Circle Q2 2026 Earnings: Revenue Falls Short of Estimates, USDC Circulation Declines by Year-End

Author | Azuma (@azuma_eth)

Before the U.S. stock market open on August 5 Beijing Time, stablecoin issuer Circle officially announced its second-quarter 2026 financial results.

Financial results show that Circle's total revenue and reserve income for the second quarter amounted to $701 million (below the market expectation of $717 million), representing a 7% year-over-year growth; adjusted EBITDA was $143 million, up 8% year-over-year; and net income from continuing operations was $48 million (above the market expectation of $43 million), an increase of $530 million year-over-year.

Affected by the earnings report, CRCL surged in pre-market trading but later weakened, trading at $61.55 as of 20:45, down 2.84% pre-market.

Total revenue fell short of expectations, but at least the trend has been reversed.

As shown in the financial report, Circle’s total revenue and reserve income for the quarter amounted to $701 million, falling short of market expectations of $717 million, but reversing the previous quarter’s decline (from $579 million → $658 million → $740 million → $770 million → $694 million → $701 million).

Breaking down the revenue structure, reserve income remains the dominant contributor, reaching $668 million in the second quarter, a 5% year-over-year increase and a 2% quarter-over-quarter increase.

Second, average USDC circulation continued to grow, but saw a significant outflow at the end of the quarter.

The growth in reserve income was primarily driven by the increase in USDC circulation—during the second quarter, USDC circulation exhibited a divergence, with average growth but a contraction at quarter-end.

Financial reports show that the average outstanding supply of USDC in the second quarter was $76.5 billion, a 25% year-over-year increase and approximately a 2% quarter-over-quarter rise (up from $75.2 billion in the previous quarter); however, the outstanding supply at quarter-end stood at $73.3 billion—while up 19% year-over-year—representing a roughly 4.8% decline from the previous quarter-end level of $77.0 billion. This indicates that the primary outflow of USDC funds occurred during the quarter-end period; although the overall supply continues to expand, the marginal trend warrants caution.

Another metric to watch is market share. According to the earnings report, USDC’s market share in USD-stablecoins stood at 27% at the end of this quarter, a 66-basis-point decline year-over-year. Amid an overall contraction in industry supply, USDC failed to gain market share and instead experienced slight outflows.

Third, other income declined sequentially but the full-year guidance was significantly raised.

Excluding reserve income, Circle's other revenue for the quarter was $34 million, a 41% year-over-year increase but a 19% sequential decline, ending a streak of five consecutive quarters of growth ($21 million → $24 million → $29 million → $37 million → $42 million → $34 million).

Notably, Circle significantly raised its guidance for other revenue in fiscal year 2026 from the previous range of $150 million to $170 million to a new range of $310 million to $330 million—nearly doubling—and specifically noted that this guidance includes recognized ARC token presale revenue.

According to the Q1 earnings call, Circle will recognize the ARC tokens held at fair value as "other income" upon fulfillment of obligations under the pre-sale agreement, directly impacting RLDC and adjusted EBITDA. This means other income over the next several quarters will be significantly elevated due to the recognition of ARC tokens. However, it should be noted that this income more closely resembles a one-time book gain rather than sustainable subscription or service revenue; excluding the impact of ARC, the growth trajectory of core other revenue remains to be closely monitored.

IV. RLDC Margin Remains High, Distribution Cost Control Optimized

RLDC Margin was the most resilient metric in Circle’s quarterly earnings report—this metric represents the profit margin after deducting distribution costs, reflecting the core business profitability excluding distribution expenses, and is widely regarded as Circle’s most critical profitability indicator.

In the second quarter, Circle's RLDC (Revenue minus Distribution Costs) was $289 million, a 15% year-over-year increase; the RLDC margin reached 41%, an improvement of 302 basis points year-over-year, flat compared to the prior quarter, and steadily increased over the past five quarters (38% → 39% → 40% → 41% → 41%).

The significance of this data is that, despite headwinds from a year-over-year decline in reserve yields (attributed to the Federal Reserve's cut to the federal funds rate), Circle maintained its profit margin, primarily through precise control of distribution costs—distribution and transaction costs in the second quarter amounted to $410 million, up only 1% year-over-year, far below the 5% year-over-year growth in reserve income.

Similar to other income, Circle’s management has raised its full-year RLDC margin guidance from 38–40% to 41.7–43.7%. However, note that this revision also includes recognized ARC token presale revenue, meaning the profit margin figures for the second half will carry a degree of “non-recurring” character.

Five: Distribution remains the largest expense, with increased investment in product development

On the expense side, distribution and transaction costs remained Circle’s largest cost item, reaching $410 million in the second quarter, with year-over-year growth of just 1% and quarter-over-quarter growth controlled within 1%.

