Circle reported $701 million in second-quarter revenue and reserve income for 2026, missing the $717 million market estimate despite higher profit and a stronger outlook for non-reserve revenue. The results underline the company’s central tension: its USDC business continues to expand, but most of its earnings remain tied to interest income from reserve assets and therefore sensitive to Federal Reserve policy.
Net income from continuing operations reached $48 million, above the $43 million expected by the market, while adjusted EBITDA rose 8% year over year to $143 million. Circle shares initially rose in premarket trading after the release but later reversed. The stock was indicated at $61.55 at 20:45, down 2.84% in premarket trading.
Reserve income, generated largely from the assets backing USDC, accounted for $668 million of the quarterly total, Circle said in its earnings materials. That represented a 5% increase from a year earlier and a 2% gain from the prior quarter. Other revenue contributed $34 million, leaving the company with a business that remains overwhelmingly reliant on returns from its stablecoin reserves.
Usdc supply grew, but quarter-end balances fell
Average USDC in circulation rose 25% year over year to $76.5 billion, compared with $75.2 billion in the first quarter. The increase supported reserve income over the three-month period, since a larger average supply gives Circle more reserve assets to hold in short-duration government securities and cash-equivalent instruments.
The quarter-end picture was less favorable. USDC supply stood at $73.3 billion at the end of the second quarter, up 19% from a year earlier but down about 4.8% from $77 billion at the end of the preceding quarter.
That decline helps explain why Circle’s reserve-income growth was modest relative to the increase in average USDC circulation. Stablecoin supply can move quickly with crypto-market activity, institutional settlement flows, redemptions, and the availability of competing dollar tokens. A lower balance at quarter-end also indicates that the higher average supply was not maintained throughout the period.
USDC represented 27% of the U.S. dollar stablecoin market at quarter-end, according to Circle’s filing, down 66 basis points from a year earlier. The company remains one of the largest regulated dollar-stablecoin issuers, but the market-share decline shows that industry growth has not translated one-for-one into USDC dominance.
Distribution costs remained a major constraint
Circle’s revenue less distribution costs, or RLDC, reached $289 million, up 15% from a year earlier. RLDC measures the revenue left after Circle shares a portion of reserve income and pays transaction-related costs associated with USDC distribution.
The RLDC margin was 41%, up 3.02 percentage points year over year and unchanged from the prior quarter. Distribution and transaction costs totaled $410 million, a 1% annual increase, compared with 5% growth in reserve income. The slower cost growth allowed Circle to retain more of the revenue produced by its reserves.
Circle raised its full-year RLDC margin outlook to a range of 41.7% to 43.7%, from previous guidance of 38% to 40%. The company said the revised forecast reflects recognized presale revenue tied to ARC tokens.
Other revenue climbed 41% from a year earlier to $34 million, though it fell 19% sequentially after five consecutive quarterly increases. Circle lifted its full-year other-revenue outlook to between $310 million and $330 million, sharply above its earlier $150 million to $170 million range, also citing recognized ARC token presale revenue.
The revised outlook gives Circle a potential path toward less dependence on interest income. Yet the quarter’s figures show that diversification remains early: reserve income was nearly twenty times larger than other revenue.
Costs fell on a GAAP basis after IPO-related compensation
GAAP operating expenses declined 56% year over year to $254 million. Circle attributed the difference largely to elevated IPO-related stock compensation in the comparable period a year earlier, when GAAP operating expenses totaled $435 million.
Adjusted operating expenses, which exclude certain non-cash and non-recurring items, moved in the opposite direction. They increased 23% to $146 million. General and administrative costs were $66.3 million, IT infrastructure spending was $16.4 million, and depreciation and amortization doubled from a year earlier to $29.9 million.
The expense figures show a company investing in infrastructure while attempting to preserve margins in its core stablecoin operation. That balance will become more difficult if interest rates decline materially, because lower Treasury yields would reduce the income Circle earns on USDC reserves unless supply growth or new revenue lines offset the pressure.
Arc launch puts tokenization at the center of Circle’s strategy
Circle set Sept. 16 for the mainnet launch of Arc, its planned blockchain network. The company named BlackRock, DTCC, Galaxy, Visa, Mastercard and Standard Chartered among Arc’s initial validators.
Circle also said BlackRock’s tokenized money-market fund, BUIDL, will deploy on Arc. DTCC plans to support tokenization on the network for assets held through DTC custody. Those commitments position Arc as an effort to connect stablecoin settlement with established financial-market infrastructure rather than solely crypto-native applications.
Circle Payments Network also expanded during the quarter. Its trailing 30-day annualized transaction volume reached $14.7 billion at quarter-end, up from $8.3 billion disclosed for the first quarter. Connected financial institutions rose to 175 from 136, a 29% quarterly increase.
On the regulatory front, Circle said the Office of the Comptroller of the Currency approved its application to establish Circle National Trust as a federal trust bank. The New York State Department of Financial Services also approved Circle’s application to establish Circle New York Trust. The approvals could give Circle more direct control over custody and trust operations as it pursues a larger role in regulated digital-dollar payments and tokenized financial assets.
Morgan Stanley downgraded Circle to underweight from equal weight on Aug. 3 and reduced its price target to $38 from $106. TD Cowen initiated coverage with a buy rating and an $82 target. The divergence reflects the same question raised by the earnings report: whether Circle can turn its stablecoin scale, payments network and Arc launch into durable operating revenue before lower interest rates compress the reserve-income engine that currently funds most of the business.
Want deeper insight into stablecoins’ role in markets? Explore our guide on stablecoins and how they work.
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