Author|Azuma(@azuma_eth)
At 8:05 AM ET on August 5th, stablecoin issuer Circle officially released its Q2 2026 earnings report.
The financial report data shows that Circle's total revenue and reserve income for Q2 was $701 million (below market expectations of $717 million), a year-over-year increase of 7%; adjusted EBITDA was $143 million, a year-over-year increase of 8%; net income from continuing operations was $48 million (above market expectations of $43 million), an increase of $530 million year-over-year.
Affected by the earnings release, CRCL surged in pre-market trading but subsequently weakened. As of 8:45 PM ET, it was temporarily quoted at $61.55, down 2.84% pre-market.
Core Data Analysis
1. Total Revenue Missed Expectations, But Reversed the Trend
As shown in the report, this quarter Circle's Total Revenue and Reserve Income was $701 million. Although it did not meet market expectations ($717 million), it reversed the contraction trend from the previous quarter ($579 million ➡️ $658 million ➡️ $740 million ➡️ $770 million ➡️ $694 million ➡️ $701 million).
Breaking down the revenue structure, Reserve Income remains the absolute main contributor, recording $668 million in Q2, up 5% year-over-year and 2% quarter-over-quarter.
2. USDC Average Circulation Still Growing, but Saw Significant Outflow at Quarter-End
The growth in reserve income primarily benefited from the increase in USDC circulation volume —— In Q2, USDC circulation exhibited a divergent pattern of "average growth, quarter-end contraction."
Financial report data shows that the average USDC circulation in Q2 was $76.5 billion, a 25% year-over-year increase and about a 2% quarter-over-quarter increase (previous quarter average was $75.2 billion); however, the quarter-end circulation was $73.3 billion, which, while up 19% year-over-year, decreased by about 4.8% from the previous quarter-end's $77 billion.This indicates that the outflow of USDC funds mainly occurred at the quarter-end window. While the overall scale is still expanding, the marginal trend warrants caution.
Another concerning metric is market share. The report shows that USDC's market share in dollar-denominated stablecoins at the end of this quarter was 27%, down 66 basis points year-over-year —— Against the backdrop of shrinking total industry supply, USDC failed to gain market share and instead lost some ground.
3. Other Revenue Declined Quarter-over-Quarter, but Full-Year Guidance Significantly Revised Upward
Excluding reserve income, Circle's Other Revenue for this quarter was $34 million, a significant 41% year-over-year increase, but down 19% quarter-over-quarter, breaking the previous streak of five consecutive quarters of growth ($21 million ➡️ $24 million ➡️ $29 million ➡️ $37 million ➡️ $42 million ➡️ $34 million).
Notably, Circle simultaneously revised its full-year 2026 Other Revenue guidance significantly upward, from $150–170 million to $310–330 million, nearly doubling, specifically explaining that this guidance includes recognized ARC token presale revenue.
According to explanations from the Q1 earnings call, ARC tokens held by Circle, after fulfilling presale agreement obligations, will be recognized at fair value as "Other Revenue" and directly included in RLDC and adjusted EBITDA. This means that Other Revenue in the coming quarters will be significantly elevated due to ARC token recognition. However, it's important to note that this portion of revenue is closer to a one-time accounting gain rather than sustainable subscription or service income; excluding the ARC impact, the growth trajectory of core Other Revenue still requires ongoing observation.
4. RLDC Margin Remains High, Distribution Cost Control Optimized
RLDC Margin was the most resilient metric in Circle's quarterly report this time —— This figure refers to the profit margin after subtracting distribution costs from revenue, reflecting the core business profitability level after accounting for distribution expenses, and is widely regarded as Circle's most crucial profitability metric.
In Q2, Circle's RLDC (Revenue Less Distribution Costs) was $289 million, a year-over-year increase of 15%; RLDC Margin reached 41%, up 3.02% basis points year-over-year, flat compared to last quarter, and stable with slight increases over the past five quarters (38% ➡️ 39% ➡️ 40% ➡️ 41% ➡️ 41%).
The significance of this data is that, in the headwind environment of declining reserve yields (attributed to the Federal Reserve lowering the federal funds rate), Circle still maintained its profit margin. The key behind this lies in refined control over distribution costs —— Q2 distribution and transaction costs were $410 million, up only 1% year-over-year, far lower than the 5% year-over-year growth rate of reserve income.
Similar to Other Revenue, Circle's management also raised the full-year RLDC Margin guidance from 38–40% to 41.7–43.7%. However, it's important to note that this revision also includes recognized ARC token presale revenue. Therefore, the profit margin figures for the second half of the year will carry a certain "non-recurring" characteristic.
5. Distribution Remains Largest Expense, Product Development Investment Increases
On the expense side, distribution and transaction costs remain Circle's largest cost item, reaching $410 million in Q2, up only 1% year-over-year, with quarter-over-quarter growth also controlled below 1%.
