Coinbase Q1 earnings miss the mark, sending shares lower despite mammoth $2.9 billion deal

Coinbase, the largest crypto exchange in the US, reported first-quarter earnings today and missed both revenue and earnings-per-share estimates

Coinbase (NASDAQ:COIN) shares fell in the aftermarket on Thursday after the company missed both revenue and earnings-per-share estimates for the first quarter. The largest US crypto exchange also reported a massive $2.9 billion deal.

Coinbase reported Q1 revenue of $2 billion, missing estimates of $2.1 billion, and EPS of $0.24, compared to expectations of $1.93 EPS, according to FactSet. Transaction revenue came in at $1.3 billion, down 19% from the previous quarter.

Earlier in the day, Coinbase announced the acquisition of Deribit, the world’s biggest trading platform for bitcoin (BTC) and ethereum (ETH) options, for a staggering $2.9 billion, marking the largest crypto deal ever undertaken.

"While Coinbase's subscription and services revenue was a bit light during the quarter, it feels like we're picking nits when the company this morning announced the largest deal ever in the digital assets space," managing director at Benchmark Equity Research Mark Palmer noted.

He added that the Deribit acquisition will significantly boost Coinbase, expanding its international presence and institutional offering. In the broader scheme, a deviation of a few million from the consensus estimate on the subscription and services revenue line doesn't carry much weight.

"This deal outshines even Ripple's Hidden Road acquisition from just two weeks ago," remarked Nic Puckin, founder of Coin Bureau.

In its shareholder letter, Coinbase expressed gratitude towards the crypto-friendly administration for several key achievements, including the executive order to establish a Strategic Bitcoin Reserve and the advancements in bipartisan crypto legislation.

"The dismissal of the SEC lawsuit against Coinbase marked a major judicial win for balanced, innovation-friendly regulation, and our efforts to make crypto mainstream," the shareholder letter further stated.

Last month, Benchmark Equity Research commenced coverage of Coinbase, assigning a "buy" rating and a $252 price target to the company, which represents a 25% premium from current price levels.