BitGo (BTGO) Q3 2026 earnings review
BitGo cuts its overhead costs, but its trading margins shrink
BitGo's core custody and trading revenue kept shrinking even as paper gains on its Bitcoin holdings produced a headline profit. The digital asset custodian's revenue after direct transaction costs fell 12% from last quarter to $37 million because quiet crypto markets and low-margin stablecoin trades squeezed trading spreads to 15 basis points. June job cuts reduced overhead by $3 million, and a $71 million paper gain on company-owned Bitcoin lifted net income, but operating profit excluding one-offs stayed negative.
| Revenue after direct costs | $37.3M -12.1% from last quarter; -32.1% from a year ago |
|---|---|
| Trading net margin | 15 bps missed 20–25 bps plan; down from 17 bps in Q2 |
| Operating expenses ex direct costs | $56.6M -5.5% from last quarter; beat <$59.9M plan |
| Adjusted EBITDA | -$4.3M missed break-even goal (-$11.6M ex treasury sales) |
⚖️ Verdict: 🔴 Bearish
The story got worse because the third-quarter margin recovery and break-even plan failed across almost every revenue line. Trading spreads, subscription fees and stablecoin revenue all shrank instead of growing as planned, and by our math the operating loss excluding treasury token sales widened to $12 million while the company changed how it calculates normalized platform assets. One positive: the June restructuring delivered nearly all of its promised cost savings on schedule.
The question now is whether higher crypto prices at the end of September can lift fee revenue enough to cover BitGo's fixed costs, or whether rival custodians will keep squeezing take rates. If client activity converts into fees, the $83 billion quarter-end asset balance will lift fourth-quarter net revenue; if fee compression continues, assets will rise while core operating losses persist. Fourth-quarter revenue after direct costs and trading spreads will settle it.
🐂 Bull Case
June Restructuring Cut Quarterly Overhead by $3.3 Million
BitGo promised about $15 million in yearly cash savings starting this quarter after cutting 15% of its staff in June and moving server work off public clouds. In the third quarter, operating expenses excluding direct transaction costs fell 5.5% from the second quarter to $56.6 million, which beat the company's ceiling of $59.9 million and attribute to "cost reduction initiatives initiated in the second quarter".
By our math, the $3.3 million quarterly drop equals a $13.2 million yearly run rate, even after absorbing staff from the NYDIG trading acquisition and $5.5 million of interest expense. However, because revenue after direct costs fell $5.1 million over the same three months, employee pay jumped by 25.7 percentage points of net revenue from a year ago, and general overhead rose 17.6 percentage points.
What to watch: fourth-quarter operating expenses excluding direct costs when the full NYDIG team is on the payroll. Another drop would show that internal savings outweigh the new acquisition's overhead.
NYDIG Purchase and Tokenization Build Institutional Reach
"During the third quarter, we continued to strengthen BitGo’s position as a leading institutional digital asset infrastructure platform," chief executive Mike Belshe said. The digital asset custodian bought NYDIG's institutional trading business for $10.1 million in net cash, adding $43.7 million of goodwill and $10.7 million of intangible assets while expanding its derivatives, lending and international OKX exchange settlement tools.
Belshe is also "positioning BitGo to provide the financial infrastructure for bringing traditional assets on-chain, beginning with tokenized equities" — digital versions of US stocks that trade and settle on blockchain networks. That strategic push builds on last quarter's Depository Trust & Clearing Corporation pilot, but the new offerings could not stop subscriptions and services revenue from falling 7.2% sequentially to $25.6 million.
What to watch: whether BitGo discloses separate fee revenue or asset balances for tokenized equities and NYDIG derivatives in the fourth-quarter report. Disclosed revenue would prove these institutional partnerships are moving past unpaid trials.
🐻 Bear Case
Trading Spreads and Net Revenue Missed the Recovery Plan
Three months ago, BitGo said third-quarter trading volume would stay flat, trading margins would rebound from 17 basis points to between 20 and 25 basis points, and Adjusted EBITDA (operating profit before non-cash items and one-offs) would reach break-even. Instead, a "continued soft crypto trading environment" and "a higher mix of lower-margin stablecoin transactions" hit the business at the same time.
- Digital asset sales revenue: $2.72 billion, down 35.2% from last quarter and 52.0% from a year ago
- Trading contribution margin: 15 basis points ($4.2 million net), missing the 20–25 basis point plan and down from 32 basis points in Q1
- Total revenue after direct costs: $37.3 million, down 12.1% from last quarter and 32.1% from a year ago
- Reported Assets on Platform: $59.9 billion on median prices, down 8.1% from Q2, though quarter-end prices lifted the September 30 balance to $83.0 billion
Because trading net contribution landed at $4.2 million instead of the $8.4 million to $10.5 million implied by the prior outlook, and engineering project delays cut subscriptions revenue by 7.2%, Adjusted EBITDA remained stuck at a $4.3 million loss.
What to watch: fourth-quarter trading margin in basis points and whether the $83.0 billion quarter-end asset balance holds. A trading margin still near 15 basis points would show that stablecoin mix and rival custodians are permanently squeezing spreads.
Accounting Gains and Definition Tweaks Flatter the Headlines
BitGo's headline numbers look much stronger than its daily operations. The custodian reported $44.1 million in net income, up 94.4% from a year ago, because rising Bitcoin prices created a $71.5 million paper gain on the 2,399 Bitcoin held in its corporate treasury. Without that paper gain, pre-tax income would be a loss of $11.9 million.
