Coinbase Global, Inc. (NASDAQ: COIN)

Coinbase delivered solid financial results in Q1 2025, with total revenue of $2 billion. Transaction revenue was $1.3 billion, down 19% quarter-over-quarter, while the company continued to gain market share in both spot and derivatives trading. The decline in transaction revenue was mainly due to growth in derivatives trading business, where the company offered trading rebates and incentives to build liquidity, as well as a spot volume mix shift concentrated among market makers and liquidity providers who tend to have lower fee rates.

Consumer trading volume was $78 billion, down 17% quarter-over-quarter, with transaction revenue declining 19%. Institutional trading volume was $315 billion, down 9%, while institutional transaction revenue declined more significantly by 30% due to the factors mentioned above. Despite these headwinds, Coinbase managed to outperform the broader market, with total global spot trading down 13% compared to Coinbase's 10% decline.

Subscription and services revenue reached an all-time high of $698 million, growing 9% quarter-over-quarter. This growth was primarily driven by stablecoin revenue, which increased 32% to $298 million. Coinbase One also continued to add new subscribers as the company extended new benefits. USDC has shown remarkable growth, with monthly transacting users holding USDC doubling over the last two years, and the average balance of USDC per holder tripling during the same period.

Total operating expenses were $1.3 billion, up 7% quarter-over-quarter, primarily driven by higher variable expenses resulting from elevated market maker activity earlier in the quarter, as well as losses on crypto assets for operations. Adjusted EBITDA for the quarter was $930 million, while net income was $66 million. The company introduced a new profitability metric, adjusted net income, which was $527 million for Q1 2025.

The company's balance sheet remains exceptionally strong, with $11.5 billion in cash and cash equivalents, short-term investments, and restricted cash as of March 31, 2025. This provides significant financial flexibility to invest in growth opportunities and return capital to shareholders.

Deribit Acquisition: On May 8, 2025, Coinbase announced the acquisition of Deribit, the world's leading crypto options exchange, for approximately $2.9 billion. The acquisition makes Coinbase the number one crypto derivative platform globally by open interest and represents the company's biggest move to accelerate its international roadmap. Deribit has a consistent track record of generating positive adjusted EBITDA, with $30 billion of open interest and $1 trillion in trading volume outside the U.S. last year. This acquisition will enable Coinbase to offer traders spot, futures, and options all under one roof, providing greater capital efficiency and more options to play the markets in either rising or falling conditions.

USDC Growth: USDC hit a market cap all-time high of $60 billion in Q1 2025, and the average USDC held in Coinbase products increased 49% quarter-over-quarter to $12 billion. This growth contributed to a 32% increase in stablecoin revenue to $298 million. Base stablecoin balances reached $4 billion in Q1, up 12% quarter-over-quarter, largely driven by USDC. The company's partnership with Circle, which is indefinitely renewable, ensures that increased USDC balances on the platform result in durable revenue for Coinbase.

International Expansion: Coinbase accelerated its international expansion by securing a VASP registration in Argentina and registering with India's Financial Intelligence Unit (FIU), unlocking access to one of the fastest-growing crypto markets. This is part of the company's successful international playbook driven by obtaining new licenses and entering new markets.

Onchain Lending: The company expanded its onchain lending products powered by Base, launching Bitcoin-backed USDC borrowing. This feature gives users instant liquidity without having to sell their Bitcoin. In the first 100 days since launch, the product saw over $100 million in loans, growing to $160 million by the time of the earnings call, demonstrating strong demand for this service.

Base Ecosystem Development: Coinbase completed two acquisitions in Q1 to enhance the utility of Base: Spindl, an onchain ad platform to help apps get distribution, and Iron Fish, which is helping create private transactions on Base. These acquisitions reflect the company's commitment to empowering builders on Base and driving the next wave of crypto adoption.

Trading Business: Despite a challenging market environment, Coinbase continued to gain share in both spot and derivatives trading. The company drove over $800 billion in global derivatives trading volume in Q1 2025, with its international exchange seeing a perps market share increase of over 60%. Consumer trading volume was $78 billion (down 17% QoQ), while institutional trading volume was $315 billion (down 9% QoQ). The decline in institutional transaction revenue (down 30% QoQ) was disproportionate to the volume decline due to growth in derivatives trading business (where trading rebates are offered) and a spot volume mix shift that was more concentrated among market makers and liquidity providers who tend to have lower fee rates.

