727 FinanceWhen Bitcoin's price is stuck in a range, the market will take a more sober view of Coinbase's profitability and risk resilience as a company.
Written by Eric, Foresight News
In the early hours of October 30 Beijing time, Coinbase delivered a quarterly report that was "strong on the surface but hollow underneath."
In the third quarter of this year, Coinbase's net income was $719 million, up 66% year-over-year, with diluted earnings per share of $2.51. But total revenue for the third quarter was $1.216 billion, down 35% year-over-year, and operating income, which reflects the results of core operations, was only $61.67 million, plunging 87% year-over-year.
The more intriguing disclosure is buried in the latter half of the filing. Within the five weeks from August to September, CEO Brian Armstrong, co-founder Fred Ehrsam, and President and COO Emilie Choi successively established stock sale plans, with a combined cap of 13.5945 million shares, worth approximately $2.18 billion based on the October 29 closing price of $160.59.
Where did the $700 million in net income come from?
In the third quarter, Coinbase's pre-tax income was $824 million, of which gains on investment crypto assets contributed $715 million, or about 87%. These gains came from the mark-to-market appreciation of the company's own holdings of bitcoin, ether, and other crypto assets. Together with other net gains of $66.73 million, that was what pushed net income to $719 million.
In other words, excluding the unrealized gains from rising coin prices, Coinbase's core business this quarter was barely hovering around the break-even line.
The weakness on the revenue side was across the board. The company said outright in its quarterly report that operating cash flow decreased by about $1 billion in the first three quarters, mainly due to an $1.1 billion decline in net consumer transaction revenue. Costs, meanwhile, moved in the opposite direction: technology and development expenses were $447 million, still growing year-over-year even as revenue fell by 30%, so operating leverage was amplified in reverse.
Stretching the timeline to the first three quarters, the picture is even less encouraging. Coinbase's cumulative net loss was $34.89 million, compared with net income of $1.927 billion in the same period last year. The single-quarter profit in the third quarter looks more like a projection of the coin price rebound onto the financial statements than an operating inflection point.
Traders down 20%, USDC deposits hit a record high
In the third quarter, Coinbase's transaction revenue was $590 million, down 44% year-over-year, and its share of net revenue fell from 59% in the same period last year to 51%. Of that, retail transaction revenue was $450 million, down 47%, behind which consumer spot trading volume shrank 59% year-over-year. Institutional transaction revenue was $91.65 million, down 32%, with institutional spot trading volume shrinking 53%.
Derivatives were the only bright spot in the trading business; the filing said they showed resilience amid poor market conditions, and Deribit, consolidated in August 2025, made derivatives revenue growth in the first three quarters outweigh the decline in spot, while prediction markets and equity trading also began contributing incremental revenue this quarter.
In the third quarter, Coinbase had 7.4 million monthly transacting users, compared with 9.3 million in the same period last year, a drop of a full 20%. Platform assets were $376.6 billion, down 27% year-over-year, of which about $160.5 billion of the decline came from falling coin prices, mainly bitcoin, with growth in users' holdings offsetting only a small part.
Supporting the other side of the statements was subscription and services revenue, at $570 million, down 20% year-over-year, but its share of net revenue rose from 41% to 49%. This is the first time Coinbase's revenue structure has come close to a 50/50 split between transaction fees and subscription fees.
Breaking it down, stablecoin revenue was $307 million, down only 5%, the most stable block among all revenue lines. The average USDC balance within Coinbase products hit an all-time high, contributing an additional $84.6 million, but lower interest rates took away $52.8 million. Block reward revenue was $85.74 million, halved year-over-year, mainly due to falling Solana and Ethereum prices and lower staking yields. Interest and finance fee revenue was $68.56 million, growing 6% against the trend.
Both the revenue and cost sides around USDC are expanding. On the revenue side, Coinbase renewed its revenue-sharing arrangement with Circle during the year on the original terms, with no change in the partnership. On the cost side, USDC holding rewards paid to users reached $129 million, up 16% year-over-year, due to continued growth in customer USDC balances on the platform. Between the inflow and the outflow, USDC has become the de facto second engine of this business.
