Three senior executives, including company founders, are preparing to sell a 5%! (MISSING) stake in Coinbase.

Written by Eric, Foresight News

In the early morning of October 30, Beijing Time, Coinbase released a quarterly report that looked strong on the surface but hollow in substance.

In the third quarter of this year, Coinbase posted a net profit of $719 million, a 66%! (MISSING) year-over-year surge, with diluted earnings per share reaching $2.51. However, its total Q3 revenue came in at $1.216 billion, down 35%! (MISSING) year over year, and its operating profit — a core metric reflecting main business performance — stood at only $61.67 million, plummeting 87%! (MISSING) year over year.

More thought-provoking disclosures are tucked in the latter half of the filing. Over the five-week period from August to September, CEO Brian Armstrong, co-founder Fred Ehrsam, and President & COO Emilie Choi successively established stock sale plans, covering a combined maximum of 13.5945 million shares. Based on the closing price of $160.59 on October 29, the total value of these planned sales stands at roughly $2.18 billion.

Where Does the $700 Million Net Profit Come From?

Coinbase recorded a Q3 pre-tax profit of $824 million, of which gains on investment-held crypto assets contributed $715 million, accounting for roughly 87%! (MISSING) of the total. These gains stemmed from the book appreciation of crypto assets held on the company’s balance sheet, including Bitcoin and Ethereum. Combined with another $66.73 million in other net gains, these figures pushed net profit to the $719 million level.

Put another way, excluding the unrealized gains driven by rising crypto prices, Coinbase’s core business in the quarter was barely hovering around the break-even line.

The weakness on the revenue front was pervasive. The company stated frankly in its quarterly report that operating cash flow for the first three quarters fell by roughly $1 billion, primarily due to an $1.1 billion drop in net consumer trading revenue. On the cost side, however, trends moved in the opposite direction: tech and R&D expenses reached $447 million, still growing year over year despite a 30% revenue decline, creating a negative amplification of operating leverage.

Looking at the first three quarters for a longer-term view, the picture is even less optimistic. Coinbase posted a cumulative net loss of $34.89 million, compared with a net profit of $1.927 billion in the same period last year. The Q3 standalone profit is more of a reflection of the crypto price rebound on financial statements, rather than evidence of an operational inflection point.

Trading Users Drop by 20%, USDC Holdings Hit Record Highs

In Q3, Coinbase’s trading revenue reached $590 million, down 44%! (MISSING) year over year, with its share of net income dropping from 59%! (MISSING) in the same period last year to 51%! (MISSING). Retail trading revenue came in at $450 million, down 47%! (MISSING), driven by a 59%! (MISSING) year-over-year contraction in consumer spot trading volume. Institutional trading revenue stood at $91.65 million, down 32%! (MISSING), accompanied by a 53%! (MISSING) drop in institutional spot trading volume.

Derivatives were the only bright spot in the trading business. The filing noted that the segment demonstrated resilience amid unfavorable market conditions, as Deribit — which was consolidated into Coinbase’s financials in August 2025 — drove derivative revenue growth in the first three quarters that outpaced the decline in spot trading revenue. Prediction markets and stock trading also began contributing incremental revenue in the quarter.

Coinbase had 7.4 million monthly transacting users in Q3, down a full 20% from 9.3 million in the same period last year. Total assets on the platform reached $376.6 billion, down 27%! (MISSING) year over year, of which roughly $160.5 billion of the decline was driven by falling crypto prices (primarily Bitcoin), as growth in user-held asset volumes only offset a small fraction of the drop.

Propping up the other side of the balance sheet is subscription and services revenue, which hit $570 million, down 20%! (MISSING) year over year, but whose share of net income rose from 41%! (MISSING) last year to 49%! (MISSING). This marked the first time Coinbase’s revenue structure approached a roughly 50-50 split between trading fees and subscription-based income.

Looking at breakdowns: stablecoin revenue reached $307 million, down only 5%! (MISSING), making it the most resilient revenue line across the board. Average USDC balances held within Coinbase products hit an all-time high, contributing an extra $84.6 million in revenue, though falling interest rates eroded $52.8 million of that gain. Block reward revenue stood at $85.74 million, halved year over year, primarily due to falling prices of Solana and Ethereum, and lower staking yields. Interest and financing fee revenue reached $68.56 million, growing 6%! (MISSING) against broader market headwinds.

Both sides of the USDC-related revenue and cost ledger are expanding. On the revenue front, Coinbase renewed its revenue-sharing agreement with Circle under existing terms earlier this year, with no change to the partnership. On the cost side, USDC holding rewards paid to users reached $129 million, up 16%! (MISSING) year over year, driven by sustained growth in client USDC balances on the platform. Between inflows and outflows, USDC has effectively become the second core growth engine of Coinbase’s business.