Portfolio Margin 2.0: Coinbase launched Portfolio Margin 2.0, expanding access to long-short capabilities and increasing leverage for institutional traders. This enhancement is part of the company's strategy to build a comprehensive trading platform that meets the needs of sophisticated institutional customers.

USDC Growth: The company made great strides toward its goal of making USDC the number one stablecoin. USDC hit a market cap all-time high of $60 billion in Q1 2025, and the average USDC held in Coinbase products increased 49% quarter-over-quarter to $12 billion. Over the last two years, the number of monthly transacting users holding USDC has doubled, and the average balance per holder has tripled. This growth has contributed to a 32% increase in stablecoin revenue to $298 million.

Base Ecosystem: Base stablecoin balances reached $4 billion in Q1, up 12% quarter-over-quarter, largely driven by USDC. The company continues to focus on empowering builders on Base and driving utility for the next wave of crypto adoption. The acquisitions of Spindl and Iron Fish are part of this strategy to enhance the utility of Base and create a more robust ecosystem.

Stablecoin Payments: Coinbase has started to build a business account that includes B2B payment features for startups and SMBs. In Q2, the company will be onboarding the first businesses to its pilot, enabling them to make stablecoin pay-ins and payouts. Given Coinbase's long history building crypto infrastructure, custody trading, and its network of bank partners around the world, the company believes it is well-positioned to power stablecoin payments for many businesses.

Coinbase's world-class policy and legal teams achieved significant wins in Q1 2025, both in Washington D.C. and in the courts, contributing to greater regulatory clarity for the crypto industry:

Key Regulatory Achievements

• Executive Order: A new executive order directed the establishment of a Strategic Bitcoin Reserve and Digital Asset Stockpile, effectively recognizing Bitcoin as a strategic asset for the United States
• Bipartisan Legislation: Progress on bipartisan legislation in Congress, building clearer frameworks for both stablecoins and crypto market structure
• SEC Lawsuit Dismissal: The dismissal of the SEC lawsuit against Coinbase marked a major judicial win for the balanced, innovation-friendly regulation that the company has been advocating for
• CFTC Collaboration: Ongoing work with the CFTC to bring perpetual futures to the U.S. market, with 24/7 trading of Bitcoin and ETH futures launching in the U.S.

The company has been meeting regularly with members on both sides of the aisle in the House and the Senate to help progress stablecoin market structure legislation. The recent vote, which took place on the day of the earnings call, represents good progress according to management, with another vote on stablecoins expected the following week.

The dismissal of the SEC lawsuit against Coinbase was highlighted as a particularly important milestone, not just for the company but for the entire industry and for protecting customers' rights. This legal victory contributes to the growing regulatory clarity that is expected to enable crypto rails to power an increasing share of global GDP.

With increasing regulatory clarity, Coinbase believes it is better positioned than ever to capitalize on the opportunities ahead in 2025. The company continues to advocate for balanced, innovation-friendly regulation that protects consumers while allowing for technological innovation and growth in the crypto industry.

Looking ahead to Q2 2025, Coinbase provided the following guidance:

• April transaction revenue of approximately $240 million, with spot transaction volume declining approximately 12% month-over-month (similar to global spot volume, which was down approximately 13%)
• Continued focus on growing derivatives trading market share, with planned investments in trading incentives expected to have a $30-40 million quarter-over-quarter impact in Q2
• Subscription and services revenue projected to be between $600 million and $680 million, with expected stablecoin revenue growth offset by declining Ethereum and Solana prices (down approximately 36% and 25%, respectively, in Q2 compared to Q1 averages)
• Technology and development and general and administrative expenses expected to be in the range of $700-750 million, with the quarter-over-quarter decline mostly driven by lower variable expenses like infrastructure, customer support, and seasonally lower payroll taxes
• Sales and marketing expenses projected to be in the range of $215-315 million, depending on performance marketing opportunities and total USDC balances

Management cautioned that macro uncertainty, including around global trade policy, may contribute to softer crypto trading markets and lower asset prices as the company enters the second quarter. However, they emphasized that Coinbase has navigated choppy markets before and expressed confidence in the company's ability to maintain its long-term product roadmap and remain financially disciplined.

Management also reminded investors that trading markets can evolve quickly and cautioned against extrapolating monthly results. The Deribit acquisition is expected to close by the end of the year, and upon closing, Coinbase expects Deribit to immediately enhance profitability and add diversity and durability to trading revenues.