Coinbase earnings: Wall Street divided on trading rebound after Robinhood crypto revenue sinks 55%

Coinbase Global (COIN) reports third-quarter earnings after the market close on Thursday, with analysts looking for signs that crypto trading is recovering after a difficult stretch for the industry.

Trading activity picked up in September after hitting multiyear lows in June, fueled by a rebound in crypto prices. Analysts disagree on how much that recovery helped the crypto exchange and whether it will last.

The uncertainty comes after Robinhood Markets (HOOD) reported a 55% drop in crypto transaction revenue as crypto trading volume fell 38% in the period. Revenue from options and equities trading, in contrast, climbed while prediction markets brought in $173 million, more than six times the year-earlier figure.

That split matters for Coinbase, which still gets a large share of its revenue from customers buying and selling cryptocurrencies. Unlike a traditional stockbroker that can rely on a mix of interest income, investment products and other services, Coinbase remains sensitive to swings in crypto prices because trading volumes tend to shrink when prices fall, leaving Coinbase with lower fee revenue.

Wall Street split on trading recovery

Wall Street analysts forecast Coinbase's trading business improved from the second quarter, but disagree on how much of that activity will translate into revenue.

JPMorgan, which rates Coinbase overweight, is the most optimistic on trading volume, forecasting $173 billion for the quarter. Barclays predicts $147 billion and Oppenheimer $141 billion. That puts their transaction revenue estimates between $578 million and $694 million, while total revenue forecasts range from roughly $1.2 billion to $1.4 billion.

For adjusted earnings before interest, taxes, depreciation and amortization (ebitda), JPMorgan forecasts $323 million, Barclays, with an underweight rating, $360 million and Oppenheimer, which rates the company outperform, $262 million.

The analysts agree that Coinbase remains heavily exposed to swings in crypto trading. Barclays noted that September's pickup in spot volumes appeared to lose steam in early October, while Oppenheimer cut its trading volume forecast by 20% amid weaker market activity.

Stablecoin revenue offers a cushion

Coinbase's stablecoin business could provide some relief. The exchange earns a share of the income generated from reserves backing USDC, the dollar-backed token issued by Circle Internet (CRCL). JPMorgan expects $320 million in stablecoin revenue for the quarter, giving Coinbase a source of income that doesn't depend on customers placing trades.

But lower interest rates could reduce returns on USDC reserves, while competition could put pressure on Coinbase's share of the income, adding risks to that line of business.

Analysts are also watching Coinbase's efforts to expand beyond spot trading through derivatives, payments and tokenized assets. Its acquisition of Deribit, the largest crypto derivatives exchange, gave it a larger presence in crypto options, though recent trading trends have been mixed. Barclays said Coinbase International's futures volume fell 12% from the second quarter, while Deribit's combined options and futures volume rose just 2%.

The concern goes beyond Coinbase. Matthew Sigel, VanEck's head of digital assets, said Robinhood's earnings pointed to a broader problem across brokers and exchanges.

"We've been tracking every broker/exchange that has reported Q3 and the obvious weak link is pricing," Sigel wrote in a post on X.

He said Robinhood showed weak pricing power across options, equities and crypto, with firms struggling to turn trading activity into revenue as fees came under pressure. That could be particularly important for Coinbase, where retail customers have historically generated higher revenue per dollar traded than institutional clients.

The longer-term outlook is where analysts differ most. JPMorgan sees opportunities in tokenization, payments and Coinbase's Base blockchain, while Barclays remains skeptical that newer businesses can offset its reliance on retail trading and USDC income.