Coinbase’s Q4 report was a blowout, with revenue beating estimates by more than 23% as transaction revenue and trading volumes both rose high triple-digits on a QoQ and YoY basis in the quarter. EPS of $4.68 came in more than 100% above estimates, with Coinbase benefiting partially from gains on crypto asset holdings and higher prices, while adjusted EBITDA and operating income generation were strong.
Management discussed share gains as a growth driver, as trading volume growth significantly outpaced spot market growth on a sequential basis, by as much as 50 points for consumer trading volumes. Transaction revenue growing at a higher rate than trading volumes for both consumer and institutional segments highlighted improvements in monetization, fueled by diversification in revenue streams to stablecoins, financing and subscriptions, and more.
Revenue
Coinbase reported a rather large revenue beat in Q4, following in Robinhood’s footsteps with strong growth in consumer transaction revenues in the quarter. Revenue increased 138.2% YoY and 88.5% QoQ to $2.27 billion, well ahead of estimates for $1.84 billion. The revenue outperformance was driven by significant triple-digit sequential growth in trading volumes, fueled by elevated crypto trading activity and a 27% sequential uptick in volatility as Bitcoin chopped around the $100K mark.
Management also said that they had “reached an all-time high for both U.S. spot and global derivatives market share in Q4,” with contributions from derivatives trading appearing in transaction revenue.
Q4’s strength was a stark contrast to Q3 for the spot market, which rebounded substantially in the quarter. In Q3, the US spot market had declined (18%) QoQ, but in Q4, the US spot market increased 126% QoQ.
For 2024, Coinbase reported $6.56 billion in revenue, up 111.2% YoY, driven by a strong Q1 and Q4. This was fueled by 148% YoY growth in trading volume to $1.2 trillion, with positive macro factors in the approval of Bitcoin ETFs in Q1 and the election of a pro-crypto administration in Q4.
Looking ahead, growth is expected to be in the mid-thirty percent rage for 1H, a substantial revenue from 1.5% and 16.3% estimated prior to the report. Trading volumes are already up significantly on a YoY basis YTD (discussed further below in Q1 Outlook). As a reminder to what we’ve stated in our deep dive from September, it’s nearly impossible to predict quarterly revenue this far in advance as asset volatility and trading volumes can be unpredictable. Recall from our post-Q3 write-up that Q4’s original grow estimate was 100 points lower at 38.9% YoY.
Key Metrics
Trading Volume
Trading volume grew significantly in the quarter, with both consumer and institutional trading volume outpacing spot market growth of 126% QoQ. Q4’s trading volume rose 137% QoQ and 185% YoY to $439 billion, the highest growth rate of the year and accelerating from 143% YoY in Q3. Interestingly, Bitcoin’s share of trading volume declined from 37% in Q3 to 27% in Q4, with other assets gaining 15 points share to 48%.
For 2024, trading volume rose 148% YoY to $1.16 trillion, still well below 2021’s peak of $1.67 trillion.
Consumer trading volume surged 224% YoY and 176% QoQ to $94 billion, outpacing spot market growth by 50 points. What’s notable is that consumer trading volumes are still well below 2021’s peaks despite Bitcoin surpassing $100,000 – consumer trading volume is under half of what it was in Q4 2021.
Institutional trading volume grew 176% YoY and 128% QoQ to $345 billion, rebounding from a string of sequential declines after Q1 this year. Institutional volumes nearly surpassed its prior record of $371 billion, coming in just 7% below that mark.
Transaction Revenue
This strong trading volume growth translated into strong transaction revenue growth; Q4’s transaction revenue 194% YoY and 172% QoQ to $1.56 billion. Despite accounting for a fraction of volume, consumer transaction revenue is the primary revenue driver, growing of 187% YoY and 179% QoQ to $1.35 billion. Institutional transaction revenue surged 285% YoY and 156% QoQ to $141.3 million – Coinbase provided a few factors that fueled this growth, discussed below.
For 2024, transaction revenue increased more than 162% YoY to $3.99 billion. Consumer transaction revenue rose 157% YoY to $3.43 billion, while institutional transaction revenue increased 283% YoY to $346 billion. Base and other transaction revenue rose 121% YoY to $210 million – Coinbase provided some strong stats for Base, with platform assets rising 89% YoY to $1.4 billion for 2024 and $25 billion in stablecoin transaction volume in Q4.
