Shares of Circle Internet Group (NYSE: CRCL) fell nearly 4% at the start of trading on Wednesday after the company's second-quarter profit beat Wall Street forecasts, while revenue fell short of expectations.
Demand for stablecoins also increased during the quarter, as a new conflict in the Middle East made cryptocurrency markets more volatile. Traders reduced their share of risky tokens and placed more funds in dollar-pegged assets.
Circle reported total revenue and interest income from reserves of $701 million for the three months ended June, a 7% increase from the previous year. Income from continuing operations was $48 million, compared to a loss-making period a year earlier.
Circle Boosts $USDC Usage While Lower Interest Yields Restrain Reserve Revenue
The amount of $USDC in circulation at the end of June was $73.3 billion, a 19% increase from the previous year. The average amount in circulation for the quarter reached $76.5 billion, representing a 25% growth.
Activity on public blockchains grew much faster. During the quarter, $USDC processed on-chain transactions worth $14.8 trillion, a 151% increase from the previous year.
Circle earned $668 million from assets backing $USDC, a 5% increase from a year ago. Growth was driven by an increase in the number of tokens in use, but lower interest yields limited the gain. The average reserve yield decreased by 66 basis points to 3.5%.
Revenue from subscriptions, services, and other products reached $34 million, a 41% increase. Net revenue after distribution expenses was $289 million, a 15% increase from the previous year. The corresponding margin rose by 302 basis points to 41%.
The adjusted EBITDA margin was 50%, down 329 basis points. Income from continuing operations accounted for 7% of total revenue and interest income.
Circle spent $412 million on distribution, transactions, and other related expenses. This figure increased by 1%, primarily due to increased payments to distribution partners.
Standard operating expenses decreased by 56% to $254 million, as compensation expenses related to last year's IPO were excluded from the comparison. Adjusted operating expenses still grew by 23% to $146 million. Circle increased investments in development, new infrastructure, AI systems, and future products.
At the end of the quarter, the company held $12.4 billion worth of $USDC on its platform, more than double the amount from a year earlier. The share of $USDC held on the platform accounted for an average of 19.5% of the total daily circulation, an increase of 1204 basis points from a year earlier.
During the quarter, users created new $USDC worth $83 billion, a 97% increase from the previous period. They also redeemed $87 billion for payout, a 113% increase from the previous period.
As of June, $USDC's share of the large, publicly verified dollar-backed stablecoin market was 27%. Compared to the previous year, its share decreased by 66 basis points.
The number of active blockchain wallets containing over $10 worth of $USDC grew by 24% to reach 7 million.
Institutional traffic also increased on the Circle Payments Network. As of the last 30 days of the quarter, the annual transaction volume on the Circle Payments Network reached $14.7 billion. This is a 76% increase from the previous quarter. The number of registered financial institutions grew by 29% to 175.
Circle Connects with Banks and Payment Firms Ahead of Opening Arc to the Public
Circle plans to open the Arc blockchain for public access on September 16. More than 100 companies and development teams are already working with this network.
Arc will include features for private transactions, tools for programmable finance, support for autonomous software, and systems for issuing tokenized versions of traditional assets.
During the earnings announcement, Circle named its first group of third-party validators. The list includes BlackRock (NYSE: BLK), Galaxy Digital (Nasdaq: GLXY), Global Payments (NYSE: GPN), Intercontinental Exchange (NYSE: ICE), Mastercard (NYSE: MA), SBI Holdings (TSE: 8473), Standard Chartered (LSE: STAN), Sumitomo Corporation (TSE: 8053), and Visa (NYSE: V).
DTCC and MoneyGram will also help validate Arc's functionality. Under this scheme, financial companies using the blockchain will participate in its security and operation.
BlackRock, BNY Mellon (NYSE: BK), DTCC, and Standard Chartered are working on potential projects related to Arc. Their projects cover tokenized securities, cryptocurrency custody, stablecoin access, foreign exchange trading, and repurchase agreements.
BlackRock plans to launch its BUIDL on the Arc platform. DTCC plans to allow companies to create blockchain versions of assets held through The Depository Trust Company.
BNY Mellon added a feature for direct creation and redemption of $USDC to its digital asset custody service. The bank already holds a large portion of the assets backing the stablecoin.
Standard Chartered implemented a bank-led system that allows institutional clients to exchange traditional money for $USDC, receiving tokens from the same account.
Circle maintained its long-term forecast for $USDC turnover growth at 40% per year. The forecast for other revenue in 2026 was raised from $150–170 million to a new range of $310 to $330 million.
The company also raised its expected net revenue margin after distribution expenses from 38% to 40% to a range of 41.7% to 43.7%. The full-year target for adjusted operating expenses remained at $570–585 million.
