Circle reported record third-quarter revenue before the U.S. market opened on Nov. 4, but the headline result was driven largely by $182 million of revenue tied to an ARC token presale as income from USDC reserves declined.
Total revenue and reserve income reached $865 million, up 17% from a year earlier, according to Circle's quarterly results. Net income from continuing operations rose 5% to $226 million, while diluted earnings per share increased to $0.84 from $0.64. Adjusted EBITDA climbed 85% to $317 million.
Shares initially rose as much as 3% in premarket activity before reversing. By 20:55 Beijing time, Circle stock was down 3.35% before the opening bell.
The figures place Circle's third-quarter performance in two distinct categories: a still-large, though declining, reserve-income business linked to USDC, and a growing effort to generate revenue from payments infrastructure and its new Arc blockchain ecosystem.
Arc presale lifts quarterly revenue
Reserve income, Circle's largest recurring revenue source, was $658 million in the third quarter. That was down 8% from a year earlier and 1.5% from $668 million in the second quarter. The company said its reserve return rate fell by 61 basis points year over year to 3.5%.
The decline reflects the sensitivity of Circle's core business to interest rates and the size of the USDC reserve. Circle earns income from the assets backing USDC, primarily cash and short-dated government securities. Lower returns on those reserves can weigh on revenue even when stablecoin activity remains high.
Other revenue rose 627% year over year to $207 million. Nearly all of that increase came from $182 million recognized in connection with an ARC token presale. Excluding the presale-related amount, other revenue was $25 million, below the $42 million reported in the first quarter and the $34 million reported in the second quarter.
That distinction tempers the record revenue result. The ARC-related recognition gave Circle a substantial quarterly boost, while its more established non-reserve revenue categories declined when that one-off contribution is removed.
Circle completed an initial genesis mint of 10 billion ARC tokens during the quarter. The company describes ARC as a token intended for Arc network security, utility and governance. Arc launched its public mainnet on Sept. 16, with USDC integrated as a native asset. Circle plans to shift the network to a proof-of-stake model in 2027.
Distribution costs fall as margins expand
Revenue less distribution costs, a metric Circle calls RLDC, reached $453 million, up 55% from a year earlier. The RLDC margin increased to 52%, compared with 41% in each of the prior two quarters.
Distribution and transaction costs totaled $412 million, down 8% from a year earlier and broadly unchanged from the second quarter. Those expenses include payments made to distribution partners that support USDC's availability and use across platforms.
Net reserve margin was 38%, up one percentage point from a year earlier but down from 39% in the previous quarter. The modest sequential compression came as reserve returns declined.
GAAP operating expenses were $245 million, up 16% year over year but down from $254 million in the second quarter. Adjusted operating expenses fell 5.2% quarter over quarter to $139 million, even as they increased 13% from a year earlier.
Circle said information-technology infrastructure expense rose to $17.92 million and marketing expense reached $11.32 million. Compensation expense declined 4% to $124 million. The company also recorded $9.15 million in cash severance and restructuring charges related to a workforce reduction of about 5%, alongside a $5.70 million reduction in stock-based compensation related to forfeited unvested restricted stock units.
USDC circulation remains steady while on-chain use rises
Average USDC in circulation was $73.3 billion during the quarter, up 8% from a year earlier but down about 4.2% from $76.5 billion in the second quarter. Ending USDC circulation stood at $73.9 billion, roughly flat year over year and up 0.8% sequentially.
Circle put USDC's share of dollar-backed stablecoins at 27% at the end of the quarter, unchanged from the prior quarter but down 1.83 percentage points from a year earlier.
Minted and redeemed USDC volume both reached $104 billion in the third quarter. The equal flows point to continued use of the stablecoin for transfers, trading settlement and liquidity management without a major net expansion in supply during the period.
On-chain activity grew more sharply. USDC transaction volume reached $13.9 trillion, up 49% year over year, while the number of effective wallets holding more than $10 in USDC rose 16% to 7.3 million.
USDC held on Circle-operated platforms climbed 36% from a year earlier to $13.9 billion. Circle said the average daily weighted share of on-platform USDC increased by 4.62 percentage points to 18.1%, giving the company a larger direct relationship with a portion of USDC users and transactions.
Payments and Arc become larger strategic priorities
Circle's payments network, CPN, reported $41.3 billion in annualized payment volume, compared with $8.3 billion in the first quarter and $14.7 billion in the second quarter. The rapid increase suggests Circle is seeking to turn USDC's settlement role into a payments-services business rather than relying solely on interest generated by reserves.
The company also said Binance made a $100 million equity investment in Circle and renewed and expanded a strategic partnership focused on USDC distribution. The arrangement could extend USDC's reach through one of the industry's largest trading venues, though Circle did not provide financial terms beyond the investment amount.
Circle has also signed a definitive agreement to acquire Singapore-based B2B cross-border payments platform Tazapay. The company expects the transaction to close in 2027 and recorded $7.75 million of acquisition-related legal and professional fees during the third quarter.
Arc is intended to support that infrastructure strategy. Circle said more than 100 institutions and ecosystem builders participated on Arc's first day, while its private-network community included more than 75,000 Arc House members, 10,000 Architect ambassadors and more than 1,200 projects built.
The quarter shows Circle gaining operational leverage and building payments products around USDC, but its record revenue also depended heavily on a token-presale accounting event. Future results will offer a clearer test of whether payment-volume growth, distribution partnerships and Arc network activity can offset pressure on reserve income as interest-rate conditions evolve.
Curious how stablecoins shape markets beyond Circle? Explore why they matter in Asia in this in-depth stablecoin analysis.
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