Circle reports $275 million in revenue for FY2025 despite a net loss; Coinbase benefits from USDC revenue sharing.

Author: insights4vc

DeepChain TechFlow

DeepOcean Summary: Circle has listed on the NYSE under the ticker symbol CRCL. But what kind of business is this company really in? This article breaks down Circle’s revenue structure, reserve model, revenue-sharing arrangement with Coinbase, and the current growth status of USDC and EURC based on its FY2025 annual report.

The author’s core conclusion: Circle is fundamentally an interest-sensitive financial infrastructure company that earns revenue from reserve interest, not from software platform subscriptions or transaction fees. This conclusion directly impacts its valuation logic.

The full text is as follows:

To understand Circle, it should first be positioned as a "reserve income company," rather than a scaled software or payment fees platform. Its revenue model heavily depends on stablecoin balances, short-term interest rates, and the portion of reserve income retained after paying out substantial shares.

The FY2025 data clearly illustrates this: total revenue combined with reserve income amounted to $2.747 billion, with reserve income contributing $2.637 billion and other income totaling only $110 million. Therefore, Circle’s recent financial performance primarily depends on three variables: the average circulating supply of USDC, the actual yield on reserves, and the economic structure of partnership revenue-sharing arrangements—particularly the contract with Coinbase.

For FY2025, total revenue and reserve revenue increased significantly from $1.676 billion in FY2024 to $2.747 billion. Reserve revenue rose from $1.661 billion to $2.637 billion, while other revenue increased from $15 million to $110 million. Despite this, Circle's net loss attributable to common shareholders for FY2025 amounted to $70 million, with operating expenses sharply rising, including compensation expenses totaling $845 million.

Chart: Circle's Key Financial Metrics for FY2025

The central debate in 2026 won’t be whether Circle is expanding its footprint, but whether that expansion will truly reflect in its financial metrics. The key variables remain: whether USDC balances can sustain growth, how reserve yields will evolve in a declining interest rate environment, whether distribution costs will remain persistently high, and whether the scaling speed of new revenue streams like CCTP, CPN, and USYC can keep pace with the growth of reserve income base.

At this stage, Circle’s strategic boundaries are clearly expanding, but its core investment framework remains unchanged: it is still a financial infrastructure company whose revenue is primarily driven by reserve income, rather than diversified platform monetization, and which is highly sensitive to interest rates and balance sizes.

Circle is a fintech company listed on the NYSE under the ticker symbol CRCL. The company filed its FY2025 annual report (Form 10-K) as of December 31, 2025, on March 9, 2026. Circle’s FY2025 balance sheet shows “stablecoin holder deposits” of $74.9 billion, directly indicating that the company’s economic core remains the management of reserve-backed stablecoins, rather than a traditional pure software model.

From an analytical perspective, Circle can be broken down into four layers:

First, the stablecoin issuer, whose primary products are USDC and EURC, has liabilities corresponding to circulating stablecoins and assets held in segregated reserves for users. Second, the reserve income business monetizes reserve assets through interest and dividend income. Third, the developer, payment, and infrastructure layer focuses on expanding use cases and transaction density for stablecoins. Fourth, a broader strategic framework is being built around the “internet financial system,” including Arc, the Circle Payment Network (CPN), and tokenized assets infrastructure.

However, disclosed data indicates that the reserve income model remains the primary source of financial performance today, rather than scaled software or trading fee businesses. For FY2025, total revenue combined with reserve income amounted to $2.747 billion, with reserve income contributing $2.6368 billion, while the non-reserve portion remained relatively limited.

This distinction is critical for valuation. While Circle’s strategic narrative is expanding, its revenue structure still does not support reclassifying it as a “software platform” story. Previously disclosed data showed that “other products” revenue accounted for only 1% of total revenue in 2024; however, management also noted that other revenue is accelerating in 2025, reaching $37 million in Q4 2025, an increase of $34 million year-over-year. This is a positive directional signal, but it is not yet sufficient to diminish the central role of reserve balances, reserve yields, and partner economics in driving profitability.

