Coinbase Reports Mixed Q3 Financials as Block and PayPal Surge

Payments firms PayPal and Block blew Q3 earnings estimates away, while crypto exchange Coinbase suffered a relatively bleak third quarter.

Coinbase improved its financial position through staking and subscriptions, as Block raked in mounds of profit from its digital payments platform CashApp. Payments provider PayPal recorded higher earnings than expected.

Crypto winter is thawing slowly for Coinbase

Coinbase reported a third-quarter loss of $2.43 per share, lower than some analysts’ estimates of $2.38 but higher than the previous quarter’s $4.98 per share. It lost $545 million on $590 million in sales, compared to $406 million in profit from $1.3 billion in sales a year ago. Its revenue from trading fell 44% compared to Q2 2022, coming in at $365.9 million. On the upside, the exchange notched up $210 million in revenue from subscriptions and services. 

After news of its earnings broke, Coinbase’s stock price rose 3.5% but is down 8.1% overall on the day. It closed the trading day at $55.8.

The company’s Q3 losses were less severe than Q2 when it faced falling asset prices caused by the collapse of significant crypto firms, including Celsius, Voyager Digital, and Three Arrows Capital. The drop in asset prices discouraged investors from actively trading and incurring fees that Coinbase could collect.

To combat these headwinds, the company introduced subscriptions and staking services that bolstered its revenue in Q2. Its stock soared after it announced a partnership with BlackRock, the world’s largest asset manager, to offer institutional investors exposure to Bitcoin.

In Sep. 2022, the company introduced the Node technology stack to help developers deploy blockchain nodes as part of a new era for Coinbase Cloud designed to diversify its revenue streams. Later, in Oct. 2022, Coinbase inked a deal with Google Cloud to allow specific Cloud customers to pay for cloud services using cryptocurrencies. 

Bitcoin revenue up in Block’s Q3 earnings report

Payments company Block beat earnings estimates, notching a gross profit of $1.57 billion, 38% higher year-on-year. Its CashApp brought in $774 million of gross profit. Its net revenue, including Bitcoin, increased to $4.4 billion in Q3, while revenue without Bitcoin rose 36% year-on-year to $2.8 billion. Block’s stock closed the day 1.3% lower.

Block earns money from Bitcoin trading on its digital payment service CashApp. In Q2 2022, the company earned $1.79 billion in Bitcoin-related revenue and $1.47 billion in profit. Bitcoin revenue accounted for $41 million of that profit.

In April 2022, the company announced it would allow specific U.S. CashApp customers to invest part of their income in Bitcoin automatically.

PayPal blows away Q3 earnings estimates

Another payments company, PayPal, made $1.15 per share on $6.85 billion in revenue. Adjusted earnings came in at $1.08 per share, blowing estimates away. 

Before the announcement, analysts from FactSet predicted that PayPal would report gains of $0.63 per share, $0.96 in adjusted earnings per share, and $6.82 billion in Q3 revenue. 

While its payments business boomed during the pandemic, it cut its growth and earnings targets as its ambitious crypto play suffered under challenging market conditions. In Oct. 2022, the company received a lift after partnering with e-commerce giant Amazon to allow customers to pay for purchases using PayPal’s Venmo app.

In after-hours trading, the company’s stock price was down 3.65% to $76.55

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