Summary Coinbase reported Q4 2025 earnings a couple of days ago. If I had to use one word to summarize the earnings print, ugly is the word I’d have chosen. As I explained in a macro analysis a few days ago, empirical evidence suggests the crypto winter may last much longer. This is bad news for Coinbase. A closer look at CFO Alesia Haas's comments on the Q3 and Q4 earnings calls and the guidance for Q1 2026 suggests that Coinbase has a new priority for 2026. 2026 is shaping up to be a transformational year for Coinbase, but not from a revenue growth perspective. This is not a good time to be an investor with exposure to cryptocurrencies. As I discussed in a recent macro analysis, empirical evidence suggests the crypto winter may last much longer . Although I do not have direct exposure to BTC, I am a Coinbase Global, Inc. ( COIN ) shareholder, so I have indirect exposure to BTC and the broad crypto market. Amid the crypto winter, COIN has been one of the biggest losers in my portfolio over the past year (down almost 50%). Although a prolonged crypto winter will most certainly impact Coinbase’s transaction revenue, which is the biggest contributor to revenue today, I believe Coinbase has what it takes to turn into a more efficient business in 2026. This will lay the foundation for a strong comeback in the post-crypto winter era. After digesting Q4 earnings and the structural changes Coinbase is going through today, I believe now is a good time to double down on COIN stock. Q4 2025 Earnings Review I will begin this analysis with a brief discussion of Coinbase's Q4 2025 earnings . If I had to summarize the earnings print in one word, ugly is the word I’d have chosen. Revenue was down 22% YoY to $1.78 billion. This was a sequential decline of 5%, which highlights how the ongoing crypto winter is continuing to threaten Coinbase’s short-term growth. Transaction revenue was down 6% sequentially, driven by a 13% QoQ decline in consumer transaction revenue to $734 million. As expected, institutional volumes remained strong, leading to a 37% QoQ increase in institutional transaction revenue to $185 million. Given that this institutional business is still relatively small compared to the retail business, this strong sequential growth could not prevent Coinbase’s revenue from dipping below the previous quarter's level. The integration of Deribit had a lot to do with this stellar growth in institutional revenue. The GAAP net loss for the quarter was $667 million. The company’s crypto investment portfolio recorded a $718 million unrealized loss, so it’s safe to say that the net loss was almost entirely driven by this. Adjusted net income, which removes the impact of these paper losses, came in at $178 million. Adjusted EBITDA was $566 million. These numbers suggest the company can immediately turn profitable from an accounting perspective when crypto markets recover. Subscription revenue was down 3% QoQ to $727 million despite a 3% sequential growth in Stablecoin revenue. The culprit was the underperforming blockchain rewards segment, where revenue declined 18% QoQ due to lower crypto prices across the board. Looking at the full year 2025, there were several bright spots for the company, including an increase in crypto trading volume market share and stellar growth in paid Coinbase One subscribers. Exhibit 1: Coinbase 2025 performance snapshot Q4 shareholder letter Looking at Q1 2026, more pain is on the cards. The guidance points to a further deterioration in transaction revenue amid the ongoing crypto market rout. As a long-term-oriented investor, however, I knew what I was getting myself into when I invested in COIN, and I view this volatility as a feature, not a bug. 2026 Could Be A Transformational Year For Coinbase For Coinbase, 2025 was all about aggressive investments. These investments spanned across M&A activity (the acquisition of Deribit, The Clearing Company, and Echo), strategic investments to expand market presence (CoinDCX), and infrastructure investments. As we move into 2026, Coinbase seems more focused on making the most of these investments rather than aggressively deploying new capital. The first hint was dropped by CFO Alesia Haas on the Q3 earnings call. Over the course of 2025, we've made a significant investment in headcount to capitalize on the many opportunities we see and accelerate our vision on the Everything Exchange. As we look to early 2026, we plan to absorb the employees we brought into the company and focus on execution and anticipate that our sequential rate of operating expense growth will slow as compared to our Q4 rate. What is interesting to see is that the management guidance for Q1 2026 supports the CFO’s comments from a few months ago. As you can see below, technology and development expenses plus G&A expenses are expected to remain flat in Q1 2026 compared to Q4 2025. The same is true for sales and marketing expenses as well. Compare this with the ~35% YoY growth in operating expenses Coinbase reported in 2025. Exhibit 2: Coinbase guidance for Q1 2026 Q4 shareholder letter The guidance follows the CFO’s earlier remarks, which, in my opinion, is evidence of Coinbase shifting its focus from a growth-at-any-cost strategy to one that prioritizes profitability. I expect operating margins to materially benefit from this shift in 2026, paving the way for Coinbase to come back strongly in the post-crypto winter phase. Also, given that operating expenses are expected to remain flat in Q1 2026, any positive revenue surprise will directly flow into the bottom line of the company, which could boost investor sentiment. There are other reasons poised to drive operating margins higher in 2026. One such factor is the normalization of operating expenditures even without cost cuts. This is because 2025 had several high-ticket one-time expenses, such as M&A costs related to acquisitions (deal-related amortization costs of $16 million and Deribit/Echo integration costs of $50 million+) and costs related to the data breach in May (estimated at more than $350 million). Even if revenue remains flat in 2026, Coinbase is likely to see a major boost in operating income thanks to improved margins. Another factor that could positively contribute to a margin expansion is the favorable unit economics of the derivatives trading business. While consumer transaction volumes are highly correlated to marketing spend, the derivatives trading business is home to sticky institutional volumes. With the expected growth of the derivatives business in 2026, I expect marketing costs per dollar of revenue to gradually decrease. In the long run, this will be a big boost to operating margins. 2026 may not be a transformational year for Coinbase from a revenue growth perspective because of the crypto winter, but I believe the company will see major improvements in its operating performance as costs normalize and the company shifts its focus from growth to profitability. Chances are that these improvements will go mostly unnoticed by Mr. Market until crypto prices turn a corner. This has created a window of opportunity for contrarian investors. Risks Investing in Coinbase is not for the faint of heart. COIN stock will remain volatile in the foreseeable future. Short-term drawdowns could hurt investor portfolios really badly if the crypto market rout worsens. Volatility risk aside, I am paying close attention to Coinbase’s market expansion efforts to evaluate if these efforts can yield desired results. The last thing I want to see as an investor is for Coinbase to invest in new markets in vain during this crypto winter. I am also closely monitoring the company’s expansion into U.S. stocks, as this fundamentally changes the regulatory outlook for the company. Takeaway Coinbase’s pains are likely to continue for some time. However, behind the curtains, the company is making the right moves to boost its operating efficiency this year, setting itself up for a strong recovery when crypto prices move higher. The company’s diversification efforts are promising to reduce its reliance on transaction revenues in the long run as well, which is another positive. I believe now is the time to double down on COIN stock while the company remains under pressure due to adverse macro developments.
