Coinbase Global Inc. reported a significant earnings beat for the first quarter, with revenues soaring past analyst expectations, thanks in part to a robust rally in bitcoin prices. The company's financial results were bolstered by increased trading volumes and a surge in transaction revenue, reflecting heightened investor interest in cryptocurrencies.
For the quarter, Coinbase announced earnings of $4.40 per share on revenue of $1.64 billion, comfortably exceeding the $1.34 billion revenue forecast by analysts surveyed by LSEG. This performance marks a stark turnaround from a year ago when the company reported a loss of $78.9 million, or 34 cents per share. The substantial improvement in net income, which reached $1.18 billion for the quarter, was significantly impacted by a $650 million mark-to-market gain on crypto assets held for investment.
Transaction revenue proved to be a major growth driver, nearly tripling to $1.08 billion from the previous year. Consumer transaction revenue alone accounted for $935 million, showcasing a dramatic increase over the past year. Subscription and services revenue also showed strong performance, contributing $511 million to the quarter's earnings.
The timing of Coinbase's success coincides with a period of intense activity in the cryptocurrency markets. Bitcoin reached a new all-time high above $73,000 in March, driven by both retail and institutional interest. The launch of several U.S. spot bitcoin exchange-traded funds (ETFs), many of which partnered with Coinbase for custody solutions, significantly enhanced market dynamics. These ETFs collectively attracted over $50 billion by the end of the quarter, although inflows have since moderated alongside a slight decline in bitcoin prices.
Coinbase's strategic positioning as the custodian for eight of the eleven new spot bitcoin ETFs underscores its pivotal role in the broader financial landscape. However, the expected direct financial impact of these ETF partnerships on Coinbase's top line has so far been modest, with custodial fee revenue totaling $32 million for the quarter.
Amidst these developments, Coinbase has also been navigating regulatory challenges. The company remains engaged in a legal battle with the SEC over allegations of unregistered securities sales, a dispute set for jury trial. Moreover, competition is intensifying, particularly from platforms like Crypto.com, which are regaining market share.
Institutional engagement has also been notable. The institutional side of the business saw a 133% increase in revenue over the quarter, reaching $85 million. This reflects growing confidence among larger investors in the cryptocurrency market's potential.
Despite the positive earnings report, Coinbase shares dipped slightly in extended trading. This reaction may reflect broader market sensitivities or concerns about future regulatory impacts. Additionally, significant insider selling was reported during the quarter, with Coinbase executives, including co-founder Fred Ehrsam, selling over $383 million worth of shares. This level of insider selling, noted by analysts at Raymond James, is the highest since the company's NASDAQ listing in 2021.