Consumer transaction revenue was 38% below Q4 2021’s peak above $2 billion, faring better than volume at 47% below peak. Consumer revenue also benefitted from a notably strong uptick in monthly transacting users (MTUs), which rose 24% QoQ to 9.7 million (still below Q4 21’s peak at 11.2 million) as Coinbase worked to improve trading experiences on the platform and added 13 new assets including “popular memecoins like PEPE and WIF” in Q4.
Interestingly, Coinbase noted that “nearly half of trading customers in Q4 were either new to Coinbase or resurrected from prior cycles.” While not a true driver of revenue, it’s a positive sign to see re-engagement of old customers and substantial new customer additions that can be monetized.
Despite being below peak volume, institutional transaction revenue reached a new peak at $141.3 million. This was nearly 56% higher than in Q4 when trading volume peaked, as Coinbase is benefiting from Prime and new products like derivates.
Management noted that they are seeing “significant momentum” in the institutional business, including “strong adoption of our Prime suite across custody, prime trading, financing, and staking, with top clients engaging with most of these products in 2024,” adding that “Prime Financing saw all-time high loan balances in Q4 [with] elevated client trading activity among customers who use financing.”
A quick note on Base (which we covered in our deep dive here): Coinbase saw “higher revenue per transaction due to increased network demand and higher ETH prices in Q4,” along with sequential growth in transactions. Cost per transaction remained below the $0.01 target, and Coinbase noted a goal to optimize this further in 2025.
Subscription and Services Revenue
Subscription and Services revenue was $641.1 million in Q4, more than 10.5% higher than the upper end of the $505 to $580 million guide provided last quarter. This reflected growth of 15% QoQ and nearly 71% YoY.
For 2024, Subscription and Services revenue grew 64% YoY to $2.31 billion, and notably “was ~4.5x higher compared to levels during the 2021 bull market.” The majority of 2024’s growth was driven by blockchain rewards with revenue more than doubling, stablecoins, and Coinbase One subscriptions.
For Q1, Coinbase guided for Subscription and Services revenue to be between $685 million to $765 million, for approximately 42% YoY growth and 13% QoQ at midpoint. This would be a nearly 30 point deceleration, though for reference, Q4 was originally guided to see 45% YoY growth.
Coinbase said the sequential growth in Q1 would be driven primarily by stablecoin revenue as USDC assets and market cap reached all-time highs in February, “continued growth in our Coinbase One subscriber base, and the higher average crypto asset prices so far in Q1.”
Within subscription and services revenue:
- Stablecoin revenue rose nearly 32% YoY but declined approximately (9%) QoQ to $225.9 million in Q4, driven by USDC growth, with international exchange customer balances more than doubling QoQ (settled in USDC). For 2024, stablecoin revenue rose 31% YoY to $910 million. Coinbase noted that it facilitated more than $12 billion in on-chain payments in USDC, up 225% YoY. The segment has shown impressive growth, reaching nearly $1 billion in revenue in just two years.
- Blockchain rewards revenue grew 126% YoY and 39% QoQ to $214.9 million in Q4, driven by “higher crypto asset prices, increases in average protocol reward rates (notably SOL), and continued native unit inflows.” For 2024, blockchain rewards revenue increased 113% YoY to $706 million.
- Interest and finance fee income rose 34% YoY and 3% QoQ to $64.7 million in Q4, driven by Prime Financing, which saw all-time highs for loan balances after the election. For 2024, interest and finance fee income grew more than 42% YoY to $266 million.
- Custodial fee revenue rose nearly 119% YoY and 36% QoQ to $43.1 million in Q4, fueled by higher crypto prices and growth in native units under custody. Coinbase noted that “BTC inflows were the largest driver of native unit growth, driven by our role as primary custodian for the vast majority of ETFs.” For 2024, custodial fee revenue rose 103% YoY to $142 million.
- Other subscription and service revenue increased 46% YoY and 56% QoQ to $91.4 million, driven primarily by Coinbase One, with subscriber growth each quarter, accelerating in Q4. One subscribers surpassed 600,000 in Q4, marking 50% growth from Q1. For 2024, other subscription and service revenue rose nearly 125% YoY to $283 million.
Margins
Operating margin showed strong growth on both a sequential and YoY basis, up more than 31 points from last quarter and 33 points from last Q4 to 45.5%. Operating margin nearly matched Q1’s level at 46.4%.
