--- title: "Circle's Q3 Report Breakdown: USDC is growing faster while Circle is earning less." type: "News" locale: "en" url: "https://longbridge.com/en/news/304465575.md" description: "Circle's Q3 revenue was $865 million, beating expectations, largely due to a one-time $182 million gain from ARC token sales. Excluding this, core revenue fell 8% year-over-year as reserve interest income dropped 8%, driven by lower interest rates outweighing an 8% increase in USDC supply. Consequently, adjusted EBITDA excluding ARC declined 21%. Despite strong transaction volume growth, Circle's stock price fell post-earnings, reflecting market concerns over declining core profitability and increased channel distribution costs." datetime: "2026-11-05T13:32:41.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/304465575.md) - [en](https://longbridge.com/en/news/304465575.md) - [zh-HK](https://longbridge.com/zh-HK/news/304465575.md) generator: "portal-rs" --- # Circle's Q3 Report Breakdown: USDC is growing faster while Circle is earning less. Author: Frank, PANews This quarter, each US dollar of USDC was transferred an average of about 190 times, roughly twice a day. The on-chain transaction volume of $13.9 trillion is 49% higher than the same period last year, and nearly 80% of the total stablecoin transaction volume in the market is in USDC. These transfers bring zero revenue to the issuer, Circle. Circle earns money from the existing stock: however much USDC a user holds, it converts that amount of USD into short-term US Treasury bonds, keeping the interest for itself. Whether a USDC is transferred twice a day or sits in a wallet for an entire quarter, Circle receives the same amount of interest. On November 4th, before the US stock market opened, Circle (CRCL) released its third-quarter financial report, with total revenue of $865 million, a year-on-year increase of 16.9%, exceeding market expectations of approximately $778 million to $802 million. Of this, $182 million was pre-sale revenue from Circle's own ARC token. Excluding this, revenue was approximately $683 million, a year-on-year decrease of approximately 8%. $182 Million in Cryptocurrency Sales Supports Better-than-Expected Performance ARC revenue is recorded in the "Other Income" category, pushing this category up from over $20 million last year to $207 million. Selling cryptocurrency incurs almost no cost and doesn't require sharing with exchanges and wallets; the amount received is essentially profit. Therefore, while it only accounts for 20% of revenue, it represents 57% of the $317 million adjusted EBITDA. According to Cointelegraph's calculations, excluding ARC, adjusted EBITDA was approximately $135 million, a 21% year-over-year decrease and lower than the $143 million in the second quarter. Circle's most valued RLDC profit margin (the percentage of revenue remaining after deducting channel commissions) was also boosted by this money: 52.4% on paper, 39.7% after deducting commissions, roughly the same as the same period last year, but 1.5 percentage points lower than the second quarter. Management clearly didn't treat this money as a regular occurrence. No changes were made to the full-year guidance, with other revenue set at $310 million to $330 million, already including ARC. The third quarter alone saw $207 million, meaning the remaining three quarters for the full year would only total $103 million to $123 million. The market reads this quickly. After the earnings release, Circle's pre-market trading briefly surged to $78.02 before falling back to open at $74.04, lower than the previous day's closing price of $75.22, and about 47% below its 52-week high of $140. A company that relies on interest income managed to prop up its balance sheet by selling tokens during a quarter of declining interest revenue. To understand its core business, we need to remove this $182 million. Interest income, squeezed from both ends. After removing this, its main revenue comes almost entirely from reserve interest. Third-quarter reserve income was $658 million, 8% less than the same period last year. Looking at it separately, the balance and interest rate are pulling in opposite directions. The average circulating supply was $73.3 billion, up 8% year-over-year, bringing in approximately $57 million more in revenue; the reserve return rate was 3.54%, down 0.61 percentage points year-over-year, resulting in a loss of approximately $110 million. The increase in the balance couldn't compensate for the decrease in the interest rate. Compared to the second quarter, the situation is reversed. In September, the Federal Reserve raised interest rates by 25 basis points, and the reserve return rate rebounded by 6 basis points month-over-month; however, the average circulating supply decreased from approximately $76.3 billion to $73.3 billion, and reserve revenue was still $10 million less than in the second quarter. CEO Jeremy Allaire also acknowledged in the conference call that the balance remained essentially flat. According to Circle, USDC's share of USD stablecoins is 27%, a decrease of 1.83 percentage points over the past year. Interest rates are a variable Circle cannot control. With a balance of over $70 billion, a 1 basis point change in the rate of return translates to approximately $7 million in interest annually. On the other hand, there are distribution channels. Most USDC users are not with Circle, but with exchanges, wallets, and on-chain platforms, resulting in a significant portion of the interest being distributed among them. Circle's net reserve margin (the percentage remaining after channel