Coinbase's third-quarter financial report is out, SBF shows strong support for its rival: Media only focuses on revenue falling short of expectations

Every financial reporting season, FTX founder SBF always takes the opportunity to compare with its rival Coinbase, emphasizing that Coinbase charges high fees to retail traders, making it a major source of income. However, this time he specifically clarified the issue that was widely reported in the media with the headline "Revenue Falls Short of Expectations," and believes that Coinbase's profitability remains very strong.

SBF stated that the media pointed out Coinbase's stock price fell due to a sudden drop in revenue. However, by observing recent trading volumes, they earned $600 million in the last quarter and will only earn more in the fourth quarter.

End Game Interactive developers also pointed out that Coinbase's revenue is on par with Niantic, the developer of "Pokémon GO," but its pre-tax and pre-interest profits are more than double those of Niantic.

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However, SBF also mentioned that the third-quarter financial report emphasized revenue diversification, but in reality, fees from retail trading are still the main source of income.

Always fact-check the narrative.

Media will tell you Coinbase is down because of an earnings miss–but look at the recent volume! They made $600m last Q and will make more this one.

Marketing will tell you revenue diversifies — but it's still almost all retail trading fees. https://t.co/VVe3SE4YAV

— SBF (@SBF_FTX) November 10, 2021

Performance in the Third Quarter

SBF first shared a chart showing the growth in trading volume, with FTX highlighted in blue and Coinbase in yellow. He believes that Coinbase's performance in the third quarter was flat, but the fourth quarter may see better results.

However, some users mentioned that measuring the growth of exchanges based on the total trading volume percentage is not fair. This is equivalent to a magnitude increase for exchanges with relatively large trading volumes like Binance to reflect their growth.

Retail Trading Fees Still Main Revenue

The net revenue is 1.2 billion, with a pre-tax and pre-interest profit of 600 million USD EBITDA. SBF pointed out:

As in previous years, profits almost entirely come from retail trading fees, averaging 1%. The average fees on the mobile app side may be higher, which could be the main source of revenue.

With the net revenue from retail trading fees reaching as high as 1.022 billion USD, the remaining net revenue is only about 212.7 million USD, 20%. SBF pointed out that around 80 million USD, 8%, comes from block rewards like Ethereum staking.

Annual Expenses

Coinbase has annual expenses of around 4 billion USD, with technology development and corporate management fees accounting for about 60%. As of the end of the third quarter, it had 2,781 full-time employees.

For SBF, the most interesting part is the annual 500 million USD in "other operating expenses," which, according to the financial report, is used to compensate users for losses caused by Coinbase's downtime.

As Mizuho analyst Dan Dolev expects Coinbase's third-quarter net revenue to be between 1.31 billion and 1.57 billion USD, the release of the financial report also led to a 13% pre-market stock price drop.

SBF often has some criticisms of Coinbase's impressive financial reports. He has complained that FTX's trading volume is actually much higher, and Coinbase only has high profits due to high fees.

However, this time he concluded that Coinbase is doing well, with a pre-tax and pre-interest profit of 600 million USD, which may increase in the next quarter.