Beyond the statements there is also an equity linkage. Coinbase holds an equity stake in Circle; after Circle went public in the second quarter of 2025, this investment was remeasured at fair value, contributing $39.23 million in gains in the third quarter, whereas in the same period last year this remeasurement caused a $400 million book loss. From the revenue-sharing agreement to the equity tie-up, the interests of Coinbase and Circle are now deeply intertwined, and the health of stablecoins determines the temperature of these financial statements more directly than ever before.
A $2 billion sell plan
This is the most closely watched part of this quarterly report, and also the easiest to misread.
According to the 10-Q disclosure, Armstrong established a plan on August 12 for the sale of up to 8.1674 million shares, with an execution window from November 16, 2026 to October 22, 2027. Ehrsam established a plan on September 4 for up to 3.8666 million shares, with a window from December 7 this year to June 7 next year. Choi established a plan on September 8 for up to 1.5605 million shares, with a window covering all of 2027.
The three together total 13.5945 million shares, about 5.1% of the company's total share capital, with Armstrong alone accounting for 60%.
A key concept needs explaining here: Rule 10b5-1 plans. This is a compliant trading mechanism set up by the SEC for insiders of listed companies, under which executives, when not in possession of material non-public information, agree in writing in advance on the quantity, price conditions, and timetable for future stock sales, after which a broker executes automatically according to the plan. The purpose of the regime is to protect insiders: as long as they were clean when establishing the plan, subsequent sales do not constitute insider trading even if they happen to coincide with good or bad news. Coinbase's own internal control policy mandates that executives may trade company stock only through such plans.
So strictly speaking, this does not mean the three executives are about to dump $2 billion. All three plans have stock price thresholds, and sales are triggered only when the market price reaches a preset level, though the specific thresholds were not disclosed. The execution windows are spread over the next 12 to 15 months, and the earliest sale will not come until mid-November. Choi's plan also specifically notes that the cap includes restricted stock units not yet granted or vested, so the actual sellable quantity will be significantly smaller than the nominal cap.
The process is compliant and is unlikely to add short-term selling pressure, but the signal cannot be ignored. Three plans landed in quick succession within five weeks, totaling more than $2 billion, at a time when Coinbase's stock price had fallen from its intra-year high of $361.40 to around $160. Such collective action is hard for the market not to read as insiders' statement on the current valuation.
On the other side, in the first three quarters, Coinbase spent $1.249 billion repurchasing about 7.13 million of its own shares, with the repurchase authorization raised all the way from $1 billion to $4 billion, leaving $1.961 billion of available capacity on the books. Over the same period, the company also repaid $1.273 billion of maturing convertible notes, and its cash reserves fell from $11.285 billion at the start of the year to $8.604 billion.
But the pace is changing. In the third quarter alone, the company's buybacks nearly ground to a halt: it bought no shares at all in July and September, and in August bought only 38,000 shares at an average price of $139.91.
The market's vote
After the earnings release, the market gave no face to this report card of "net income up 66%." In pre-market trading on October 30, as of the time of writing, Coinbase's stock price was $152.78, down about 4.84% from the previous close.
The divergence is also obvious. The average price target from sell-side analysts is $210.85, with ratings still in buy territory, implying about 30% upside from the current price. But because the company as a whole was loss-making over the past twelve months, the price-to-earnings metric has become useless; behind a price-to-sales ratio of around 7x, what is actually being bet on is the elasticity of the crypto market's next cycle.Barclays firmly assigned an "Underweight" rating, believing that global crypto trading activity is generally weak, with low confidence in a broader recovery, and that new businesses can hardly fully offset reliance on retail trading and USDC revenue.
Coinbase itself stated this candidly in its quarterly report: if crypto asset prices fluctuate by 50%, the company's $2.225 billion investment holdings would generate approximately $1.1 billion in mark-to-market gains or losses. The fluctuations in this income statement are essentially in sync with the coin price.
The net profit of $719 million in the third quarter was, rather than earned by the exchange, helped by Bitcoin. And the three executives' $2 billion sell-off timetable has already been set, and will be initiated as early as mid-November.
When the Bitcoin price is neither high nor low, the market will view Coinbase's profitability and risk resistance as a company more calmly. The market still needs to wait for more data to determine whether the increase in the proportion of Coinbase's non-trading revenue can be sustained.