<\/p>\n
Circle Internet Group (CRCL) issues USDC, a stablecoin designed to maintain a value of $1.<\/p>\n
The company earns most of its revenue from interest on the reserve assets backing the USDC in circulation.<\/p>\n
Circle said USDC onchain transaction volume reached $14.8 trillion during the second quarter, an increase of 151% from a year earlier.<\/p>\n
Total revenue and reserve income increased only 7% to $701.3 million.<\/p>\n
Circle reported earnings of 18 cents per share, above Wall Street estimates, but revenue and reserve income missed the consensus estimate of $717.5 million.<\/p>\n
Circle’s stock price was flat at 3 pm EDT on Aug. 5 after investors weighed an earnings beat against a revenue miss. Circle shares had fallen nearly 4% in early trading after the results were released.<\/p>\n
Reserve income rose 5% to $668 million.<\/p>\n
A 25% increase in average USDC circulation was partly offset by a 66-basis-point decline in Circle\u2019s reserve return rate to 3.5%.<\/p>\n
Circle\u2019s disclosed transaction revenue comes from services including stablecoin redemptions, blockchain rewards and use of its own infrastructure. It does not receive a fee tied to every USDC transfer recorded on a public blockchain.<\/p>\n
The results distinguish two measurements that can appear similar: the amount of USDC moving across blockchains and the revenue Circle earns from the assets and services that support it.<\/p>\n
Related: Fed hold leaves Circle\u2019s key profit question unanswered<\/p>\n
USDC transfers do not directly become Circle revenue<\/p>\n
Onchain transaction volume measures the total USDC value transferred across Circle-supported blockchains during the quarter.<\/p>\n
The figure does not represent unique dollars or unique users.<\/p>\n
A single USDC can contribute to the total each time it moves between wallets, exchanges, or blockchain applications.<\/p>\n
Circle reports several different measurements for its stablecoin business:<\/p>\n
$14.8 trillion: USDC onchain transaction volume, up 151%.$73.3 billion: USDC in circulation at the end of the quarter, up 19%.$76.5 billion: Average USDC in circulation during the quarter, up 25%.3.5%: Reserve return rate, down 66 basis points.$668 million: Reserve income, up 5%.$701.3 million: Total revenue and reserve income, up 7%.<\/p>\n
Circle\u2019s quarter-end figure measures the amount of USDC that remained outstanding on June 30.<\/p>\n
The average-circulation figure measures the daily average during the quarter and is more important for reserve income because it determines the average amount of assets Circle can invest.<\/p>\n
The 25% increase gave Circle a larger reserve balance on which to earn interest.<\/p>\n
The decline in reserve yields limited the resulting income growth to 5%.<\/p>\n
Circle, therefore, needs average USDC balances to rise fast enough to offset any further decline in the yield earned on its reserves.<\/p>\n
SOPA Images / Getty Images<\/p>\n
Coinbase payments and other distribution costs limit what Circle keeps<\/p>\n
Circle pays cryptocurrency platforms and other partners to distribute USDC and support its liquidity.<\/p>\n
Circle\u2019s annual report says distribution costs paid to Coinbase and Binance are affected by the amount of USDC held on their platforms.<\/p>\n
Under Circle\u2019s agreement with Coinbase (COIN), payments are tied principally to USDC net reserve income.<\/p>\n
Circle retains an issuer portion, and the two companies receive allocations based on the amount of USDC held on their respective platforms.<\/p>\n
After certain third-party payments, Coinbase also receives half of the remaining income tied to USDC circulating elsewhere in the ecosystem.<\/p>\n
Circle recorded $412 million in distribution, transaction, and other costs during the second quarter, up 1% from a year earlier.<\/p>\n
After subtracting those costs, Circle reported $289 million in revenue less distribution costs, or RLDC, up 15%.<\/p>\n
Its RLDC margin increased to 41% from 38%.<\/p>\n
A 41% RLDC margin means Circle retained about 41 cents before operating expenses from each dollar of total revenue and reserve income.<\/p>\n
USDC growth through paid distribution channels can increase circulation, but those arrangements also increase the payments Circle makes to its partners.<\/p>\n
Growth through channels that do not require third-party incentives could allow Circle to retain a larger share of its revenue.<\/p>\n
More Tech:<\/p>\n
ServiceNow\u2019s quiet $1B cybersecurity boomA European rival to SpaceX is chasing a $2B valuationSK Hynix denies Intel Ohio fab deal, but the market didn\u2019t careArc has to add recurring revenue beyond reserve interest<\/p>\n
Circle generated $34 million in other revenue during the second quarter, up 41% from a year earlier.<\/p>\n
The increase came primarily from subscription and services revenue.<\/p>\n
Other revenue still accounted for less than 5% of Circle\u2019s quarterly total.<\/p>\n
Circle raised its 2026 other-revenue forecast from $150 million to $170 million to a new range of $310 million to $330 million.<\/p>\n
The revised forecast includes revenue that Circle has already recognized from the presale of tokens connected with Arc, its planned blockchain network.<\/p>\n
Token presale revenue differs from recurring subscription or transaction revenue because the same sale does not repeat each quarter.<\/p>\n
Circle plans to launch Arc\u2019s public mainnet on Sept. 16.<\/p>\n
The network has more than 100 institutional and ecosystem builders and is expected to include privacy features, support for tokenized financial assets, and an agent stack for programmable finance.<\/p>\n
Artificial intelligence agents could use that infrastructure to make payments and purchase digital services with USDC.<\/p>\n
Circle\u2019s adjusted operating expenses increased 23% to $146 million as the company invested in product development, infrastructure and artificial intelligence capabilities.<\/p>\n
Arc will reduce Circle\u2019s dependence on reserve income only if the network begins producing recurring infrastructure, subscription, or transaction fees.<\/p>\n
Related: Bank of America doubles down on Micron stock price for 2026<\/p>\n
Lower rates are not Circle\u2019s only risk<\/p>\n
Another decline in short-term interest rates would reduce the yield Circle earns on USDC reserves.<\/p>\n
Average USDC circulation would have to continue increasing to offset that pressure.<\/p>\n
Circle says the relationship between interest rates and USDC circulation is difficult to predict because higher or lower rates can change how investors use stablecoins and other financial assets.<\/p>\n
The mix of USDC growth also affects Circle\u2019s margins.<\/p>\n
USDC held through Coinbase, Binance, and other paid distribution arrangements can increase the fees Circle owes those partners.<\/p>\n
Circle\u2019s RLDC margin could decline if those payments grow faster than its reserve and service revenue.<\/p>\n
Arc presents a separate execution risk.<\/p>\n
Circle must launch the network on schedule, attract continuing financial activity, and prevent cybersecurity or governance problems.<\/p>\n
The company\u2019s own risk disclosures identify launch timing, ecosystem adoption, validator governance, token price volatility, and regulatory uncertainty as potential obstacles.<\/p>\n
Circle\u2019s third-quarter results will show whether average USDC circulation rises above $76.5 billion, whether the reserve return rate falls below 3.5%, and whether RLDC margin remains within the revised full-year range of 41.7% to 43.7%.<\/p>\n
After Arc launches Sept. 16, investors can compare the network\u2019s recurring service revenue with the token presale revenue already included in Circle\u2019s 2026 forecast.<\/p>\n
Related: Jim Cramer sends strong signal to stock market investors<\/p>\n
#Circles #USDC #volume #jumps #revenue #tells #story<\/p>\n","protected":false},"excerpt":{"rendered":"
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