Payward Reports Q3 Financial Highlights, AI Emerges as Fifth Business Pillar
Payward, the parent company of cryptocurrency exchange Kraken, has released its third-quarter financial highlights, revealing a total platform profit of $487 million. This figure represents a 12% decrease year-over-year but a 12% increase quarter-over-quarter. Notably, revenue from asset-based and access-based services combined for the first time exceeded half of the total, reaching 52%. The company also announced artificial intelligence (AI) as its fifth major business pillar and plans to integrate an agent framework into all its proprietary applications by early next year.
Key Financial Metrics and Reporting Changes
In its third-quarter financial update, Payward shifted its primary performance indicator to “total platform profit,” amounting to $487 million. This new metric is down 12% year-over-year but up 12% quarter-over-quarter. Adjusted EBITDA stood at $60 million, a significant 1.6-fold increase from the $23 million recorded in the second quarter. The EBITDA margin also improved, rising from 5% to 12%. However, this figure remains approximately two-thirds lower than the same period last year.
The company also implemented three key changes in its third-quarter financial reporting. Firstly, “total platform profit” replaces the previous “adjusted revenue” metric. The former adjusted revenue only deducted trading costs, excluding staking rewards paid to customers. The new metric accounts for both, consolidating all customer-facing incentives into a single calculation. Secondly, profits are now categorized into three streams: trading, asset-based, and access-based. Thirdly, two new operational metrics, “contract trading volume” and “paying account numbers,” have been introduced to provide a more comprehensive view of growth beyond nominal trading volume.
Revenue Stream Breakdown and Growth Drivers
Breaking down the revenue streams, trading profit accounted for $234 million, a 7% increase quarter-over-quarter, remaining the largest segment. Asset-based revenue reached $128 million, marking a 26% quarter-over-quarter increase and emerging as the fastest-growing category. Access-based revenue contributed $125 million, up 7% quarter-over-quarter. Combined, asset-based and access-based revenues totaled $253 million, representing 52% of the total, an increase from 50% in the second quarter and 46% in the same period last year. Most recently, access-based revenue saw a 59% year-over-year increase, now constituting approximately a quarter of the overall revenue.
Trading Volume and Market Share Dynamics
On the trading front, total platform volume reached $353 billion, a 22% increase from the second quarter but a 30% decrease year-over-year. Despite a 7% quarter-over-quarter decline in overall spot market volume during the same period, Kraken’s market share expanded from 3.3% in September of last year to 6.5% in September of this year. Derivatives also showed promise, with contract trading volume reaching 66 million contracts, a 10% increase quarter-over-quarter and an 84% increase year-over-year. The company views this growth as a way to decouple trading revenue from nominal trading volume.
Customer Base Expansion
The customer base is also showing signs of expansion. The platform’s average assets under management increased by 4% quarter-over-quarter to $43 billion, though this is down 21% year-over-year. However, when calculated at a fixed price, it represents a 29% growth to $71 billion compared to the previous year. The number of funded accounts grew by 37% year-over-year to 7.1 million, and paying accounts, which utilize products and services, increased by 74% to 1.5 million. Since the end of 2023, accounts with a balance have grown at an average annual rate of approximately 35%.
Industry Landscape and Competitive Pressures
The competitive landscape remains challenging. Coinbase reported a 35% year-over-year decrease in third-quarter revenue but returned to profitability through diversified business lines. Gemini saw its revenue decline by 19% and trading volume shrink by 73% in the same period, though its losses narrowed. While these exchanges pursue different strategies, they all face the same fundamental question: how to sustain cash flow when trading fees are tied to market fluctuations.
AI Integration and Future Roadmap
Payward, which last quarter defined its business around four pillars—trading, banking, asset management, and Payward Services—has now added AI as a fifth. Concrete AI-powered products are already being deployed. The U.S. version of the Kraken App features Kraken AI, allowing customers to buy, sell, swap, and stake assets through conversational commands, with each transaction requiring user confirmation. Kraken Pro offers an assistant and a strategy builder that translates natural language into backtestable strategies, with similar functionality for NinjaTrader currently under testing. The company has also opened its proprietary CLI and MCP servers to allow customers to bring their own agents, and its ChatGPT App is undergoing review.