From an operating expenses perspective, GAAP-based second-quarter expenses were $254 million, a 56% year-over-year decline; however, this is primarily due to a base effect from an unusually high stock-based compensation expense of $435 million in the same period last year, driven by the IPO, and thus has limited relevance.

More meaningfully, adjusted operating expenses amounted to $146 million in the second quarter, representing a 23% year-over-year increase, reflecting Circle’s continued investment in product development, infrastructure, and AI capabilities. Breaking it down, general and administrative expenses rose to $66.3 million, IT infrastructure costs increased to $16.4 million, and depreciation and amortization expenses more than doubled year-over-year to $29.9 million. Given management’s statements regarding ongoing investments in product development, infrastructure, and AI capabilities, these expense increases are likely closely tied to initiatives such as Arc, Agent Stack, and CPN.

In addition to financial data, several business-level advancements disclosed in Circle's second-quarter earnings report are also noteworthy.

First, the Arc network has officially entered its go-live countdown. Circle announced that the Arc mainnet will launch on September 16, with initial network validators including major traditional financial institutions such as BlackRock, DTCC, Galaxy, Visa, Mastercard, and Standard Chartered Bank. Meanwhile, BlackRock’s tokenized money market fund, BUIDL, will be deployed on the Arc network, and DTCC plans to support the tokenization of assets held by DTC on Arc.

Compared to previous descriptions that focused mainly on technical roadmaps and visions, this disclosure signifies that Arc has begun to attract actual participation from traditional financial institutions. For Circle, Arc is no longer merely a blockchain built around USDC, but rather an attempt to establish a foundational infrastructure connecting stablecoins, RWA, and traditional financial institutions.

Another business worth noting is the Circle Payments Network (CPN). According to the financial report, as of the end of the second quarter, CPN’s annualized transaction volume over the past 30 days increased to $14.7 billion, representing a roughly 76% rise from the $8.3 billion reported in the first quarter; the number of connected financial institutions grew from 136 to 175, a 29% sequential increase. Although CPN’s direct contribution to revenue remains limited at this stage, both transaction volume and the number of institutions demonstrate that this payment network is gradually building network effects.

On the regulatory front, Circle also achieved significant milestones this quarter, officially receiving approval from the U.S. Office of the Comptroller of the Currency (OCC) to establish Circle National Trust, becoming one of the first stablecoin issuers to obtain a U.S. federal trust bank charter; simultaneously, its application to establish Circle New York Trust was approved by the New York State Department of Financial Services (NYDFS).

For a stablecoin issuer that positions compliance as a core competitive advantage, these two licenses further strengthen Circle’s regulatory standing within the U.S. financial system and provide a more solid institutional foundation for future growth in custody, payments, and institutional finance services.

Yesterday, we published an article titled "Wall Street Divided on CRCL Valuation Ahead of Circle's Earnings Report." The article noted that, ahead of this quarter's earnings release, Wall Street has already shown significant disagreement over Circle's future value.

On August 3, Morgan Stanley (hereinafter referred to as "Morgan Stanley") downgraded Circle's rating from "Equal Weight" to "Underweight" and significantly reduced its price target from $106 to $38; meanwhile, TD Cowen initiated coverage of Circle with a "Buy" rating and set a price target of $82.

Two institutions have issued vastly different ratings, reflecting a fundamental disagreement over how to assess Circle’s revenue growth prospects—whether Circle’s long-term value stems from USDC itself or from the digital financial infrastructure built around USDC.

Based on this financial report, both parties' perspectives have been somewhat validated.

On one hand, several concerns raised by Morgan Stanley persist—USDC’s circulating supply continued to decline quarter-over-quarter at quarter-end, and its market share has not improved; the company’s revenue still primarily stems from reserve yields. Although the full-year guidance for other revenue has been significantly raised, the additional portion mainly comes from the recognition of ARC token presale income, rather than sustained growth in payment, API, or RWA businesses. This means that, in the short term, Circle’s profitability remains heavily dependent on the growth of USDC and the interest rate environment.

On the other hand, new evidence supporting TD Cowen’s bullish thesis appears to be mounting. The official launch date for the Arc mainnet has been set, traditional financial institutions such as BlackRock and DTCC have joined the ecosystem, CPN continues its rapid expansion, and the federal trust bank charter has been secured. Although these initiatives have not yet become primary revenue drivers, they are continuously enriching Circle’s platform strategy.

Overall, the only clear takeaway from this earnings report seems to be that "Circle is moving toward a platform-oriented strategy." Whether these initiatives will ultimately translate into sustained non-interest income and support the valuation thesis of a digital financial infrastructure platform may still require further validation over the coming quarters.