Circle misses revenue estimates as USDC trades $14.8T

Circle reported second-quarter results that missed analysts’ revenue estimates despite a surge in on-chain USDC activity. On-chain USDC transaction volume rose 151% to $14.8 trillion and circulation reached $73.3 billion.

Total revenue and reserve income for the quarter reached $701 million, a 7% increase from a year earlier and below analysts’ consensus of $717.5 million. Average USDC in circulation increased 25% for the quarter.

The average return on the reserves backing USDC declined 66 basis points to 3.5%. Reserve income grew about 5%, and lower yields on those reserves constrained overall revenue growth because reserve income remains the company’s largest revenue source.

Revenue excluding distribution costs rose 15% to $289 million and the associated margin improved from 38% to 41%. Net income from continuing operations was $48 million, compared with a $482 million loss in the same quarter a year earlier; prior-year results included substantial stock-based compensation tied to the company’s planned initial public offering, accounting for much of the swing.

Adjusted EBITDA increased 8% to $143 million. Adjusted operating expenses rose 23% as Circle increased spending on product development, infrastructure and artificial intelligence. Shares of the company traded lower after the earnings release.

Revenue from payments, subscriptions and blockchain infrastructure rose 41% to $34 million. The Circle Payments Network reported an annualized transaction volume of $14.7 billion and 175 participating financial institutions, up 29% from the prior quarter.

Circle plans to launch its Arc public mainnet on Sept. 16. The founding validator group for Arc includes BlackRock, DTCC, Mastercard, Standard Chartered and Visa.

USDC on-chain activity expanded rapidly while reserve-based income grew more slowly. Circle said it is increasing investment in payments and infrastructure and plans to diversify revenue beyond interest earned on USDC reserves.