Gemini lost $107.7 million in the second quarter, challenging revenue diversification strategy

Gemini's second quarter 2026 financial report analysis: Revenue diversification has achieved initial results, but costs and risks still remain

Gemini's second quarter 2026 financial report shows that the company is successfully diversifying revenue, but it has not yet completely escaped the attendant costs and risks. According to the company's financial report released on August 13, 2026, the company's net loss for the quarter ended June 30, 2026 was US$107.7 million, although total revenue increased 37% year-on-year to US$45.5 million, of which service revenue increased 149% to US$23.5 million, while exchange revenue fell 38% to US$12.5 million.

This loss data is time-sensitive because it tests the core proposition of Gemini's strategy: whether establishing services such as credit cards, pledges and consulting can offset cyclical fluctuations in trading business. In the second quarter, the services business did effectively cushion weak exchange revenue. But operating expenses increased 24% year-on-year to $122.4 million, and new business also brought new risks. Trading losses climbed to $20.1 million, mainly due to $16.1 million in CECL reserves associated with identified identity fraud groups in the credit card portfolio.

Adjusted results also failed to bring relief. The adjusted EBITDA loss widened to $74 million, which the company attributed mainly to realized and unrealized losses driven by the Bitcoin market related to private equity offerings in May 2026. Even if the service business expands in size, the revaluation of cryptocurrency prices still has an impact on the income statement.

What changes will Gemini's business in the second quarter of 2026?

The revenue structure is further tilted towards the service business. The company's reporting services revenue was US$23.5 million, a year-on-year increase of 149%; exchange revenue fell to US$12.5 million, a year-on-year decrease of 38%. This quarter continued a multi-year trend. The company's 2025 financial report shows that the ratio of exchange revenue to total revenue has dropped from 67.4% in 2024 to 52.0% in 2025, reflecting the continued shift in reliance on exchanges.

Credit cards have become the cornerstone of this transformation. Credit card revenue increased 231% year-on-year to $16.2 million in the second quarter, and managed credit card receivables expanded to $219.6 million from $93.5 million a year ago. Expanding loan products brings balance sheet and operational risks, which were reflected in reserves and fraud-related costs this quarter.

Costs rise as companies invest and absorb listing costs. Total operating expenses increased to $122.4 million, including $48.2 million in compensation expenses, including $20.3 million in stock compensation related to the IPO. This development highlights how equity-based compensation and growth spending can mask the operating leverage that services businesses may ultimately generate.

The strongest evidence: service size versus loss drivers

The second quarter provided clear signals on both sides of the diversification account. The following are the specific data disclosed by Gemini:

Net loss: US$107.7 million; Total income: US$45.5 million, a year-on-year increase of 37%; service revenue: US$23.5 million, a year-on-year increase of 149%; exchange revenue: US$12.5 million, a year-on-year decrease of 38%; credit card revenue: US$16.2 million, a year-on-year increase of 231%; managed credit card receivables: US$219.6 million, up from US$93.5 million in the same period last year; total operating expenses: US$122.4 million, a year-on-year increase of 24%; salary expenses: US$48.2 million, including US$20.3 million in IPO-related stock compensation; trading loss: US$20.1 million, of which US$16.1 million was CECL reserves related to identity fraud groups; Adjusted EBITDA: loss of US$74 million, mainly due to the revaluation of Bitcoin related to private equity offerings in May 2026.

The verified facts reveal a double dilemma. Income diversification is real and expanding, driven mainly by credit card programs. At the same time, operating and credit costs are rising rapidly, and market-related bitcoin market capitalisation continues to put pressure on adjusted results.

As a peer comparison, Coinbase reported in the first quarter of 2026 that subscription and service revenue accounted for approximately 44% of net revenue, highlighting how a larger service base buffers trading volatility. This is a benchmark, not a forecast, but it outlines the type of revenue structure that Gemini seems to be pursuing.

Impact on Gemini's sustainable profit path

Reasonable inference: Gemini's near-term profitability depends more on unit economics and risk control of the credit card portfolio, as well as stricter operational discipline, than on revenue growth. The CECL fees associated with identity fraud groups are a specific reminder of the volatility of losses caused by expanding consumer credit. The rapid growth of accounts receivable means that loss identification and collection capabilities must be improved accordingly.

Personal opinion: The strategy is reasonable on paper. Services businesses that generate recurring or usage-based revenue can reduce reliance on the spot trading cycle. But achieving breakeven may require three levers that were highlighted in the second quarter: fraud mitigation and credit underwriting results; operating expense controls after excluding IPO-related stock compensation; and the continued sensitivity of reporting metrics to Bitcoin's valuation resulting from private offerings in May 2026.

Industry and User Inspiration

For cryptocurrency exchange operators, Gemini's quarterly report highlights the trade-off for large-scale entry into financial services. Revenue has become more stable, but credit and operational risks have increased and pricing and provisions have to be made. A comparison with Coinbase's service share shows the potential buffer that diversification can create, but it does not eliminate the risk of market fluctuations or the cost of building and maintaining a risky infrastructure.

For users, growth in credit card and pledge products could mean a broader suite of products and potentially more rewards or features. On the other hand, institutions that take on more credit risk may become more conservative in underwriting, or adjust pricing to reflect higher loss expectations when fraud surges, as shown in the second quarter CECL reserves.

The strongest rebuttal

There is good reason to regard the second quarter as a noise quarter rather than a new benchmark. Facts verified: Compensation expenses include $20.3 million in IPO-related equity compensation, and adjusted EBITDA was subject to bitcoin revaluation pressure related to private equity offerings in May 2026. A reasonable alternative: As IPO-related compensation normalizes and cryptocurrency price valuations stabilize, losses may improve without significantly increasing revenue. In addition, CECL reserves are associated with specific identity fraud groups and may not be repeated if controls are strengthened.

Rebuttal to the opposite: Even if these factors subsided, the second quarter highlighted lasting sensitivity. Services businesses can offset trading slumps, but they do not automatically generate operating leverage if cost increases and loss reserves exceed revenue growth.

What future signals will confirm or weaken this argument

Focus on the following specific signals in future quarters and disclosures: credit performance of the credit card portfolio: CECL reserve updates, net write-off rates, overdue trends, and comments on resolved identity fraud groups. Services business portfolio and scalability: Continued growth in services revenue relative to exchange revenue, and evidence of improved unit economics of credit card projects. Operating expense trends: Changes in compensation expenses after excluding IPO-related stock compensation, and total expense growth versus revenue growth. Bitcoin exposure in reporting metrics: Sensitivity of adjusted EBITDA and net income to the May 2026 revaluation of cryptocurrencies related to private equity offerings. Rhythm of accounts receivable growth: Manage the comparison between credit card accounts receivable growth and reserve accruals to indicate whether risk control keeps up with scale. Peer benchmark: Changes in service shares of mature exchanges such as Coinbase as a measure of how non-trading revenue buffers volatility.

Conclusion

Personal opinion: Gemini's diversity strategy is complete, but costly. The second quarter demonstrated that the services business can grow during periods of slowing transactions, but also showed credit, operational and market risks that must be controlled before the strategy can continue to generate profits.