San Francisco-based cryptocurrency exchange Coinbase reported better-than-expected revenue for the first quarter of 2023, beating analysts’ estimates and sending their shares up by 9%. The company announced on Tuesday that it generated $2.23 billion in revenue during the first three months of the year, surpassing the $1.81 billion consensus estimate of analysts surveyed by FactSet.
Coinbase’s net profit for the quarter came in at $1.84 billion, or $9.32 per share, compared to a loss of $30.7 million, or $0.17 per share, in the same period last year.
A surge in trading volume and active users drives Coinbase’s strong performance
The company’s strong performance was driven by a surge in trading volume, as the total trading volume on the platform reached $335 billion in the first quarter, up from $89 billion in the same period last year.
In addition to Coinbase shares up by 9%, Coinbase’s active user base grew to 68 million during the quarter, up from 56 million at the end of 2022.
“Coinbase had a robust first quarter,” said Brian Armstrong, the company’s CEO. “We saw increased crypto adoption by institutions, and we’re seeing a lot of retail interest as well.”
The company’s results were particularly impressive, given the recent volatility in the cryptocurrency markets. Bitcoin, the largest cryptocurrency by market capitalization, saw its price drop by more than 20% during the first quarter, while other cryptocurrencies experienced similar declines.
Trading fees remain Coin base’s primary revenue source despite market volatility
Despite the volatility, Coinbase’s revenue from trading fees remained strong, accounting for 86% of the company’s total revenue for the quarter. Coinbase’s success in the first quarter has led some analysts to revise their estimates for the company’s performance for the entire year.
“We believe Coinbase is well-positioned to benefit from the ongoing adoption of cryptocurrencies,” said Tom Lee, managing partner at Fundstrat Global Advisors. “We are raising our estimates for Coinbase’s 2023 revenue and earnings per share.”
Analysts revise estimates for Coin base’s full-year performance based on Q1 results
Coinbase’s shares have been volatile since the company went public via a direct listing on the Nasdaq in April 2021. The company’s shares surged in the first few days of trading, reaching a high of $429.54 on April 14, before falling back to earth in the following weeks.
The stock has been on an upward trajectory in recent weeks, however, as investors have become more optimistic about the outlook for the cryptocurrency markets. Despite the recent gains, where Coinbase shares are up by 9%, some analysts remain cautious about the long-term prospects for Coinbase and other cryptocurrency companies.
Some analysts remain cautious about Coin base’s long-term sustainability and competition
“While Coinbase is clearly benefiting from the growth of the cryptocurrency markets, we remain concerned about the long-term sustainability of its business model,” said Richard Repetto, an analyst at Piper Sandler. “We believe the company will face increased competition from other exchanges and new entrants, and we are sceptical about the long-term value of cryptocurrencies.”
Coinbase has been working to diversify its business in recent months, launching a range of new products and services aimed at institutional investors and other high-net-worth clients. The company has also been expanding its international footprint, launching operations in Japan and other Asian markets.
“We’re focused on building a sustainable and diversified business that can weather the ups and downs of the cryptocurrency markets,” Armstrong said. “We’re optimistic about the future of cryptocurrencies and the role Coinbase can play in the ecosystem.”