Another strategic pillar is regulatory positioning. Circle disclosed that, in December 2025, it received conditional approval from the Office of the Comptroller of the Currency (OCC) to establish a national trust bank named First National Digital Currency Bank, N.A. Management characterized this as a significant step toward strengthening USDC infrastructure and potentially expanding regulated custody and reserve management capabilities. This could enhance regulatory sustainability and institutional confidence in reserve governance, but it should not yet be considered a disclosed profit driver.

Circle's business model is determined by two factors: the scale of stablecoins in circulation and the yield on reserve assets. The company explicitly defines reserve income as a function of reserve balances and the reserve return rate.

Reserve income for FY2025 was $2.6368 billion, compared to $1.6611 billion in FY2024. In contrast, other income for FY2025 amounted to only $109.8 million (compared to $15.2 million in FY2024), with subscription and service revenue of $84.8 million being the largest non-reserve item. This confirms that Circle’s profit structure is highly sensitive to interest rates and balance growth, even as ancillary revenues begin to scale from a lower base.

The reserve is managed conservatively. Circle discloses that, as of June 30, 2025, approximately 87% of USDC reserves are held in the Circle Reserve Fund—a government money market fund compliant with Rule 2a-7, managed by BlackRock and custodied by BNY Mellon. The remainder is held as cash in accounts servicing USDC holders, primarily at globally systemically important banks. The reserve structure prioritizes liquidity, capital preservation, transparency, and compliance over maximizing returns.

Circle’s economic structure is also significantly influenced by its distribution arrangements, particularly its agreement with Coinbase. Reserve income is recorded at gross, but the company makes substantial downstream payments through distribution and transaction costs. This means a considerable portion of gross reserve revenue is contractually distributed through the distribution layer before reaching operating expenses.

The data shows that revenue after deducting distribution costs (RLDC) for FY2025 was $1.083 billion, while the combined total revenue and reserve income amounted to $2.747 billion. The difference indicates that the majority of gross monetization was paid out through the distribution layer.

This is critical for modeling. Circle is not a pure beneficiary of rising interest rates or USDC balance growth—the increase in reserve realization cannot be translated one-to-one into retained profitability. According to Circle’s earlier sensitivity disclosures, based on an average reserve yield of 4.26% as of June 30, 2025, a 100-basis-point change results in an estimated change in reserve income of approximately $618 million, but distribution and transaction costs also change by approximately $315 million. This means a significant portion of the upside from reserves is offset, with only the remainder flowing to RLDC before operating expenses. For institutional analysis, RLDC is a more useful intermediate profitability metric than reserve income alone.

The quality of earnings in FY2025 was also significantly impacted by non-core and non-cash items. Circle reported a net loss from continuing operations of $70 million in FY2025, but adjusted EBITDA of $582 million. The discrepancy primarily stems from high equity-based compensation tied to IPO vesting conditions—Circle disclosed at the time of its FY2025 earnings release that the results were significantly affected by $424 million in IPO-related equity compensation, specifically a $423.8 million equity compensation expense recorded when the performance conditions for RSUs were met upon the commencement of trading on the NYSE. Therefore, GAAP net income is not the best perspective for evaluating the underlying unit economics or profitability.

The most important reason is Circle’s arrangement with Coinbase, which is the most crucial and often underappreciated part of its business model.

When USDC was launched in 2018, Circle and Coinbase formed a joint consortium to govern the stablecoin. This structure was dissolved in 2023, with Circle assuming sole control over issuance. However, Coinbase retained a highly favorable revenue-sharing agreement.

