Coinbase reported net income of $718.7 million in the third quarter, representing a 66% increase from $432.6 million a year earlier, as expanding prediction markets and derivatives operations helped offset weaker cryptocurrency trading activity. However, the headline earnings improvement was largely driven by gains on cryptocurrency investment holdings, while adjusted profitability declined sharply.
Total revenue reached $1.22 billion for the three months ended September 30, down 35% year over year but broadly unchanged from the previous quarter. Net revenue, excluding other revenue, stood at $1.16 billion, consisting of $590.2 million in transaction revenue and $570.2 million from subscriptions and services.
The difference between reported earnings and underlying profitability remains central to understanding Coinbase's quarterly performance. The company recorded a $715 million gain on crypto assets held for investment, compared with $423.9 million in the same quarter last year. These gains significantly influenced reported net income.
Adjusted net income, which excludes investment gains and other specified non-operating items, fell to $77.7 million from $420.7 million a year earlier. Adjusted EBITDA also declined substantially, reaching $332.9 million compared with $800.7 million in the third quarter of 2025.
The divergence indicates that Coinbase's stronger headline earnings did not reflect an equivalent improvement in its core operating performance. Transaction revenue declined approximately 44% annually to $590.2 million, while subscription and services revenue decreased approximately 20%, despite recording sequential growth.
This performance highlights the challenge facing Coinbase as it attempts to reduce its dependence on spot cryptocurrency trading. Its expanding Everything Exchange strategy combines digital assets, derivatives, prediction markets and financial services to create a broader revenue base that is less exposed to fluctuations in individual trading segments.
Prediction markets have emerged as an increasingly important component of that strategy. The business exceeded $200 million in annualized revenue during the quarter, doubling its approximately $100 million run rate in the previous quarter. Daily prediction traders also increased by more than 60% quarter over quarter.
Coinbase launched its prediction markets offering in February through its partnership with Kalshi, initially providing limited access before expanding nationwide. The platform offers contracts covering sports, politics, economics and other real-world events.
The contribution is becoming material to Coinbase's transaction revenue structure. Chief Financial Officer Alesia Haas said prediction markets and derivatives collectively represented approximately 25% of transaction revenue in the third quarter.
Coinbase also increased its share of global cryptocurrency trading activity for the fourth consecutive quarter across spot and derivatives markets, reaching 10.7% of total crypto trading volume market share. This occurred despite a 10% quarterly decline in broader cryptocurrency spot trading volume.
The relative stability of Coinbase's total quarterly revenue suggests that newer trading products and subscription services helped compensate for weaker spot market activity. However, the extent to which these businesses can consistently offset declining transaction revenue remains an important consideration for the company's longer-term earnings profile.
Subscriptions and services are another increasingly important part of the diversification strategy. The segment generated $570.2 million, representing approximately 49% of net revenue. Its contribution provides Coinbase with an additional revenue source beyond transaction-based trading activity.
Stablecoin operations accounted for a significant portion of this business. Stablecoin revenue increased 5% quarter over quarter to $307 million, supported by stronger USDC balances. Average USDC held in Coinbase products reached a record $22 billion, equivalent to approximately 30% of average USDC market capitalization.
The company also reported record paid Coinbase One subscriptions, which increased 24% year over year. Meanwhile, its average daily loan book balance reached an all-time high, rising 74% annually.
These developments indicate that Coinbase is expanding its revenue sources through customer subscriptions, lending and stablecoin-related services. Nevertheless, stablecoin economics remain exposed to changes in interest rates and reserve income, meaning growth in USDC balances does not necessarily translate into proportionate revenue growth under every market condition.
Coinbase's commercial relationship with Circle remains relevant to this business model. The renewed USDC agreement provides an important foundation for stablecoin distribution and the associated revenue relationship between the companies.
Derivatives expansion represents another strategic priority. Following its integration of Deribit, Coinbase is combining global derivatives liquidity with its existing spot and institutional operations. The company is also preparing to bring back Coinbase Pro, with spot trading, futures, perpetuals, options and equities expected to become available through a unified trading platform.
The broader objective is to create an integrated trading environment capable of generating activity across different asset classes and market conditions. Such diversification could reduce the company's sensitivity to spot cryptocurrency trading cycles, although its financial contribution will depend on customer adoption, trading activity and the economics of operating these products.
Management also plans to increase sales and marketing investment in prediction markets during the fourth quarter, seeking to attract new customers and reactivate existing users. While this could accelerate product adoption, higher marketing expenditure may also introduce additional near-term costs.
For investors, the central issue is whether Coinbase can translate its expanding product portfolio into more sustainable operating earnings. The latest results demonstrate that prediction markets, derivatives and subscription services are helping stabilize revenue, but the substantial difference between reported net income and adjusted net income shows that underlying profitability remains under pressure.
The next phase of Coinbase's performance will therefore depend on the growth and profitability of its newer business segments, the stability of stablecoin-related revenue and the company's ability to manage operating expenses as it expands its product ecosystem. A sustained improvement in adjusted earnings would provide stronger evidence that its diversification strategy is delivering operating benefits rather than simply reducing dependence on spot trading.
