Cyclical stocks or growth stocks? Coinbase Q2 earnings report reveals "valuation divergence"

Author: Golem, Odaily Planet Daily

On July 31, Coinbase announced its Q2 2026 financial report. Coinbase CEO Brian Armstrong summarized the quarter in a post on the X platform, stating, "Although the market environment in the second quarter was very challenging, Coinbase continued to move steadily forward amidst various disruptions," and highlighted achievements in Q2, such as over 90% of stablecoin trading volume concentrated on Base; a new high in cryptocurrency trading market share, reaching 10.3%; and a forecast market revenue doubling, with a quarter-on-quarter growth of 106%.

Overall, the report focuses on good news rather than bad, which is consistent with Coinbase's style, but the market will not play along; Coinbase's Q2 2026 revenue still fell short of expectations.

The financial report shows that Coinbase's total revenue for Q2 2026 was $1.22 billion, a year-on-year decrease of 19% and a quarter-on-quarter decrease of 14%, falling short of market expectations ($1.29 billion); trading revenue was $599 million, also below the market expectation of $628 million; and the net loss reached $359 million, marking Coinbase's third consecutive quarter of net losses* (Odaily note: Q4 2025 net loss of $666.7 million, Q1 2026 net loss of $394.1 million)*.

As a result, Coinbase (NASDAQ: COIN) fell over 5% in after-hours trading.

Market share hits a new high, but cryptocurrency spot trading market share continues to shrink

During the Q2 earnings call, Coinbase did not even explain the reasons for the net loss this quarter, instead choosing to sidestep the issue and focus on answering questions unrelated to cryptocurrency brokerage. In Q1 2026, Coinbase attributed the losses to a weak cryptocurrency market and impairment of cryptocurrency assets, but Odaily Planet previously analyzed that the essence of its net loss is due to continuous user attrition and a sharp decline in cryptocurrency trading revenue. *(Related reading: * Q1 net loss of $394.1 million, Coinbase can only cling to Circle's thigh )

By Q2, the situation had not improved, and trading revenue continued to decline. The financial report shows that Coinbase's total trading revenue for Q2 reached $599 million, with retail trading revenue accounting for a significant portion at $452 million, a year-on-year decrease of 30% and a quarter-on-quarter decrease of 20%, even regressing to 2023 revenue levels. According to the financial report, retail cryptocurrency spot trading volume has decreased by 24%.

Coinbase Q2 2026 trading revenue

Even with such dismal results, the trading revenue contributed by retail users remains the largest source of revenue in this quarter's Coinbase financial report, with the second source being stablecoin revenue, reaching $292 million. Since the financial report disclosed that Coinbase's cryptocurrency trading market share reached a new high of 10.3% in Q2, why is its trading revenue still sharply declining? Could it be, as some analysts say, that users have not left, but rather that the weak cryptocurrency market has reduced retail trading appetite?

But the truth is that Coinbase played a word game, because according to Coinbase's calculations, this figure also includes new products such as derivatives trading, prediction markets, and tokenized stocks, not limited to the market share of cryptocurrency spot trading. Therefore, Coinbase's cryptocurrency trading market share could grow from 9.1% in Q1 to 10.3% now, with this 1% increase largely contributed by new businesses.

Quarterly changes in Coinbase's cryptocurrency trading market share

According to the financial report, the growth of the prediction market has partially offset the impact of the decline in retail cryptocurrency spot trading volume on revenue. However, according to Coinbase's calculations, although the prediction market revenue has more than doubled quarter-on-quarter compared to Q1, the annualized revenue is only $100 million, which means the actual revenue may be less than $30 million, so its offsetting effect on the loss of retail trading revenue can only be described as a drop in the bucket.

In summary, cryptocurrency spot trading remains the pillar business of Coinbase's revenue. Although Coinbase is doing its utmost to develop other businesses to create a so-called "everything exchange," the growth rate and revenue level have not satisfied the market and investors. In the established market patterns of prediction markets, cryptocurrency derivatives, and tokenized stock trading, Coinbase, as a new participant, has limited competitiveness, and its hope of relying on new businesses for substantial growth to turn a profit does not seem optimistic at this point.

Cyclical stock or growth stock

However, to return to the point, Coinbase's current valuation depends on whether it is viewed as a cyclical stock or a growth stock.

