2Q26 review：continuous share gain despite challenging market environment

2Q26 review:continuousshare gaindespitechallenging market environment Target PriceUS$205.00(Previous TPUS$235.00)Up/Downside40.2%Current PriceUS$146.26 Coinbaseannounced 2Q26 results:netrevenuefellby 14% QoQ to US$1.15bn,slightly belowBloombergconsensus estimate of US$1.22bn, primarily due tothe headwinds to crypto assetprice and trading volume;adjustedEBITDAdeclinedby 31%QoQ to US$208mn amid challenging crypto marketenvironment, vs. consensus of US$327mn.The company continued to diversifyrevenue streams and optimize cost structure to weather sector headwinds. Thecompany achieved c.US$600mncost reduction vs.2025 annualized exit rate,after 14% headcount reduction in May. Managementalsolowered FY26 adj.expenses guidance to US$4.20-4.45bn (previous: US$4.25-$4.60bn). In view ofthe continued weakness in crypto market sentiment, we lower FY26-28E totalrevenueforecasts by 15-17%, and trim our SOTP-derived target price toUS$205.0 (previous: US$235.0).Althoughtheoverallcrypto market yet to seesigns ofrecovery, Coinbase maintained healthy business trend and continuedto gain share. MaintainBUY. Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk Ye TAO, CFA(852) 3850 5226franktao@cmbi.com.hk Solidprogress on Everything Exchange.Transaction revenuedroppedby 21% QoQ to US$599mn in 2Q26 (52%of net revenue). The companycontinued to outperform overall crypto market, with its market share up by3.2/1.2ppts YoY/QoQ to 10.3% in 2Q26. The progress on EverythingExchangebecame a key growth driver:1)Coinbase’s TTM cryptoderivativestradingvolumewas flat QoQ despite the 12% decline in overallmarket volume, with its market share reaching an all-time high; 2) PredictionMarkets revenue grew by 106% QoQ in 2Q26, with annualized revenuesurpassingUS$100mn,driven by the newly launched features andseasonally strongsport events. For 3Q26, managementguidedtransactionrevenue of c.US$130mn QTD (1Jul-26Jul). Shuyin GUO(852) 3916 3716guoshuyin@cmbi.com.hk Diversifyingrevenue streams.Subscription and Services revenuedeclined by 15% QoQ to US$555mn in 2Q26 (48% ofnet revenue).Stablecoin’srevenue declined by 4% QoQ to US$292mnin 2Q26, mainlydue to decline in interest rates. USDC and Coinbase’s partner stablecoinsaccounted for 79% of totalmarketstablecointransactionvolumeYTD, asperArtemis Analytics. Blockchain rewards revenue dropped by 17% QoQto US$83mnin 2Q26,primarilyattributable to decline in crypto asset pricesand reward rates.Looking into 3Q26,managementguidedSubscription andServicesrevenue of US$500-580mn,largelyflat with2Q26at the midpoint. Enhancingefficiency to weather market headwinds.Coinbaseenhancedits operatingefficiencyamid market uncertainty,andloweredFY26 adj. expenses guidanceby c.US$100mnto US$4.20-4.45bn. Thecompany, however,remainscommitted to generating positiveadj.EBITDAin allmarket conditions.The company leveraged AI to improve engineerefficiency, with pull requests per engineer up by 2.2x YoY andtest coverageup by 2.5x YoY. With14% headcount reduction in May,Coinbaseachievedc.US$600mn cost reduction vs.2025 annualized exit rate(4Q25 adj.expensesmultiplied byfour). Source: FactSet Valuation WevalueCoinbaseat US$205.0per share based onSOTPvaluation, comprising: 1)transaction business of US$130.1per share (63% of total valuation) based on35x FY26EEV/EBITDA,a premium over average EV/EBITDA of traditional exchanges/brokers (25x),giventhat its business remains at a nascent stage with a longer growth runway; 2)stablecoin business of US$43.4per share (21% of total valuation) based on27x FY26EEV/EBITDA(on par withCircle); 3) custodial, blockchain rewards and otherbusiness ofUS$13.7per share (7% of total valuation) based on11x FY26E EV/EBITDA (on par withassetmanagement companies);and 4) net cash of US$17.8 per share (9% of totalvaluation). Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflecthis or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirmsthat neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer of any of the HongKong listed companies covered in this report; and (4)have any financial interests in the Hong Kong listed companies covered in this report. CMBIGM R