Feb 15, 2024 - Business

Coinbase posts annual profit for 2023 after fourth quarter surge

Illustration of the Coinbase logo being lifted by a stock trend line

Illustration: Annelise Capossela/Axios

Coinbase Global, the U.S.'s largest centralized crypto exchange, posted a quarterly profit for the first time since 2021.

Zoom in: Transaction revenue, the firm's core business, grew 83% in the fourth quarter from the prior period to $529 million — driven by higher volatility and asset prices.

  • The firm breaks its transaction revenue into bitcoin, ether, and all other crypto assets. That final category, accounting for 48% of such revenue, narrowly beat bitcoin, at 35%, across 2023.

Of note: The approval of spot bitcoin ETFs mid-January weighed on Coinbase's shares as analysts and investors wondered if they would compete with the company's crypto trading business.

  • That question won't be answered until future quarters.

By the numbers: Coinbase's stock jumped over 13% in after-hours trading following the results Thursday.

  • The company reported a $273 million profit in the fourth quarter. For the full year of 2023, it earned $95 million on $3.1 billion in revenue. In 2022, it booked a $2.6 billion loss.
  • Revenue was $954 million in Q4, up 41% from the prior three months.
  • So far in Q1 2024, through Feb. 13, it's seen $320 million in transaction revenue.

Be smart: Earnings reports give investors a sense of how the company is doing, but also where it's going.

  • Coinbase largely makes money by charging its customers fees for trading cryptocurrency, so analysts expected the surge in crypto prices in the fourth quarter to translate to higher trading volume.
  • That's, in part, why Coinbase is considered a bitcoin-proxy, often moving with the world's largest digital asset. (BTC rose more than 50% last quarter.)

What we're watching: The company has been trying to diversify its business as ever-changing crypto seasons showed up in its financials, to the chagrin of its shareholders.

Flashback: In late August, it re-cut its deal with stablecoin issuer Circle, now earning a pro rata portion of income earned on USDC reserves based on the amount of USDC held on its platform, as well as from USDC distribution after certain expenses.

  • Coinbase announced a cut of 20% of its workforce, or 950 people, in January last year, and Armstrong said was a "difficult decision" aimed at reducing expenses. It was Coinbase's third round of layoffs since 2022.

Our thought bubble: The company's also been spending a lot in a bid to influence public policy.

  • Coinbase is a major donor to super pac Fairshake, as well as associated pacs, and lengthy television ads about how crypto changes the future.

The bottom line: It's also in battle with the SEC in court over its business model.

Brady Dale contributed reporting.

Editor's note: This report was corrected to reflect that Coinbase's last round of layoffs were announced in January last year (not this year).

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