Beyond the income statement, there is also an equity linkage between the two firms. Coinbase holds equity in Circle, and after Circle completed its public listing in Q2 2025, this stake was remeasured at fair value, generating $39.23 million in gains in Q3 — compared with a $400 million book loss from the same remeasurement in the prior-year period. From revenue-sharing agreements to equity alignment, Coinbase and Circle’s interests are deeply intertwined, such that stablecoin market health now more directly than ever shapes the performance reflected in Coinbase’s financials.

A $2 Billion Stock Sale Plan

This is the most eye-catching section of this quarter’s report, and also the most prone to misinterpretation.

Per disclosures in the 10-Q filing, Armstrong established his plan on August 12, with a maximum planned sale of 8.1674 million shares, to be executed between November 16, 2026 and October 22, 2027. Ehrsam established his plan on September 4, with a maximum of 3.8666 million shares, to be executed between December 7 this year and June 7 next year. Choi established her plan on September 8, with a maximum of 1.5605 million shares, to be executed across the full 2027 calendar year.

The three executives’ combined planned sale covers 13.5945 million shares, roughly 5.1%! (MISSING) of the company’s total outstanding stock, with Armstrong alone accounting for 60% of the total.

Here, a key concept requires explanation: the Rule 10b5-1 plan. This is a compliant trading mechanism established by the SEC for corporate insiders of publicly listed companies. Under the rule, executives who are not in possession of material non-public information can pre-negotiate in writing the volume, price conditions, and timeline for future stock sales, which are then automatically executed by a brokerage per the agreed terms. The original design of this framework is to protect insiders: as long as the plan is established when the executive has no improper information access, the subsequent sale timing — even if it aligns with positive or negative news events — does not constitute insider trading. Coinbase’s internal control policy itself mandates that executives may only trade company stock through such pre-arranged plans.

Strictly speaking, this does not mean the three executives are about to immediately sell $2 billion worth of stock. All three plans are subject to pre-set share price thresholds, with sales only triggered when the market price reaches the specified level, and the exact thresholds have not been disclosed. The execution windows are spread across the next 12 to 15 months, with the earliest sale scheduled to take place in mid-November. Choi’s plan also explicitly notes that the maximum share count includes ungranted, unvested restricted stock, meaning the actual sellable volume will be significantly lower than the nominal cap.

While the process is fully compliant and unlikely to add meaningful short-term sell-side pressure, the signaling effect cannot be ignored. The three plans were densely launched over a five-week window, with a combined scale of over $2 billion, coinciding with a pullback in Coinbase’s share price from its year-to-date high of $361.40 to the ~$160 level. Such coordinated action will inevitably be interpreted by the market as a form of insider sentiment toward the company’s current valuation.

On the other side of the ledger, Coinbase spent $1.249 billion in the first three quarters repurchasing roughly 7.13 million of its own shares. Its total share repurchase authorization has been repeatedly raised from $1 billion to $4 billion, with $1.961 billion of remaining authorization available on the balance sheet. Over the same period, the company also repaid $1.273 billion in maturing convertible bonds, bringing its cash reserves down from $11.285 billion at the start of the year to $8.604 billion.

But the pace is shifting. In Q3 alone, the company’s share repurchase activity nearly ground to a halt: it did not repurchase a single share in July or September, only buying 38,000 shares in August at an average price of $139.91.

The Market's Verdict

Following the earnings release, the market did not cut the company any slack over its "66%! (MISSING) net profit surge" headline. As of press time during pre-market trading on October 30, Coinbase shares were trading at $152.78, down roughly 4.84%! (MISSING) from the previous close.

Market disagreement is also clear. Sell-side analysts have set an average price target of $210.85, with ratings still in the buy range, implying roughly 30% upside from current levels. However, as the company posted an overall loss over the past 12 months, the price-to-earnings metric is no longer meaningful. Behind its ~7x price-to-sales valuation, investor bets are effectively tied to the upside potential of the next crypto market cycle.

Barclays has firmly maintained its "Underweight" rating, arguing that global crypto trading activity remains broadly weak, with limited confidence in a broad-based recovery, and that new business lines will be unable to fully offset the company’s heavy reliance on retail trading and USDC-related revenue.

Coinbase itself was blunt about this dynamic in its quarterly report: if crypto asset prices move by 50%! (MISSING), the company’s $2.225 billion in investment-held positions will generate roughly $1.1 billion in book gains or losses. The ups and downs of its income statement are fundamentally synchronized with crypto price movements.

The $719 million Q3 net profit was less earned by the exchange itself, and more delivered courtesy of Bitcoin’s price performance. Meanwhile, the three executives’ $2 billion stock sale timeline is already set, with the earliest execution scheduled to launch in mid-November.

With Bitcoin’s price stuck in a mid-range position, the market will take a more measured view of Coinbase’s profitability and risk resilience as a standalone corporate entity. Market participants will need more data over time to determine whether the rising share of non-trading revenue at Coinbase is a sustainable structural trend.