Coinbase reported a third-quarter net income of $719 million, or $2.51 per diluted share, reversing a two-quarter losing streak and beating analyst expectations for a loss. However, the majority of this profit, approximately $715 million, stemmed from unrealized gains on cryptocurrency held on its balance sheet rather than core operational performance. Excluding these investment gains, adjusted net income stood at $78 million.
Total revenue reached $1.22 billion, matching estimates and remaining flat compared to the second quarter, though it represented a 35% decline year-over-year. Transaction revenue slipped 1% to $590 million but exceeded consensus forecasts as crypto volatility hit multiyear lows. In contrast, subscription and services revenue grew 3% to $570 million, accounting for nearly half of net revenue. This segment was driven by stablecoin holdings, with average USDC in Coinbase products reaching a record $22 billion, and paid Coinbase One subscribers hitting an all-time high.
Prediction markets emerged as a significant growth driver, surpassing $200 million in annualized revenue. The company noted that daily traders in this product grew more than 60% from the prior quarter, with revenue compounding at 82% per quarter since launch. CFO Alesia Haas highlighted that prediction markets provide a revenue stream less correlated with crypto volatility. Additionally, Coinbase cut its 2026 adjusted expense guidance by another $100 million at the midpoint, bringing the range to between $4.15 billion and $4.3 billion.
The headline profitability figure masks a divergence between asset appreciation and operational health. While the $719 million net income satisfies immediate earnings expectations, the reliance on $715 million in crypto gains indicates that core trading activity remains under pressure amid low volatility. The adjusted net income of $78 million provides a clearer view of the exchange's actual earning power, which is positive but modest compared to previous highs.
Strategically, the shift toward subscription services and prediction markets represents a crucial diversification effort. With transaction revenue declining due to market conditions, the growth in stablecoin interest and non-crypto-dependent products like prediction markets offers a hedge against future volatility cycles. The aggressive cost-cutting measures further suggest management is prioritizing margin preservation over top-line expansion in the current environment, aiming to stabilize earnings even if trading volumes remain subdued.