interest payments) was 37.8% in the third quarter, a decrease of 0.8 percentage points from the previous quarter. The company explained that this was due to the revenue sharing arrangement with Hyperliquid entering its first full quarter. Dolphin Research estimates that this arrangement alone costs Circle nearly $100 million less in gross profit annually. Binance also has a long-term agreement. The two parties signed a five-year agreement, with Binance investing $100 million in Circle, and Circle issuing approximately 1.237 million Class A shares to Binance in September at $80.84 per share. CFO Jeremy Fox-Geen stated that the fourth quarter will be the first full quarter after the renewal. Dolphin Research believes that the interests of the stablecoin alliance led by US financial institutions are too numerous and difficult to unite, posing a limited threat to USDC. The real challenge lies with channels like Hyperliquid, which have a large user base and demand interest returns. This aligns with Circle's situation: its competitive advantage is its distribution network, which itself requires payment. In quarters with declining interest rates, total interest payments are shrinking, while channel demand for increased market share is rising, and operating expenses have increased by 16%. Excluding ARC, profits can only decline. ### Usage not translating into revenue, Circle is building tollbooths Back to the initial figures. USDC usage is still rising: transaction volume reached $13.9 trillion, a 49% year-on-year increase (slightly lower than the $14.8 trillion in the second quarter); the turnover rate is said by Circle to be about 10 times that of the second-largest stablecoin; its share of total stablecoin transaction volume rose from 66% to 79%. Minting and redemption each reached approximately $104 billion, totaling $208 billion, a record high; there are 7.3 million wallets holding more than $10 USDC, a 16% year-on-year increase. Putting the two sets of shares together: the existing share is 27% and still decreasing, while the trading volume share is 79% and still increasing. Minting and redemption are almost equal; money comes in and goes out, without accumulating. USDC is increasingly resembling a frequently used channel, and increasingly unlike money held for the long term. Here's an extension that's not very friendly to Circle. The most frequent resale is often in trading scenarios, and platforms in these scenarios have the most bargaining power. The more a channel is used, the more confident they are in demanding interest upon return. For Circle, increased usage not only doesn't directly translate into revenue, but may also become leverage when channels negotiate revenue sharing. Circle aims to collect tolls on this channel. Its method is the Circle Payment Network (CPN), a cross-border settlement network for banks and payment institutions. As of the end of the third quarter, CPN's annualized payment volume, based on 30-day data, was $41.3 billion, a year-on-year increase of over 15 times; by October 30, it had exceeded $58 billion, a further increase of about 40% in about a month. There were 205 registered financial institutions, a year-on-year increase of over 4 times. Meanwhile, Circle announced the acquisition of payment company Tazapay for $400 million in Class A shares. Tazapay's annualized payment volume exceeds $25 billion, roughly equivalent to 60% of CPN's size at the end of the third quarter, covering more than 100 markets; the transaction requires regulatory approval and is expected to be completed in 2027, with $7.7 million in related expenses already recorded in the third quarter. Another investment is betting on public perception: USDC has become Chelsea's main partner, appearing on the front of the 2026/27 season jerseys. These haven't yet turned into cash. Fox-Geen stated in a conference call that CPN won't contribute substantial revenue until 2027. Allaire describes Circle's platform as multiple overlapping growth flywheels; based on current financial reports, only reserve interest is truly generating revenue. The fourth quarter will be a cleaner report: no ARC pre-sale revenue, Hyperliquid revenue sharing, and Binance renewals are all fully recorded. Before CPN actually starts charging fees, no matter how fast USDC circulates, Circle's ledger will only record balances and interest rates. ### Related Stocks - [CRCL.US](https://longbridge.com/en/quote/CRCL.US.md) - [CCUP.US](https://longbridge.com/en/quote/CCUP.US.md) - [CIR.US](https://longbridge.com/en/quote/CIR.US.md) - [CRCA.US](https://longbridge.com/en/quote/CRCA.US.md) - [CRCD.US](https://longbridge.com/en/quote/CRCD.US.md) - [CRCG.US](https://longbridge.com/en/quote/CRCG.US.md) - [CRCO.US](https://longbridge.com/en/quote/CRCO.US.md) - [CRY.US](https://longbridge.com/en/quote/CRY.US.md) - [ICRC.US](https://longbridge.com/en/quote/ICRC.US.md) ## Related News & Research - [Circle Q3 2026 operating income more than doubles year-over-year to $208.33 million](https://longbridge.com/en/news/304264925.md) - [Circle's 'Big Quarter' Revenue Jumps 17% but Analysts Remain Skeptical](https://longbridge.com/en/news/304324835.md) - [Circle cuts workforce by ~5%, impacting Q3 charges](https://longbridge.com/en/news/304486188.md) - [Circle CEO Backs Binance Despite $6.3 Billion Hack: ‘Remains an Extraordinarily Powerful Platform’ With 'Incredibly Strong' Reach](https://longbridge.com/en/news/304392348.md) - [Circle reports $865M Q3 revenue – Can USDC challenge Tether’s dominance?](https://longbridge.com/en/news/304541552.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**