Financial outlook | Coinbase (COIN.US) faces the challenge of the crypto winter: Q1 revenue and profit are expected to drop simultaneously, 14% of employees will be laid off to bet on AI transformation.

Coinbase Global will announce its first quarter results for 2026 on Thursday, May 7th after the US stock market closes. Against the backdrop of a continuous decline in the cryptocurrency market since its peak in October last year, Wall Street's expectations for this financial report have dropped to abnormally conservative levels. According to FactSet data, analysts expect Coinbase's Q1 revenue to be around $1.5 billion, ranging between $1.39 billion and $1.77 billion, a year-on-year decrease of approximately 26%. Adjusted EBITDA is expected to be around $455 million, a decrease of approximately 51% from the same period in 2025, hitting a new low in two years. Industry woes lead to Bitcoin price drop This pessimistic expectation is not unfounded. In the first quarter of 2026, Bitcoin dropped by 22%, Ethereum dropped by 41%, and the global cryptocurrency exchange trading volume plummeted by nearly 48% from its peak in October 2025 to $4.3 trillion, the lowest level since October 2024. Data shows that Coinbase's Q1 average daily trading volume has dropped to its lowest level since the second quarter of 2024. Oppenheimer analysts have lowered their estimation of Coinbase's Q1 trading volume from $244 billion to $211 billion, and adjusted their total revenue estimate to $1.48 billion, lower than previous predictions and Wall Street consensus. Barclays analyst Benjamin Budish has also pointed out that there has been no significant improvement in daily trading volumes in March and April, with his adjusted EBITDA estimate being 24% lower than the Wall Street consensus. Robinhood issued an early warning with a trillion-dollar market value evaporating Coinbase's woes are not unique, as its competitor Robinhood sounded the alarm a week ago. Robinhood's Q1 financial report released on April 28 showed revenue of $1.07 billion, lower than the market's expectation of $1.18 billion; earnings per share were $0.38, below the expected $0.39. Crypto revenue dropped by 47% year-on-year to $134 million. After the financial report was released, Robinhood's stock price subsequently fell. In terms of overall market size, since the peak of the cryptocurrency market in October 2025, the total market value of digital assets has evaporated by approximately $1.6 trillion. Bitcoin had reached a historical high of $126,000 in October 2025, but as of early May 2026, it had fallen to around $81,000, a drop of about 35% from its peak. However, there are signs of stabilization in the market. As of Wednesday, May 6, Bitcoin's price has been holding steady at just under $82,000 for three months, benefiting from the continuous inflow of funds into US physically-backed ETFs (with $467 million recorded on Tuesday), providing institutional buying support. K33 Research's report indicates that Bitcoin's 30-day average funding rate has been negative for a record 67 consecutive days, the longest in this decade, historically such sustained negative rates often occur near market bottoms. However, the confirmation of a bottom still requires observation of the sustainability of trading volume and prices. Restructuring: 14% of employees out, AI narrative symphony Two days before the financial report was released on May 5, Coinbase suddenly announced that it would lay off approximately 700 employees, accounting for about 14% of its global workforce. CEO Brian Armstrong explained on the social media platform X: "Two forces are convergingThe crypto market is entering a correction phase again, and AI is fundamentally changing how we work. We need to proactively address these two forces." The restructuring measures are quite radical. Armstrong stated that the company will have "no purely managerial positions," compressing the organizational structure to a maximum of five layers between top executives and the remaining 4,300 employees, integrating the roles of engineers, designers, and product managers into single roles for certain teams, creating "AI-native squads." He wrote: "Over the past year, I've watched engineers complete tasks in a few days with AI that used to take weeks for teams to accomplish. Non-technical teams can now code and go live, and many of our workflows are being automated." Coinbase expects the restructuring to cost between $50 million and $60 million, almost entirely representing employee severance and other termination costs, with most of it expected to be incurred in the second quarter. The market's reactions to this have been mixed. After the layoff announcement, the company's stock price rose by 8% in pre-market trading, as investors viewed this move as a positive signal of the company proactively controlling costs during a market downturn. However, it dropped over 2% after the market opened on Tuesday, indicating ongoing doubts in the market about the long-term effects of AI replacing manpower. In fact, Coinbase is not the only company undertaking layoffs. According to Challenger, Gray & Christmas data, technology companies announced layoffs of 52,050 people in the first quarter of 2026, a 40% increase year-on-year. Many tech giants, including Block, Meta, and Oracle, have announced large-scale layoff plans this year, with AI-driven efficiency improvements becoming an industry consensus, despite critics believing that the role of AI is being exaggerated in some scenarios. This is not the first time Coinbase has wielded the axe in a market downturn. Since its launch in 2012, the exchange has implemented layoffs in every crypto bear marketin 2022, it laid off around 950 people to cope with the market collapse at the time. However, unlike previous pure cyclical responses, this round of layoffs has been given a stronger structural transformation color, with AI explicitly listed as one of the two DRIVES. Armstrong bluntly stated: "The biggest risk is not taking action, rather than taking action." Revenue restructuring: from "transaction dependence" to "subscription magic" Despite significant pressure on the trading front, Coinbase's active push for revenue restructuring in recent years is beginning to bear fruit. Coinbase has weathered several crypto winters, and has now successfully transformed, actively seeking to expand revenue sources, no longer relying solely on retail trading fees to sustain itself. To that end, the company has expanded its consumer product line and is providing cryptocurrency services to institutions. According to the Q4 2025 financial report, the company's subscription and service revenue grew by 13% year-on-year to $727 million, with stablecoin revenue increasing by 61% to $364 million. The average balance of USDC on the platform hit a historical high of $17.8 billion. Coinbase One's paying subscription users have nearly reached 1 million, growing more than three times in three years. However, the management's guidance for Q1 in February appeared cautioussubscription and service revenue guideline's median was around $590 million, about 27% lower than the Wall Street consensus expectation of $747.5 million. This means that even non-trading business might not be able to fully hedge the impact of the market downturn. To further reduce dependence on trading fees, Coinbase is accelerating its "universal exchange" strategic layout. At the end of last year, the company announced the launch of stock, tokenized stocks, futures, and prediction market contract trading services, aiming to create a comprehensive platform covering both traditional finance and crypto assets. On the institutional side, through the acquisition of derivatives trading platform Deribit, Coinbase's institutional trading revenue grew by 31% year-on-year in Q4 to $185 million. The major exchange is also on the brink of victory in a lobbying battle with the banking industry in Washington, which has blocked a landmark cryptocurrency bill. Coinbase is striving to protect its ability to pay interest on stablecoins to customers, which is a key driver of its growth. Analysts estimate that Coinbase's income from stablecoin reserves will grow by 45% compared to the same period last year, reaching $327 million.