Connect with us

Business

Coinbase earned $1.5 billion from Circle investment earnings show

Published

on



When Coinbase published its second quarter earnings on Thursday, the results were ho-hum at best: a narrow miss on revenue and a decline in trading volume, which led the company’s stock—which has been on a tear in recent months—to drop by around 15%. The market’s focus on typical earnings metrics, though, mean the news coverage largely overlooked three very significant one-off numbers that matter a lot to Coinbase’s short and long term future.

The first of those numbers is $1.5 billion. That figure reflects what Coinbase described as “pre-tax gains on strategic investments—which included an unrealized gain on our investment in Circle.” Translation: Coinbase hit the jackpot when Circle, its partner on the fast-growing USDC stablecoin, went public in early June and saw the value of its shares soar soon after.

Coinbase is presumably subject to the same six month lock-up as other Circle shareholders, and it’s unclear when the company might cash out its windfall or if those shares will still be worth as much when it decides to do so. But even if Circle stock does decline, it’s a safe bet that Coinbase will still be sitting on a large and liquid investment it can cash out during a downturn, or use to fuel its impressive acquisition spree.

It’s also important to recognize that Circle is just one of many crypto firms in which Coinbase has an equity stake. As the crypto market continues to mature, other startups will go public and it’s a good bet that Coinbase will be in position to collect when they do. In this proves to be the case, the $1.5 billion that the company reported as a one-time item will actually be replicated to greater or less degrees in upcoming quarters.

The second one-time number Coinbase reported on Thursday is part of a far less positive story. That would be the “$307 million in expenses related to the data theft incident disclosed in May.”

The “incident” in question is the calamitous hacking episode that saw criminals bribe customer service agents in India, and then use the personal data they garnered to pose as Coinbase employees and defraud them. In response, Coinbase pledged to make good any customer who lost money in the scheme and to put a $20 million bounty on the heads of those responsible.

If the fallout from the episode only costs $307 million, Coinbase can count that as a win. But that’s a big if in light of the gaggle of class action lawyers and state regulators lining up to extract a payout from the company over the data breach. Then there is the reputational damage that goes with Coinbase failing to see how outsourcing sensitive customer data to dirt-cheap agents in India posed a security risk. For now, though, the company appears to have weathered the PR storm and its announcement of a new customer service “Center of Excellence” in North Carolina could help to smooth out remaining mistrust.

Finally, there is third big one-off number tucked into Thursday’s earnings report: “a $362 million pre-tax gain on our crypto investment portfolio (largely unrealized).” This reflects a pair of significant recent developments. The first is the obvious run-up in crypto asset prices, which is fattening Coinbase’s treasury holdings. The other is the recent change in accounting rules that allows companies to record crypto gains as they accrue. While companies accumulating crypto on their balance sheet is generally a dicey corporate finance strategy, it is fortunately only a small part of Coinbase’s operations and, for now, the gains are very real and help to strengthen its already strong fundamentals.

While one-off numbers are typically just that—temporary noise that shouldn’t be mistaken for a signal of a company’s broader performance—they can also represent something more. That is the case with Coinbase’s Q2 earnings, where items like its massive Circle windfall arguably matter more than the usual quarter-to-quarter revenue and trading fluctuations.

On the new Fortune Crypto Playbook vodcast, Fortune’s senior crypto experts decode the biggest forces shaping crypto today. Watch or listen now



Source link

Continue Reading

Business

The rise of AI reasoning models comes with a big energy tradeoff

Published

on



Nearly all leading artificial intelligence developers are focused on building AI models that mimic the way humans reason, but new research shows these cutting-edge systems can be far more energy intensive, adding to concerns about AI’s strain on power grids.

AI reasoning models used 30 times more power on average to respond to 1,000 written prompts than alternatives without this reasoning capability or which had it disabled, according to a study released Thursday. The work was carried out by the AI Energy Score project, led by Hugging Face research scientist Sasha Luccioni and Salesforce Inc. head of AI sustainability Boris Gamazaychikov.