Net margin was 56.8% in Q4 as Coinbase reported $1.29 billion in net income, impacted by “$476 million in pre-tax gains on our crypto asset investment portfolio, the vast majority of which were unrealized.” Pre-tax gains were $357 million when reflecting tax impacts. This was a significant QoQ increase from a 6.3% net margin in Q3, and nearly double Q4 2023’s net margin of 28.9%.
Stock-based compensation was $222 million, or 9.8% of revenue, declining (11%) QoQ. For Q1, Coinbase guided for SBC to be approximately $206 million.
EPS and Adjusted EBITDA
Coinbase places an emphasis on adjusted EBITDA due to crypto asset holdings, reporting its highest adjusted EBITDA quarter of the year in Q4 at $1.29 billion versus $1.01 billion in Q1. Adjusted EBITDA margin was 56.8% in Q4, up from 37.2% in Q3 but down from 61.9% in Q1 due to higher revenue.
For 2024, adjusted EBITDA was $3.35 billion in 2024, rising more than 242% YoY. Adjusted EBITDA margin expanded from 31.5% in 2023 to 51.0% in 2024.
Coinbase posted a rather huge EPS beat in Q4, with diluted GAAP EPS of $4.68 coming in at more than double the $2.04 estimate. This also surpassed the $4.40 in GAAP EPS that Coinbase generated in Q1. One primary takeaway here is that strong spot market conditions and elevated volatility are exponentially beneficial to Coinbase’s earnings generation and growth – Q1 and Q4 accounted for nearly 96% of 2024’s EPS generation.
Cash and Balance Sheet
Operating cash flow remained strong in Q4, rising more than 38% QoQ to $964.6 million. This also marked substantial growth from negative operating cash flow of ($5.2 million) in the year ago quarter. OCF margin was 42.5% in Q4. For 2024, operating cash flow rose 169% YoY to $2.56 billion, with OCF margin expanding from 29.7% to 39.0%.
Cash and equivalents totaled $8.54 billion, while debt remained steady at $4.23 billion. Coinbase is continuing to grow its cash reserves at a quick rate – cash is up almost 11% QoQ and 66% YoY, from $5.14 billion in Q4 2023.
This is quite different than Robinhood, where cash reserves have been flat at $5.1 billion since Q2 2024, and down from $5.3 billion a year ago. Cash and equivalents account for approximately 20% of Robinhood’s total assets, versus 38% for Coinbase.
Q1 Outlook
Coinbase provided a snapshot of transaction revenue for Q1 to date, noting that through February 11, transaction revenue was approximately $750 million. Coinbase cautions not to extrapolate this for the quarter as volatility and asset prices could change on a whim and quickly alter the path of revenue generation, but data from The Block supports a strong quarter of growth, with Coinbase gaining some share.
Monthly exchange volume was estimated to decline approximately (21%) MoM to $2.32 trillion in January, with Coinbase’s volume estimated to decline just (17%) MoM to $159 billion. Through February 14, Coinbase is estimated to have seen trading volume of $64.5 billion, with total exchange volume at $943 billion.
As a percentage of monthly exchange volume, Coinbase’s share rose from 6.5% in December to nearly 6.9% in January and 6.8% in February; both this and the relative outperformance on volume support management’s commentary that they are gaining share.
So far, halfway through Q1, Coinbase’s trading volume is at nearly $224 billion, versus Q1 2024’s $256 billion. Volumes so far are keeping pace with Q4, though this could change quickly.
Earnings Call Q&A
Management discussed the longer-term vision for crypto to fully evolve into an asset with significant daily usage across the world. CEO Brian Armstrong explained Coinbase thinks “crypto is much, much more than just an asset class that people want to trade. There's going to be daily use cases for everybody in the world as crypto updates the global financial system,” touching upon some opportunities in payments and tokenizing securities.
Stablecoin Growth, Revenue Diversification and USDC
Coinbase noted that it diversified its revenue streams during Q4, with growth in derivatives, stablecoins, USDC, staking and other products.
Management shared some interesting stats on stablecoins in the Q&A portion of the call, saying that “there was $30 trillion of crypto stablecoin volume last year. That was up 3x year over year.” CEO Brian Armstrong discussed that for stablecoins, Coinbase believes it can fuel more growth “just driving more partnerships with global and local players like Stripe and Yellow Card to do more global adoption. We've been adding a number of additional stable coin trading pairs on our platform. We've been offering rewards to our customers when they hold USDC,” and these efforts have helped drive stablecoin adoption and revenue in 2024.
