Coinbase Reports 63% Drop in Revenue Amid Crypto Industry Slump

When the cryptocurrency exchange Coinbase went public in April 2021, it was a triumphant moment for the nascent crypto industry.

But the company has endured a grim 2022, grappling with a crypto market crash that has tanked its stock price and forced it to lay off hundreds of employees.

Those struggles continued on Tuesday when Coinbase reported a 63 percent decline in revenue in the second quarter and swung to a $1.1 billion loss from a year ago.

Blaming the “fast and furious” crypto downturn, the company said revenue was $808 million, down from $2.2 billion a year earlier. Its monthly customer total rose to nine million from 8.8 million last year, but was down from 9.2 million in the last quarter. Coinbase also predicted that its user numbers would continue to fall over the next three months.

In an earnings call on Tuesday, Brian Armstrong, Coinbase’s chief executive, emphasized the cyclical nature of crypto and pointed out that the company had survived previous downturns.

“It seems scary,” he said. “But it’s never as bad as it seems.”

The results illustrated the stark challenges facing Coinbase at a turbulent moment for the crypto industry. The prices of the leading digital currencies crashed in May and June as a series of experimental crypto ventures collapsed, plunging investors into financial ruin. The crash has led to layoffs across the industry, dampening the excitement that surged last fall when the price of Bitcoin reached a record high.

As part of the industry meltdown, Coinbase’s stock price has fallen about 75 percent since November. The company’s success is largely tied to the fluctuations of the broader crypto market. In the second quarter, more than 80 percent of its revenue came from trading fees it charged customers to buy and sell digital assets like Bitcoin and Ether.

In June, Coinbase laid off 18 percent of its staff, or about 1,100 employees. Mr. Armstrong said at the time that the company had “over-hired.”

Coinbase’s recent struggles have fueled concerns that it may be squandering its early lead in the industry, as competitors like Binance and FTX expand during the downturn.

Despite its early start, Coinbase has never had a strong foothold in the international market, and it recently botched an expansion effort in India. Its most hyped product launch of the year — a marketplace for the digital collectibles known as nonfungible tokens, or NFTs — drew little customer interest. And a hiring spree last year led to overspending and bloat, as the company’s expenses more than doubled.

“We probably could have grown slower over the last couple of years,” Mr. Armstrong said on the call.

Coinbase has also come under regulatory scrutiny. Last month, the Justice Department filed insider-trading charges against a former Coinbase employee. In a related action, the Securities and Exchange Commission said that it considered some of the digital coins listed on Coinbase’s exchange to be securities and, therefore, subject to regulation like stocks or bonds — a stance the company has objected to.

In a letter to shareholders on Tuesday, Coinbase said that the S.E.C. sent the company a “voluntary request for information” in May about that listing process. “We do not yet know if this inquiry will become a formal investigation,” the letter said.

Coinbase’s competitors appear to be faring better during the downturn. FTX, another crypto exchange, has had financial results that are “ballpark similar” to last year’s, according to its chief executive, Sam Bankman-Fried. Binance, the world’s largest exchange, announced in June that it was looking to fill 2,000 positions.

Still, Coinbase remains one of the most trusted and recognized crypto brands in the United States, known for its Super Bowl commercial featuring a bouncing QR code. Last week, the company announced a partnership with BlackRock, the world’s largest asset manager, to help institutional investors trade Bitcoin.

Meta Reports First Revenue Decline and 36 Percent Profit Drop

SAN FRANCISCO — For years, Fb’s gross sales grew with out fail and stored on rising, defying the legal guidelines of gravity whilst the corporate was battered by scandals over privateness and misinformation.

Not anymore.

On Wednesday, Meta, the corporate previously generally known as Fb, reported a 1 p.c decline in quarterly income from the earlier 12 months. It was the primary time the social media big’s income had fallen because it went public a decade in the past, because it confronts elevated regulatory scrutiny and a turbulent economic system whereas making an attempt to construct a brand new frontier of digital communication.

Meta’s income for the second quarter was $28.82 billion, down from $29.07 billion a 12 months earlier. Revenue was $6.69 billion, down 36 p.c from a 12 months earlier. Wall Road analysts had predicted earnings of $7.04 billion on income of $28.9 billion, in keeping with knowledge compiled by FactSet.

The outcomes compounded a tough day for Meta, which was additionally sued on Wednesday by the Federal Commerce Fee over a deal to purchase a digital actuality firm referred to as Inside. The lawsuit struck straight on the ambitions of Mark Zuckerberg, Meta’s founder and chief govt, who has been spending billions of {dollars} to create an immersive world of social interplay within the “metaverse,” which is a mix of digital and augmented realities that shall be certain by commerce and on-line relationships.