The researchers evaluated 40 open, freely available AI models, including software from OpenAI, Alphabet Inc.’s Google and Microsoft Corp. Some models were found to have a much wider disparity in energy consumption, including one from Chinese upstart DeepSeek. A slimmed-down version of DeepSeek’s R1 model used just 50 watt hours to respond to the prompts when reasoning was turned off, or about as much power as is needed to run a 50 watt lightbulb for an hour. With the reasoning feature enabled, the same model required 7,626 watt hours to complete the tasks.

The soaring energy needs of AI have increasingly come under scrutiny. As tech companies race to build more and bigger data centers to support AI, industry watchers have raised concerns about straining power grids and raising energy costs for consumers. A Bloomberg investigation in September found that wholesale electricity prices rose as much as 267% over the past five years in areas near data centers. There are also environmental drawbacks, as Microsoft, Google and Amazon.com Inc. have previously acknowledged the data center buildout could complicate their long-term climate objectives

More than a year ago, OpenAI released its first reasoning model, called o1. Where its prior software replied almost instantly to queries, o1 spent more time computing an answer before responding. Many other AI companies have since released similar systems, with the goal of solving more complex multistep problems for fields like science, math and coding.

Though reasoning systems have quickly become the industry norm for carrying out more complicated tasks, there has been little research into their energy demands. Much of the increase in power consumption is due to reasoning models generating much more text when responding, the researchers said. 

The new report aims to better understand how AI energy needs are evolving, Luccioni said. She also hopes it helps people better understand that there are different types of AI models suited to different actions. Not every query requires tapping the most computationally intensive AI reasoning systems.

“We should be smarter about the way that we use AI,” Luccioni said. “Choosing the right model for the right task is important.”

To test the difference in power use, the researchers ran all the models on the same computer hardware. They used the same prompts for each, ranging from simple questions — such as asking which team won the Super Bowl in a particular year — to more complex math problems. They also used a software tool called CodeCarbon to track how much energy was being consumed in real time.

The results varied considerably. The researchers found one of Microsoft’s Phi 4 reasoning models used 9,462 watt hours with reasoning turned on, compared with about 18 watt hours with it off. OpenAI’s largest gpt-oss model, meanwhile, had a less stark difference. It used 8,504 watt hours with reasoning on the most computationally intensive “high” setting and 5,313 watt hours with the setting turned down to “low.” 

OpenAI, Microsoft, Google and DeepSeek did not immediately respond to a request for comment.

Google released internal research in August that estimated the median text prompt for its Gemini AI service used 0.24 watt-hours of energy, roughly equal to watching TV for less than nine seconds. Google said that figure was “substantially lower than many public estimates.” 

Much of the discussion about AI power consumption has focused on large-scale facilities set up to train artificial intelligence systems. Increasingly, however, tech firms are shifting more resources to inference, or the process of running AI systems after they’ve been trained. The push toward reasoning models is a big piece of that as these systems are more reliant on inference.

Recently, some tech leaders have acknowledged that AI’s power draw needs to be reckoned with. Microsoft CEO Satya Nadella said the industry must earn the “social permission to consume energy” for AI data centers in a November interview. To do that, he argued tech must use AI to do good and foster broad economic growth.



Source link

Continue Reading

Business

SpaceX to offer insider shares at record-setting valuation

Published

on



SpaceX is preparing to sell insider shares in a transaction that would value Elon Musk’s rocket and satellite maker at a valuation higher than OpenAI’s record-setting $500 billion, people familiar with the matter said.

One of the people briefed on the deal said that the share price under discussion is higher than $400 apiece, which would value SpaceX at between $750 billion and $800 billion, though the details could change. 

The company’s latest tender offer was discussed by its board of directors on Thursday at SpaceX’s Starbase hub in Texas. If confirmed, it would make SpaceX once again the world’s most valuable closely held company, vaulting past the previous record of $500 billion that ChatGPT owner OpenAI set in October. Play Video

Preliminary scenarios included per-share prices that would have pushed SpaceX’s value at roughly $560 billion or higher, the people said. The details of the deal could change before it closes, a third person said. 

