Author: Nancy, PANews
Following the passage of the US GENIUS Act in July, Circle, the first listed stablecoin company, recently released its first financial report under the new policy. While revenue slightly exceeded expectations, the stock price still fell due to its reliance on a single profit structure, low-quality earnings, downward pressure on interest rates, and the upcoming unlocking of a large number of shares, triggering short-term market concerns. However, Circle is actively developing a second growth curve and exploring diversified revenue streams through new business initiatives such as the Arc public chain and the USYC tokenized money market fund, aiming to reduce its dependence on interest rates.
USDC is driving revenue, while distribution costs are further eroding profit margins.
Circle's latest financial report shows that total revenue this quarter approached $740 million, of which USDC reserve revenue reached $711 million, a year-on-year increase of 60%, accounting for 96.1% of total revenue (slightly lower than the same period last year), becoming Circle's absolute core revenue source. This revenue growth was mainly due to the market growth of USDC, with circulating supply reaching $73.7 billion, average circulating supply increasing by 97% year-on-year, and market share rising from approximately 22.6% to 29%. The official forecast for USDC's long-term compound annual growth rate is 40%, indicating that revenue growth has a certain degree of sustainability.
In contrast, other revenue contributions still accounted for less than 4% (approximately $28.51 million), mainly from subscriptions, APIs, and payment networks, but this represents a more than 52-fold increase year-over-year. Circle has also raised its full-year forecast to $90 million to $100 million. However, in the short term, the impact of this type of revenue on overall revenue remains limited, meaning Circle's revenue structure remains highly concentrated and extremely sensitive to interest rate changes. The market widely expects the Federal Reserve to cut interest rates by another 25 basis points at its December meeting, and Circle's return on reserves has already declined by 96 basis points to 4.15% this quarter. This means that if interest rates continue to fall, Circle's interest income may be further compressed, putting significant pressure on its overall profitability.
In terms of profitability, Circle achieved a net profit of $214 million this quarter, successfully reversing the huge losses incurred in the second quarter due to IPO-related expenses, representing a significant year-on-year increase of 202%. However, excluding the $56.21 million gain from the decline in the fair value of convertible debt and the $61.29 million in income tax benefits (from stock-based compensation, R&D tax credits, and the impact of the new tax law), the actual operating profit was approximately $96.5 million. In other words, the profit generated by Circle's core business accounted for only about 45.1% of the total net profit this quarter, significantly reducing its profitability.
It's worth noting that Circle's aggressive, "money-spraying" distribution partnership model has become a stumbling block to its performance, as USDC's rapid growth is inseparable from this model. This quarter, Circle's distribution and transaction costs reached $447 million, approximately 62.8% of its reserve revenue, compared to 42% in the same period of 2024. The official explanation for this is that the increase in distribution costs was mainly due to the increase in USDC's circulating balance, the increase in Coinbase's average holdings, and partnerships with other strategic partners. Meanwhile, Circle's retained revenue as a percentage of reserve revenue decreased to 37% in the third quarter, compared to 42% in the same period last year. This indicates that Circle's distribution costs are growing faster than its revenue. Regarding the decline in RLDC (revenue minus distribution costs), the official response in the earnings call was that its priority partner distribution incentives and dynamic market rewards led to increased costs, but economies of scale will improve leverage, and the full-year RLDC gross margin is expected to be approximately 38%.
On the other hand, Circle's operating expenses in the third quarter were $211 million, a 70% year-over-year increase, primarily due to increased compensation (including $59.08 million in stock-based compensation) and higher spending on IT, administration, and R&D. Circle also raised its annual adjusted operating expense forecast to $495 million to $510 million, citing increased investment in platform capability building and global partner expansion.
Overall, Circle continues its rapid growth in the USDC reserve business, but profit margins are limited, and diversified revenue streams have not yet provided strong support. This has triggered market concerns, with CRCL falling to $86.3, a current drop of approximately 12.2%, and a decline of approximately 64.1% from its historical high. Meanwhile, as Circle will face a large-scale unlocking of shares on November 14th, the previously disclosed lock-up shares will only be available for sale after 180 days or the second trading day after the public release of its Q3 financial report (whichever is earlier). Potential selling pressure could further increase stock price volatility.
Exploring the Second Growth Curve: Circle's Three New Moves
With more and more new stablecoin players entering the market, competition is becoming increasingly fierce. In this context, market distribution capabilities and ecosystem expansion capabilities have become new core competitive dimensions, no longer solely relying on first-mover advantage or compliance. To this end, Circle is continuously expanding the collaborative ecosystem of its core business, USDC.
According to its financial report, since the second quarter, Circle has announced several key partnerships and collaborations related to USDC, including with Brex, Deutsche Börse Group, Finastra, Fireblocks, Hyperliquid, Kraken, Itaú Union Bank, and Visa, covering areas such as corporate payments, traditional finance, custody, DeFi, and cross-border payments, and is accelerating its deep penetration from crypto-native to mainstream financial infrastructure.
At the same time, in order to get rid of the risk of relying too much on USDC issuance for its profit model as soon as possible, Circle is accelerating the diversification of its revenue structure.
On one hand, Circle is entering the field of underlying infrastructure. In August of this year, the company announced the launch of its self-developed first-layer blockchain, Arc. On October 28, the Arc testnet officially went live, attracting more than 100 institutions to participate in the testing, covering multiple industries such as capital markets, banking, asset management, insurance, payments, and technology. Circle hopes to use this to provide developers and enterprises with programmable financial infrastructure, promoting the scaling of on-chain economic activities. At the same time, Circle plans to explore the issuance of Arc's native token to incentivize network participation, promote the implementation of ecosystem applications, and build a long-term sustainable network economic model.
On the other hand, Circle continues to deepen its presence in the payment and settlement field. In May of this year, the company launched the cross-border payment network Circle Payments Network (CPN), which currently covers 8 countries, with 29 financial institutions officially connected, another 55 under review, and 500 still waiting in line for connection. As of November 7, 2025, CPN's annualized transaction volume over the past 30 days has reached approximately US$3.4 billion.
In addition, asset tokenization has become a key area of exploration. Circle launched its tokenized money market fund, USYC, in the middle of the year, aiming to provide institutional and high-net-worth investors with liquid, tradable, and stable-yield digital asset instruments. From June 30 to November 8, 2025, USYC's size grew by more than 200%, reaching approximately $1 billion.
Overall, while Circle's business continues to grow steadily, short-term profitability faces pressure. The company is actively expanding its business beyond stablecoins, accelerating its transformation from a stablecoin issuer to an on-chain financial infrastructure provider. However, in the highly competitive stablecoin market, this transformation is not easy.