Looking at operating expenses under GAAP, Q2 was $254 million, a sharp 56% year-over-year decrease. However, this is largely due to a high base effect from last year's IPO-related stock-based compensation expenses ($435 million), offering limited reference value.
More meaningful are the Adjusted Operating Expenses, which were $146 million in Q2, a 23% year-over-year increase, reflecting Circle's continued investment in product development, infrastructure, and AI capabilities. Breaking it down specifically, general and administrative expenses increased to $66.3 million, IT infrastructure costs rose to $16.4 million, and depreciation and amortization expenses more than doubled year-over-year to $29.9 million. Combined with management's statements about ongoing investment in product development, infrastructure, and AI capabilities, these expense increases are likely highly correlated with businesses like Arc, Agent Stack, and CPN.
Business Progress: Platformization Layout Continues to Advance
Beyond financial data, the multiple business-level developments disclosed by Circle in the Q2 earnings report are also noteworthy.
First is the formal countdown to the Arc network launch. Circle announced that the Arc mainnet will officially launch on September 16th, with the first batch of network validators including a host of traditional financial institutions such as BlackRock, DTCC, Galaxy, Visa, Mastercard, and Standard Chartered Bank. Simultaneously, BlackRock's tokenized money market fund BUIDL will be deployed on the Arc network, while DTCC plans to support the tokenization of assets custodied by DTC on Arc.
Compared to previous introductions that remained more at the level of technical roadmaps and visions, this disclosure signifies that Arc has begun to gain actual participation from traditional financial institutions. For Circle, Arc's positioning is no longer merely a public chain built around USDC, but rather an attempt to become the underlying infrastructure connecting stablecoins, RWAs, and traditional financial institutions.
Another notable business is the Circle Payments Network (CPN). The report shows that as of the end of Q2, CPN's annualized transaction volume over the past 30 days has increased to $14.7 billion, a roughly 76% increase from the $8.3 billion disclosed in Q1; the number of connected financial institutions has grown from 136 to 175, a 29% quarter-over-quarter increase. Although CPN's direct contribution to revenue is still relatively limited, both transaction volume and the number of institutions indicate that this payment network is gradually accumulating network effects.
On the regulatory front, Circle also achieved a significant breakthrough this quarter. The company officially received approval from the U.S. Office of the Comptroller of the Currency (OCC) to establish Circle National Trust, becoming one of the first stablecoin issuers to receive a U.S. federal trust bank charter; concurrently, its application to establish Circle New York Trust was also approved by the New York State Department of Financial Services (NYDFS).
For a stablecoin issuer that prioritizes compliance as a core competitive advantage, these two charters not only further elevate Circle's regulatory standing within the U.S. financial system but also provide a more solid institutional foundation for the future development of custody, payment, and institutional finance businesses.
Does the Earnings Report Answer Wall Street's Valuation Disagreement?
Yesterday, we published an article titled "On the Eve of Circle's Earnings, Wall Street Shows Huge Divergence in CRCL Valuation." The article mentioned that on the eve of this quarter's earnings release, Wall Street had already shown significant divergence regarding Circle's future value.
On August 3rd, Morgan Stanley (hereafter "MS") downgraded Circle's rating from "Equal Weight" to "Underweight" and significantly lowered its target price from $106 to $38; meanwhile, TD Cowen initiated coverage of Circle for the first time, giving it a "Buy" rating and setting a target price of $82.
The two institutions offered completely different rating judgments. The core divergence reflected behind this lies in how to evaluate Circle's revenue growth expectations —— Does Circle's long-term value come from USDC? Or from the digital financial infrastructure built around USDC?
Looking at this earnings report, both sides' viewpoints have been validated to some extent.
On one hand, several issues Morgan Stanley raised concerns about still exist —— USDC quarter-end circulation continues to decline quarter-over-quarter, and market share hasn't improved; company revenue still mainly comes from reserve earnings; the full-year guidance for Other Revenue was significantly revised upward, but the new additions primarily come from ARC token presale revenue recognition, not from sustained scaling of payment, API, or RWA businesses. This means that, in the short term, Circle's profit model remains highly dependent on USDC's growth situation and the interest rate environment.
On the other hand, new evidence supporting TD Cowen's bullish thesis also seems to be increasing. The Arc mainnet launch date is officially set, traditional financial institutions like BlackRock and DTCC are joining the ecosystem, CPN continues its rapid expansion, and a federal trust bank charter is obtained... These businesses, while not yet revenue pillars, are continuously enriching Circle's platformization layout.
In summary, the definitive answer we can truly find from this earnings report seems to be only that "Circle is moving forward in the direction of platformization." As for whether these layouts can ultimately translate into sustained non-interest revenue growth and support a valuation logic based on a digital financial infrastructure platform, it may still require validation in the coming quarters.