If viewed as a cyclical stock, Coinbase's revenue is indeed constrained by the current cryptocurrency bear market cycle, and new businesses have not freed it from cyclical limitations, while user attrition and declining competitiveness in exchanges are also evident issues.

Therefore, from this perspective, Coinbase's stock price decline is reasonable, and everything Coinbase is currently doing seems to be aimed at enduring until the bull market cycle. Brian Armstrong also stated during the earnings call, "I believe Bitcoin will make a strong comeback; it has always gone through such cycles, and prices will rise and fall. But we must have a diversified revenue strategy, which is the core of the exchange's operational strategy." The implication is that when the bull market arrives, everything will get better.

If Coinbase is viewed as a growth stock for the future, then it is currently even undervalued.

Starting from the revenue composition, although Coinbase has not yet achieved revenue diversification, with cryptocurrency spot trading still being its main revenue source, the trend towards revenue diversification is already evident. According to the financial report, Coinbase's revenue is now decoupled from Bitcoin trading fees, with 88% of net revenue coming from non-Bitcoin spot trading, compared to over 55% in 2020; meanwhile, Coinbase's subscription and service revenue for this quarter reached $555 million, accounting for 48% of net revenue, nearly on par with trading revenue ($599 million).

Proportion of Coinbase's Bitcoin trading fee revenue and quarterly growth of subscription and service revenue

Additionally, this quarter, the number of paid users for Coinbase One reached a record high, with subscription revenue growing to $114 million. The trading volume of cryptocurrency derivatives in Q2 did not decrease but remained roughly the same as Q1, reaching $4.221 trillion. Coinbase has already acquired Deribit and can provide cryptocurrency derivatives trading for international users in the future, with market trading volume expected to grow significantly.

Therefore, from a developmental perspective, it is possible that by Q3 2026 or Q1 2027, the total revenue from Coinbase's other businesses will replace cryptocurrency spot revenue as the decisive source of revenue. The concept of the "everything exchange" that Coinbase aims to build does not mean it has to excel in every field (such as prediction markets, cryptocurrency derivatives, and tokenized stocks); most investors do not have such expectations, and being able to turn a profit and achieve diversified revenue would already meet expectations.

Because investors are focused on Coinbase's future potential, mainly in the stablecoin business and the agency economy.

During the earnings call, CFO Alesia Haas reiterated that the revenue-sharing agreement between Coinbase and Circle will continue. Coinbase's stablecoin revenue for Q2 2026 reached $292 million, still the second-largest source of revenue for Coinbase, while the USDC deposited in Coinbase's platform and products reached a new high, with over 30% of circulating USDC stored on Coinbase. Furthermore, Coinbase disclosed in the financial report that over the past year, Coinbase has captured 50% of the total economic value of USDC, and broader on-chain collaborations and product integrations will drive the widespread use of USDC.

At the same time, Coinbase does not want to rely solely on USDC and is becoming a multi-stablecoin platform. Coinbase is one of the founding members of OUSD, and the variety of stablecoins supported by the platform is continuously increasing.

In the on-chain agency economy, Coinbase is a leader in on-chain agency finance (AIFi). Currently, according to the financial report, over 99% of on-chain agency transactions are completed using USDC, and over 90% of agency stablecoin transactions are completed on Base, with over 97% of on-chain agency transactions in Q2 2026 using Coinbase's x402 protocol.

Moreover, Base's leading position in the agency economy will not be shaken by low-price competition from new market participants, as it is already sufficiently cheap. Brian Armstrong stated during the earnings call, "Base's settlement price is below $0.01, and settlement time is under 1 second. From this perspective, it is very competitive."

Although Base's leadership in the agency economy has not yet made a significant revenue contribution to Coinbase, this part of the business holds immense future commercial value. The agency economy is currently recognized as the best intersection of blockchain and AI, and in the future, the agency economy will require payment settlement systems and identity systems, which is exactly where Base and the x402 protocol come into play. According to Coinbase's estimates, by 2030, agents will handle $3-5 trillion in agency transactions, and if Base can capture 40% of the market share, even charging a fee of one-thousandth, the revenue could reach billions of dollars.

Although Coinbase's current business situation is not optimistic, the future is not entirely bleak; it depends on how investors view it and the length of their investment horizon.