Even the company's preferred operating metric, Adjusted EBITDA of negative $4.3 million, stripes out paper crypto swings on its treasury while keeping $7.4 million of realized cash gains from selling treasury tokens. By our math, excluding those treasury sales leaves an underlying operating loss of $11.6 million, worse than last quarter's $9.7 million comparable loss.
Platform growth metrics also carried quiet caveats in the footnotes. Reported clients rose by 807 in three months to 6,640, but Footnote 3 reveals the jump "does not represent new clients from acquisition or asset inflows". Meanwhile, BitGo changed its price-adjusted asset metric "to use the current quarter medians instead of quarter average to reduce the impact of statistical outliers", which restated second-quarter normalized assets from $65.2 billion down to $59.6 billion and turned a sequential drop into 0.6% growth.
What to watch: realized gains on digital asset sales in the fourth-quarter income statement. If BitGo needs treasury token sales to reach positive Adjusted EBITDA, core custody and trading operations are still losing money.
Staking and Stablecoin Fees Are Compressing
Outside of trading, BitGo relies on staking — locking up client tokens to help run blockchain networks in exchange for rewards — and Stablecoin-as-a-Service, where it manages cash reserves for dollar-pegged tokens. Staking gross revenue rose 5.4% from the second quarter to $68.2 million on higher Ether prices, beating the flat outlook, but fell 24.1% from a year ago.
After paying $64.2 million in staking fees, BitGo kept a net take rate of just 5.9% ($4.0 million net), down from 9.7% a year ago and 16.1% in the first quarter due to lower-priced contracts for large institutions. Stablecoin-as-a-Service revenue slipped 3.8% sequentially to $37.4 million, missing the growth plan, and after $34.5 million in sponsor payouts left only $2.9 million of net profit (a 7.7% take rate, down from 8.0% in Q2).
What to watch: staking net take rate and stablecoin net revenue in the fourth quarter. A staking take rate stuck below 6% means volume gains from big institutions are barely adding to gross profit.
Risks this quarter didn't answer
Four standing governance, regulatory and operational concerns received no update in the third-quarter earnings release.
- Finance chief succession: Ed Reginelli announced his exit last quarter during an ongoing shareholder lawsuit over the initial public offering, and the release names no replacement.
- Derivatives trading volume: after notional volume fell from $3 billion in Q1 to $1 billion in Q2, the release omitted the Q3 figure; the conference call or quarterly filing will show if NYDIG lifted it.
- Customer concentration and insider trading: the release gives no update on the single client that drove 20.7% of Q2 revenue or the $436 million in first-half trading with company insiders; Footnotes 2 and 20 of the Form 10-Q will show both.
- US crypto legislation: delays to the CLARITY Act remain a hurdle for traditional banks entering the market, with no timeline update in the release.
💲 Other KPIs
Cash burn from operations continued in the third quarter. By our math, subtracting first-half operating cash flow of negative $36.2 million from the nine-month total of negative $54.7 million leaves a $18.5 million cash outflow in Q3, plus $2.3 million in equipment and software spending for negative $20.7 million in free cash flow.
Unrestricted cash on the balance sheet fell 10.0% from $159.0 million in June. BitGo spent $24.7 million during the quarter to buy back and retire its own stock — using nearly half of its $50 million buyback plan in three months — and spent another $10.1 million in net cash to close the NYDIG acquisition.
Restricted cash held for stablecoin customers — which sits on BitGo's balance sheet alongside an equal deposit liability and earns interest — fell by $218.2 million (4.7%) from $4.63 billion at the end of June. That reverses two straight quarters of inflows since December's $3.31 billion balance and explains why stablecoin service revenue missed its growth target.
🔮 Guidance
Unchanged. BitGo did not publish a fourth-quarter outlook table in the press release, leaving its second-quarter restructuring target as the active benchmark. Third-quarter operating expenses excluding direct costs fell by $3.3 million from the second quarter to $56.6 million, which by our math puts annualized savings at $13.2 million — nearly matching the $15 million goal in its first quarter.
Unchanged. The board approved a $50 million buyback plan in June with no expiration date. After buying zero shares in the second quarter, management repurchased $24.7 million of stock in the third quarter, leaving $25.3 million on the authorization against $143.2 million in unrestricted cash.
❓ Key Questions
What is the fourth-quarter outlook across each business line?
Management gave line-by-line targets on the second-quarter call and missed five of those seven goals in Q3. The press release includes no fourth-quarter forecast, leaving investors without a target for year-end trading margins or break-even timing.
Who will replace departing finance chief Ed Reginelli?
BitGo announced last quarter that Reginelli would step down during Q3 without naming a successor. The Q3 release does not mention the search or whether the transition has occurred while the post-IPO shareholder lawsuit continues.
Why did 807 new reported clients bring zero asset inflows?
Footnote 3 states that the 13.8% quarterly jump in client count did not come from the NYDIG acquisition or new asset inflows, and BitGo simultaneously switched its normalized asset math from averages to medians. Management should explain what those accounts represent.
What was third-quarter derivatives volume, and what did NYDIG add?
Derivatives trading carries higher net margins than spot trading, but notional volume dropped from $3 billion in Q1 to $1 billion in Q2 and went unreported in the Q3 release despite closing the NYDIG institutional trading deal.