Management sees stablecoin payments as a large opportunity in the future, saying that “we're moving with haste to integrate crypto payments across our entire suite of products. We think that'll be a big business over time.”
For USDC, management explained that they “have a stretch goal to make USDC the number one dollar stablecoin,” as it “has a network effect behind it” and could be “really defensible long term. So we'll be accelerating the market cap growth of USDC with more partnerships and leaning into new use cases like adding payment support across our product suite.”
International revenue is improving as well, with management explaining that “international revenue share reached 19% in Q4. And this is due to improved payment rails and localization. We've got a repeatable playbook now that we can launch in these new markets and get them to contribution margin positive. And so we're going to keep doing that in more markets.”
Derivatives Growth
Given that management pointed out that global derivatives reached an all-time high in Q4, they fielded questions about take rates long-term:
Q: Devin Ryan, Citizens JPM: A question on international derivatives. Obviously, just gaining kind of massive traction there and another great quarter of growth. Seems like the fees there are quite a bit lower, obviously. And so also appreciate that might make sense as you're taking share at this type of rate. But I'm curious as you think about take rates in derivatives kind of longer term, should we expect that they would kind of hold the line with where they are now? Or could there be an opportunity to actually increase the take rates as you get to kind of a more mature share?
A: Alesia Haas, Coinbase CFO
“So right now we're focused on building liquidity and building trading volume. And we are providing incentives to various market participants and focus on building that depth of liquidity in each of the order books as we put them on the platform. So, yes, I do believe that over time our fees will evolve and become more mature as we gain this to the scale and market position that we seek to have. And that right now we are not focused on monetizing at the top of the range.
That said, we're going to monetize this competitive with the market. And this is a lower priced product than spot trading. And so you can see us be in a competitive market position here, but not at the current levels that we are today.”
Coinbase is hinting at a path to higher fees, but remaining at a lower take rate than spot trading, requiring more volume to generate the same amount of revenue.
Tokenizing Securities
Management also discussed the tokenization of securities, where they see the potential for a wide range of real-world assets to be brought on-chain with real-time clearing, settlement, and ability to trade 24/7 across the globe.
Q: John Todaro, Needham:
“I have a broader question about the overall vision for Coinbase to maybe become something a lot bigger than a crypto brokerage. The two areas I see are stablecoins and the tokenized real-world assets, which you've discussed some, you could see a world where a lot of that transfer activity ultimately happens on Base. So one, just do you agree with that vision? And then two, is there anything more specifically you guys can do to push both of those segments?”
A: Brian Armstrong, Coinbase CEO:
“Well, that is definitely the plan. … And tokenizing real-world assets or traditional securities. I mean eventually, real estate, the debt markets like private credit, everything should come on chain. It's really just a more efficient way of transferring value and it can do real-time settlement and eliminate various risks that are out there in the ecosystem. So I mean, there's lots that we can do on this front.”
Crypto and Global GDP
Coinbase also shared a long-term vision for the crypto industry, predicting that “up to 10% of global GDP could be running on crypto rails by the end of this decade.” Management noted that “only about half of 1% of global GDP is [currently] running on crypto rails, but we think that, that could expand dramatically by the end of the decade.”
Based on global GDP of ~$105 trillion in 2023, that correlates with about $500 billion of GDP running on crypto. By 2030, global GDP is estimated to rise to $140 trillion, per the IMF, suggesting that crypto’s influence could rise to $10 trillion to $14 trillion should this prediction be realized – that’s more than 20x growth from today for the industry.
Conclusion
Coinbase posted a large beat in Q4 as elevated trading activity and higher volatility drove triple-digit transaction revenue and trading volume growth. Management highlighted revenue diversification with stablecoin and USDC contributions rising, with blockchain rewards and international markets two other growth outlets. Q1 is also off to a solid start with trading volumes keeping pace with Q4, with transaction revenue at $750 million halfway through the quarter, setting the stage for a strong entrance to 2025.
I/O Fund Equity Analyst Damien Robbins contributed to this report.
Please note: The I/O Fund conducts research and draws conclusions for the Fund’s positions. We then share that information with our readers. This is not a guarantee of a stock’s performance. Please consult your personal financial advisor before buying any stock in the companies mentioned in this analysis.
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