The roadmap for early next year includes integrating an agent framework into every proprietary application, enabling agents to operate across different products using a single balance. Payward plans to train its models using its own data across trading, balances, payments, identity, and risk control, aiming to predict “the next transaction” rather than “the next word.” All agent-initiated actions will be subject to risk control engines and executed within customer-defined limits, with custody, margin, and settlement adhering to strict rules that prevent models from bypassing them.
Developments Across Other Business Pillars
Significant progress is also being made across other business pillars. In October, xStocks, the company’s tokenized stock offering, surpassed $1 billion in assets under management with over 700 listings. Payward also announced a collaboration with the London Stock Exchange to tokenize 100 UK stocks as xStocks for trading on the LSE, pending regulatory approval. On the banking front, the Krak debit card was launched in August, supporting over 600 currencies and assets, and enabling instant USD settlement through a partnership with SoFi. In October, Payward agreed to acquire Saldo Bank, an EU-licensed digital bank. In asset management, Payward’s affiliated funds and clients purchased AAVE on the secondary market this quarter. Payward Services continues to license its infrastructure to third parties; OKX has launched tokenized stocks on its platform, and WOO X EU in Europe utilizes Payward for custody.
Partnerships and Regulatory Progress
Updates on external partnerships and regulatory progress were also provided. Beyond OKX and WOO X EU, Payward Services’ partnership network includes a global market integration with GTN and a collaboration with Reap to expand debit card services into over 100 markets. Kraken is set to launch in the UAE following the acquisition of a full market license from Dubai’s VARA. Payward has also received in-principle approval from Kazakhstan’s AFSA. Reserve proofs as of September 30 were verified by third-party accountant The Network Firm.
Strategic Outlook and Future Challenges
While the $487 million in total platform profit is a key figure, the 52% share of asset-based and access-based revenue is more strategically significant. Historically, exchange valuations have been heavily influenced by trading fees tied to market performance. By increasing revenue from areas like index licensing, subscriptions, and listing fees, alongside asset-driven income, Payward is shifting its cash flow generation from volume-dependent to asset-scale dependent. However, it’s important to note that the company only provided a quarter-over-quarter growth rate for trading revenue, not a year-over-year figure. Therefore, the extent to which the “over half non-trading revenue” is due to genuine expansion of new businesses versus a relative decline in trading revenue’s proportion cannot be fully determined from the public data. The true test will be whether asset-based and access-based revenues can continue to grow if trading volumes remain flat in the next quarter.
Derivatives and Regulatory Scrutiny
The first key observation point is derivatives. The 84% year-over-year increase in contract trading volume is one of the few metrics showing high growth in an environment of year-over-year declines. This explains Payward’s focus on U.S. individual stock perpetuals and on-chain perpetual contracts. The ongoing jurisdictional dispute between the CFTC and individual stock perpetuals remains a critical factor. If these products are approved, this area could represent a powerful growth narrative pre-IPO. However, if courts rule that the CFTC has overstepped its authority, growth will need to be compensated by xStocks and banking operations.
Timeline and Valuation Considerations
The second observation point is the timeline. The company underwent a reduction in force of 150 employees earlier this year and is seeking a new funding round at a $20 billion valuation. Market speculation points to an IPO in 2027. Against the backdrop of Bitcoin’s pullback in November and a renewed weakening of trading volumes, the ability to narrow the year-over-year decline in total platform profit for the fourth quarter will directly impact valuation.
For Taiwanese readers, the xStocks initiative is particularly noteworthy. If over 700 tokenized stocks can be launched through compliant channels, they will directly compete with the fee structures of prime brokerage and overseas brokerage services. The rise of access-based revenue also indicates a shift in how exchanges generate revenue, moving from “transaction taxes” to “selling infrastructure and licensing.” Platforms still reliant on a single revenue stream from trading fees will face greater pressure during the next market downturn.