Meta’s declining income was particularly stark provided that as just lately as 2019, its quarterly income development was 28 p.c. The corporate attributed its most up-to-date lackluster monetary outcomes to weaker demand for digital promoting and the broader financial uncertainty.

“We appear to have entered an financial downturn that may have a broad affect on the digital promoting enterprise,” Mr. Zuckerberg mentioned in an earnings name. “The state of affairs appears worse than it did 1 / 4 in the past.”

Google, Twitter and Snap, which depend on internet advertising, have additionally mentioned this month that they skilled diminished demand for promoting due to the slowing international economic system. Among the firms cited the results of the battle in Ukraine and its destabilizing impact on the European advert market, in addition to the energy of the U.S. greenback, which has harm firms in relation to international gross sales.

That ache is unlikely to finish quickly. For the present quarter, Meta mentioned it anticipated “a continuation of the weak promoting demand atmosphere.” E-commerce advertisements have been waning as “peak pandemic” had handed and extra folks ventured outdoors, the corporate mentioned, including that powerful intervals like these have been “cyclical” traditionally.

Mr. Zuckerberg, who has been reining in spending and trimming perks at his firm, mentioned he anticipated to “get extra accomplished with fewer sources.” However he famous that he deliberate to proceed investing in key areas that will set Meta up for its subsequent section of development.

Past the financial tumult, Meta faces its personal specific set of challenges. Final 12 months, Apple made privacy-related modifications that hampered Meta’s capability to measure and ship its promoting on Apple-made cell units. (Meta makes the overwhelming majority of its promoting income from smartphones.)

Additionally it is staring down the barrel of one among its hardest rivals in TikTok, the Chinese language-owned video app that has captured the eye of a couple of billion folks in just some years. Mr. Zuckerberg has begun to shift his firm’s merchandise to imitate TikTok’s choices, together with making sweeping modifications to Instagram and Fb.

On the similar time, Mr. Zuckerberg has been spending huge on his imaginative and prescient for the metaverse. He has instructed traders, technologists and others that the hassle could take years to come back to fruition and that the endeavor shall be expensive. Some traders are skeptical that the investments will repay in the long run.

Nonetheless, there have been vibrant spots in Meta’s earnings report. The corporate mentioned its “every day energetic folks,” its time period to explain customers throughout its household of apps — which incorporates Fb, Instagram and WhatsApp — elevated to 2.88 billion, up 4 p.c from a 12 months in the past. That exceeded analysts’ expectations that the corporate was dropping guests. The Fb app additionally noticed consumer development inside america, an space that some believed was saturated.

Mr. Zuckerberg mentioned he was inspired by different areas of Meta’s enterprise which can be driving development and engagement, just like the Reels video product, a function inside Instagram that’s just like TikTok’s video providing. Investments in synthetic intelligence advice algorithms have additionally pushed extra folks to make use of the service and for longer intervals, the corporate mentioned.

His purpose, he mentioned, was to finally make more cash from Reels, which isn’t as profitable for Instagram because the app’s different promoting codecs. A part of the problem was to push via a “cannibalization” impact, the place extra folks use the brand new Reels product and shift away from viewing extra invaluable advertisements displayed in between the pictures and tales parts of the app. Mr. Zuckerberg mentioned he believed it was solely a matter of time earlier than Meta discovered how one can higher become profitable from Reels.

To make it via a tough interval, the corporate mentioned it deliberate to gradual hiring within the second half of the 12 months and lower prices. On Tuesday, Meta’s Actuality Labs {hardware} division, which makes digital actuality headsets and different merchandise, mentioned it could improve the value of its marquee V.R. headset, the Quest 2, by $100.

Meta additionally mentioned that David Wehner, the chief monetary officer, would change into chief technique officer, a brand new place that additionally oversees company improvement. Susan Li, who serves as vp of finance at Meta, will change into chief monetary officer.

In a submit to his Fb web page, Mr. Zuckerberg mentioned the change in Mr. Wehner’s function would assist with challenges, partnerships and inner group. “These areas will profit from a extra disciplined technique course of,” he mentioned.

Sheryl Sandberg, Meta’s chief working officer, additionally appeared on Wednesdays firm earnings name, the final of her 14-year tenure. Ms. Sandberg, who plans to depart the corporate within the fall, struck an upbeat tone where
as acknowledging the challenges Meta faces.

“There isn’t any doubt that we’re going via a transition interval, and doing so in a time of world financial uncertainty,” she mentioned. “Meta is an organization that has proven extraordinary resilience. And we’ve got demonstrated time and time once more that once we construct merchandise, they scale globally.”