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Coinbase Global (Nasdaq: COIN) stock was trading lower on Friday following the release of somewhat disappointing first quarter earnings.

It was a stark about-face for the leading crypto trading platform after the stock surged one day earlier on news of a key acquisition.

As for Q1 results, Coinbase generated $2 billion in revenue, a 24% increase over the first quarter of 2024. However, revenue was down 11% from the previous quarter. It was also below analysts’ estimates of $2.1 billion.

Net income was just $66 million, down from nearly $1.2 billion in Q1. But that number fluctuates based on the performance of the company’s crypto investment portfolio. But they are unrealized gains, or losses, so it’s not really relevant to company performance.

That huge gap reflects the massive difference in the performance of Bitcoin in Q1 2024 and Q1 2025. In Q1 2024, Bitcoin soared about 69%, boosting net income. On the other hand, Q1 2025 was a brutal quarter for Bitcoin, as it dropped 12%, reflecting the drastically lower net income.

The Q1 drop in the crypto markets resulted in $597 million in losses, along with a $135 million loss due to the tax effect of crypto losses.

The better metric is adjusted net income, which came in at about $527 million. That was still down 22% from the same quarter a year ago. However, adjusted earnings of $1.94 per share were slightly better than the $1.93 per share estimate among analysts. Adjusted earnings were impacted in part by a 7% increase in operating expenses to $1.3 billion. Also, transaction expenses as a percentage of net revenue rose to 15%, from 14% the previous quarter.

Q2 outlook

Trading volume on the Coinbase platform was up 12% year-over-year to $393 million, with $315 million of that coming from institutional trading. But, it was down 10% from Q4 2024. About 27% of the volume was Bitcoin, down from 33% a year ago.

Transaction revenue dropped 18% from the previous quarter to $1.26 billion but was up 18% year-over-year.

Also, Coinbase generated $698 million in subscription and services revenue, up 9% from the previous quarter and 36% year-over-year. This was primarily driven by growth in stablecoin and Coinbase One revenue. Stablecoin revenue jumped 32% from the previous quarter to $298 million and 51% year-over-year.

However, both transaction and subscription revenue fell a bit short of estimates.  

For the second quarter, Coinbase anticipates subscription revenue of between $600 million and $688 million, which would be below Q1 results. It would also be significantly less than the Street’s estimate of $703 million.

Coinbase did not provide guidance for transaction revenue but noted that it generated about $240 million of transaction revenue in April. But spot transaction volume was down approximately 12% month-over-month in April, similar to global spot volume.

Further, the transaction expenses percentage is targeted in the mid-teens. Overall, the outlook for expenses is roughly in the range that they were in Q1.

Major acquisition to broaden revenue stream

Coinbase is highly dependent on what crypto markets are doing, as the Q1 earnings depict.

But Wednesday’s announced acquisition of Deribit, a global leader in crypto options trading, will broaden its revenue stream and complement its derivatives business.

The $2.9 billion deal is one of the largest in the crypto industry. It includes $700 million in cash and 11 million Coinbase shares.

“Deribit will immediately enhance profitability and add diversity and durability to our trading revenues upon close,” Greg Tusar, VP, institutional product at Coinbase, wrote in a blog post. “Options trading revenues are typically less cyclical than spot trading, as traders utilize options to manage risk during both rising and falling markets. Deribit has a consistent track record of generating positive Adjusted EBITDA which we believe will grow as a combined entity.”

Despite the big move, Coinbase stock received several analyst downgrades, including from J.P. Morgan, which dropped it from $276 to $215 based on the Q1 results and outlook.

Coinbase stock is currently trading at about $204 per share, down 18% YTD. It has a median price target of $253 per share, which suggests a 24% return. It is trading at 21 times earnings and 31 times forward earnings.

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