A representative for SpaceX didn’t immediately respond to a request for comment. 

The latest figure would be a substantial increase from the $212 a share set in July, when the company raised money and sold shares at a valuation of $400 billion.

The Wall Street Journal and Financial Times, citing unnamed people familiar with the matter, earlier reported that a deal would value SpaceX at $800 billion.

News of SpaceX’s valuation sent shares of EchoStar Corp., a satellite TV and wireless company, up as much as 18%. Last month, Echostar had agreed to sell spectrum licenses to SpaceX for $2.6 billion, adding to an earlier agreement to sell about $17 billion in wireless spectrum to Musk’s company.

Subscribe Now: The Business of Space newsletter covers NASA, key industry events and trends.

The world’s most prolific rocket launcher, SpaceX dominates the space industry with its Falcon 9 rocket that launches satellites and people to orbit.

SpaceX is also the industry leader in providing internet services from low-Earth orbit through Starlink, a system of more than 9,000 satellites that is far ahead of competitors including Amazon.com Inc.’s Amazon Leo.

SpaceX executives have repeatedly floated the idea of spinning off SpaceX’s Starlink business into a separate, publicly traded company — a concept President Gwynne Shotwell first suggested in 2020. 

However, Musk cast doubt on the prospect publicly over the years and Chief Financial Officer Bret Johnsen said in 2024 that a Starlink IPO would be something that would take place more likely “in the years to come.”

The Information, citing people familiar with the discussions, separately reported on Friday that SpaceX has told investors and financial institution representatives that it is aiming for an initial public offering for the entire company in the second half of next year.

A so-called tender or secondary offering, through which employees and some early shareholders can sell shares, provides investors in closely held companies such as SpaceX a way to generate liquidity.

SpaceX is working to develop its new Starship vehicle, advertised as the most powerful rocket ever developed to loft huge numbers of Starlink satellites as well as carry cargo and people to moon and, eventually, Mars.



Source link

Continue Reading

Business

U.S. consumers are so strained they put more than $1B on BNPL during Black Friday and Cyber Monday

Published

on



Financially strained and cautious customers leaned heavily on buy now, pay later (BNPL) services over the holiday weekend.

Cyber Monday alone generated $1.03 billion (a 4.2% increase YoY) in online BNPL sales with most transactions happening on mobile devices, per Adobe Analytics. Overall, consumers spent $14.25 billion online on Cyber Monday. To put that into perspective, BNPL made up for more than 7.2% of total online sales on that day.

As for Black Friday, eMarketer reported $747.5 million in online sales using BNPL services with platforms like PayPal finding a 23% uptick in BNPL transactions.

Likewise, digital financial services company Zip reported 1.6 million transactions throughout 280,000 of its locations over the Black Friday and Cyber Monday weekend. Millennials (51%) accounted for a chunk of the sizable BNPL purchases, followed by Gen Z, Gen X, and baby boomers, per Zip.

The Adobe data showed that people using BNPL were most likely to spend on categories such as electronics, apparel, toys, and furniture, which is consistent with previous years. This trend also tracks with Zip’s findings that shoppers were primarily investing in tech, electronics, and fashion when using its services.

And while some may be surprised that shoppers are taking on more debt via BNPL (in this economy?!), analysts had already projected a strong shopping weekend. A Deloitte survey forecast that consumers would spend about $650 million over the Black Friday–Cyber Monday stretch—a 15% jump from 2023.

“US retailers leaned heavily on discounts this holiday season to drive online demand,” Vivek Pandya, lead analyst at Adobe Digital Insights, said in a statement. “Competitive and persistent deals throughout Cyber Week pushed consumers to shop earlier, creating an environment where Black Friday now challenges the dominance of Cyber Monday.”

This report was originally published by Retail Brew.



Source link

Continue Reading

Trending

Copyright © Miami Select.