Coinbase Turns Solid Profits in Q4: Shares Jump 14% Afterhours

California-headquartered Coinbase (Nasdaq: COIN) has reported a profit of $273.4 million or $1.04 per share in the fourth quarter of 2023, beating an expected loss of expected loss of 1 cent per share, according to LSEG data. It was the first quarterly profit of the crypto exchange since 2021.

For comparison, the exchange generated a loss of $2 million in the third quarter of 2023 and a loss of $557 million in the last three months of 2022, showing a massive recovery.

The market quickly reacted to the solid numbers as the value of publicly listed shares of the crypto exchange jumped 14.2 percent in after-hours trading. Coinbase shares are still trading at a heavy discount from its listing price in April 2021.

Revenue Receives a Boost

The profit for the three months between October and December was generated on revenue of $953.8 million, which also exceeded the analysts’ expectation of $826.1 million. The figure elevated 41 percent quarter-over-quarter.

Furthermore, the transaction volume surged 84 percent quarter-over-quarter to $529 million, primarily driven by the volatility and demand for cryptocurrencies. Revenue from its subscription services reached $375.4 million, an increase from the previous quarter’s $826.1 million.

The quarterly demand surged when the market anticipated the approval of Bitcoin exchange-traded funds (ETFs) in the United States. The securities market regulator approved the much-awaited instrument in January.

“ETFs have just been net positive for the industry and additive to Coinbase,” said Alesia Haas, the Chief Financial Officer at Coinbase.

Solid Forecasts

The crypto exchange is expected to generate better results in the ongoing first quarter 2024. It has already generated about $320 million in transaction revenue until February 13. From the subscription and services unit, the exchange is expecting to generate between $410 million and $480 million.

Meanwhile, the legal battle between Coinbase and the Securities and Exchange Commission is ongoing. The exchange is now strengthening its presence in the overseas markets, particularly in Europe, with multiple new licenses.

“Coinbase has always taken a long-term approach focussing on building in a compliant manner, even when it wasn’t the popular choice. Many of our competitors cut corners and broke laws to get big fast, and we’ve seen how that strategy played out,” Coinbase’s CEO, Brian Armstrong, said during the earnings call.