppenheimer (Outperform) and Barclays highlighted macroeconomic risks, including tariff-related uncertainty and weak sentiment that reduced the volume in April and May. Hope for clarity in regulations suffered from set-up when the genius act (a Senate bill focusing on stablecoin) was blocked earlier this week. Nevertheless, JP Morgan said management remains optimistic that legislative progress could resume before the August break.
Coinbase sees it as the centre of an evolving cryptographic ecosystem. Although the immediate outlook is clouded with low volumes and narrowed prices, many analysts say the long-term advantages of the expanding suite of exchanges, the dominant US market position, and the early derivatives and infrastructure movement.
As Canaccord said, Coinbase remains the “gold standard” for both institutional and retail to digital assets in the short term, even when it is necessary to navigate a more choppy ocean.
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