Circle reported another quarter of strong USDC growth, with on-chain transaction volume surging to $14.8 trillion during the second quarter. Yet the stablecoin issuer still missed Wall Street’s revenue expectations as lower reserve yields weighed on earnings.
The results highlight a key challenge for Circle’s business model. While USDC adoption continues to accelerate, falling interest rates are reducing the income generated from the reserves backing the stablecoin.
USDC activity continues to accelerate
Circle ended the quarter with $73.3 billion in USDC circulation, up 19% year over year.
On-chain USDC transaction volume climbed 151% to $14.8 trillion, underscoring continued growth in stablecoin usage across payments, trading, and blockchain applications.
Even so, financial growth did not keep pace.
Total revenue and reserve income increased 7% to $701 million, below analysts’ consensus estimate of $717.5 million, according to Reuters.
The primary reason was lower reserve yields.
Although average USDC circulation increased by 25%, the average reserve return declined by 66 basis points to 3.5%, limiting reserve income growth to 5% despite the expanding USDC supply.
Because reserve income remains Circle’s largest revenue source, lower interest rates continue to significantly impact overall earnings.
Revenue excluding distribution costs reached $289 million, up 15%, while the associated margin improved from 38% to 41%.
Return to profitability needs context
Circle reported $48 million in net income from continuing operations, compared with a $482 million loss during the same quarter last year.
However, the comparison reflects more than just stronger operations.
The prior-year results included substantial stock-based compensation tied to Circle’s 2025 initial public offering, so much of the $530 million year-over-year improvement reflected lower IPO-related expenses rather than a comparable increase in operating profitability.
Adjusted EBITDA increased 8% to $143 million.
Meanwhile, adjusted operating expenses rose 23% as the company continued to invest in product development, infrastructure, and artificial intelligence.
Following the earnings release, CRCL shares came under pressure as investors reacted to a revenue miss despite a return to GAAP profitability.
Circle expands beyond reserve income
The quarter also highlighted Circle’s efforts to diversify its business beyond interest earned on USDC reserves.
Revenue from payments, subscriptions, and blockchain infrastructure increased 41% to $34 million.
Meanwhile, the Circle Payments Network reached an annualised transaction volume of $14.7 billion and expanded to 175 participating financial institutions, representing 29% quarter-over-quarter growth.
Looking ahead, Circle plans to launch the Arc public mainnet on 16 September.
Its founding validator group includes BlackRock, DTCC, Mastercard, Standard Chartered, and Visa, signalling continued institutional support for the company’s blockchain infrastructure ambitions.
What does it mean for Circle?
The quarter shows that USDC adoption and Circle’s financial performance are no longer moving in lockstep.
Transaction activity and circulation continue to expand rapidly, but lower interest rates are limiting growth in reserve income, making diversification increasingly important to Circle’s long-term strategy.
If interest rates remain lower, investors are likely to pay closer attention to whether products such as Circle Payments Network and Arc can become more meaningful contributors to revenue.
Final Summary
- USDC transaction volume surged 151% to $14.8 trillion, but lower reserve yields limited Circle’s revenue growth and contributed to a quarterly revenue miss.
- Circle returned to profitability and continued expanding its payments and blockchain infrastructure businesses as it seeks to reduce its reliance on reserve income.
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