Circle Internet Group (CRCL) issues USDC, a stablecoin designed to maintain a value of $1.
The company earns most of its revenue from interest on the reserve assets backing the USDC in circulation.
Circle said USDC onchain transaction volume reached $14.8 trillion during the second quarter, an increase of 151% from a year earlier.
Total revenue and reserve income increased only 7% to $701.3 million.
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.
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.
Reserve income rose 5% to $668 million.
A 25% increase in average USDC circulation was partly offset by a 66-basis-point decline in Circle’s reserve return rate to 3.5%.
Circle’s 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.
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.
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USDC transfers do not directly become Circle revenue
Onchain transaction volume measures the total USDC value transferred across Circle-supported blockchains during the quarter.
The figure does not represent unique dollars or unique users.
A single USDC can contribute to the total each time it moves between wallets, exchanges, or blockchain applications.
Circle reports several different measurements for its stablecoin business:
- $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%.
Circle’s quarter-end figure measures the amount of USDC that remained outstanding on June 30.
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.
The 25% increase gave Circle a larger reserve balance on which to earn interest.
The decline in reserve yields limited the resulting income growth to 5%.
Circle, therefore, needs average USDC balances to rise fast enough to offset any further decline in the yield earned on its reserves.
Coinbase payments and other distribution costs limit what Circle keeps
Circle pays cryptocurrency platforms and other partners to distribute USDC and support its liquidity.
Circle’s annual report says distribution costs paid to Coinbase and Binance are affected by the amount of USDC held on their platforms.
Under Circle’s agreement with Coinbase (COIN), payments are tied principally to USDC net reserve income.
Circle retains an issuer portion, and the two companies receive allocations based on the amount of USDC held on their respective platforms.
After certain third-party payments, Coinbase also receives half of the remaining income tied to USDC circulating elsewhere in the ecosystem.
Circle recorded $412 million in distribution, transaction, and other costs during the second quarter, up 1% from a year earlier.
After subtracting those costs, Circle reported $289 million in revenue less distribution costs, or RLDC, up 15%.
Its RLDC margin increased to 41% from 38%.
A 41% RLDC margin means Circle retained about 41 cents before operating expenses from each dollar of total revenue and reserve income.
USDC growth through paid distribution channels can increase circulation, but those arrangements also increase the payments Circle makes to its partners.
Growth through channels that do not require third-party incentives could allow Circle to retain a larger share of its revenue.
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Arc has to add recurring revenue beyond reserve interest
Circle generated $34 million in other revenue during the second quarter, up 41% from a year earlier.
The increase came primarily from subscription and services revenue.
Other revenue still accounted for less than 5% of Circle’s quarterly total.
Circle raised its 2026 other-revenue forecast from $150 million to $170 million to a new range of $310 million to $330 million.
The revised forecast includes revenue that Circle has already recognized from the presale of tokens connected with Arc, its planned blockchain network.
Token presale revenue differs from recurring subscription or transaction revenue because the same sale does not repeat each quarter.
Circle plans to launch Arc’s public mainnet on Sept. 16.
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.
Artificial intelligence agents could use that infrastructure to make payments and purchase digital services with USDC.
Circle’s adjusted operating expenses increased 23% to $146 million as the company invested in product development, infrastructure and artificial intelligence capabilities.
Arc will reduce Circle’s dependence on reserve income only if the network begins producing recurring infrastructure, subscription, or transaction fees.
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Lower rates are not Circle’s only risk
Another decline in short-term interest rates would reduce the yield Circle earns on USDC reserves.
Average USDC circulation would have to continue increasing to offset that pressure.
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.
The mix of USDC growth also affects Circle’s margins.
USDC held through Coinbase, Binance, and other paid distribution arrangements can increase the fees Circle owes those partners.
Circle’s RLDC margin could decline if those payments grow faster than its reserve and service revenue.
Arc presents a separate execution risk.
Circle must launch the network on schedule, attract continuing financial activity, and prevent cybersecurity or governance problems.
The company’s own risk disclosures identify launch timing, ecosystem adoption, validator governance, token price volatility, and regulatory uncertainty as potential obstacles.
Circle’s 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%.
After Arc launches Sept. 16, investors can compare the network’s recurring service revenue with the token presale revenue already included in Circle’s 2026 forecast.
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