Chart: USDC Reserve Allocation Structure between Circle and Coinbase

Under the agreement, 100% of the reserve income generated from USDC held on the Coinbase platform goes to Coinbase, while 50% of reserve income generated through other channels goes to Coinbase. In 2024, of Circle’s total distribution costs of $1.01 billion, $908 million was paid to Coinbase. In other words, for every dollar Circle earned, approximately $0.54 flowed to a company that neither issues USDC nor manages its reserves. By early 2025, Coinbase held 22% of the total USDC supply, up from just 5% in 2022. As USDC becomes increasingly concentrated on Coinbase, Circle’s payment obligations have risen accordingly.

In summary, Circle should currently be viewed as a financial infrastructure company whose revenue engine is centered on reserve income from stablecoins and is sensitive to interest rates, rather than a software platform primarily driven by subscription or transaction revenue. The platform’s option value is becoming increasingly clear, particularly through the expansion of Arc, CPN, and non-reserve revenue streams. However, Circle’s disclosed FY2025 revenue structure still supports an analytical framework centered on reserve balances, reserve yields, and distribution sharing mechanisms. Until non-reserve revenue becomes a significantly larger portion of total revenue, reserve income will remain the primary driver of Circle’s profitability sensitivity and the core of valuation debates.

USDC

USDC is Circle’s core economic engine heading into 2026. According to Circle’s FY2025 annual report, the USDC circulating supply stood at $75.266 billion as of December 31, 2025. Circle’s USDC product page subsequently showed that the circulating supply reached $79.2 billion as of March 16, 2026. Based on this, USDC’s circulating supply increased by approximately $3.9 billion, or about 5.2%, from year-end to mid-March. While not explosive growth, this does indicate continued net expansion atop a strong foundation established in 2025.

Chart: USDC Stablecoin Supply (Source: Allium)

Circle’s FY2025 disclosures point to a strong growth year for USDC. In Q4 2025, USDC’s circulating supply increased 72% year-over-year to $75.3 billion, and on-chain USDC transaction volume rose 247% year-over-year to $11.9 trillion. The full-year average USDC circulating supply was $64.87 billion, up from $33.34 billion in FY2024, but the FY2025 reserve yield was 4.1%, down from 5.0% in FY2024. The key takeaway is that revenue expansion in 2025 was driven by balance growth, not higher yields, as the reserve yield declined year-over-year.

Circle also disclosed several operational metrics indicating that USDC is a high-turnover monetary instrument rather than a static collateral asset. In FY2025, USDC minting amounted to $257.5 billion, while redemptions totaled $226.1 billion; at year-end, USDC held a 28% market share among stablecoins (based on third-party market cap data); and the number of active wallets at year-end reached 6.8 million (as defined by Circle). The sheer volume of minting and redemptions relative to the year-end outstanding supply suggests substantial transactional turnover, likely driven by exchange settlements, liquidity routing, collateral management, and DeFi-related fund flows—rather than a simple buy-and-hold reserve asset model. Circle has not publicly provided a clear breakdown of these usage scenarios.

The payment narrative for USDC is becoming more credible, but it remains in its early stages compared to the reserve income model. Visa has officially launched USDC settlement capabilities in the U.S. with selected card issuers and acquirers, enabling settlement of certain VisaNet obligations on specific blockchains outside traditional banking hours. Circle views this as proof that USDC can function as a persistent settlement asset, not merely a crypto-native transaction tool. Although the current scale remains small relative to Visa’s overall network, the analytical significance is substantial: this is one of the clearest public signals that USDC is being positioned as part of real-world backend payment infrastructure.

Partnership distribution targeting consumers and small business ecosystems is also expanding. On December 18, 2025, Circle announced a partnership with Intuit to integrate USDC functionality into TurboTax, QuickBooks, and Credit Karma. Strategically, this strengthens Circle’s argument that USDC is moving beyond trading venues and crypto-native users into mainstream financial workflows. However, the monetization path remains unclear—Circle has not disclosed pricing, commission rates, or revenue-sharing structures for this integration; therefore, progress on distribution should not be misconstrued as evidence of high-margin payment revenue.

At the market structure level, Circle and Polymarket announced on February 5, 2026, that Polymarket will migrate from bridged USDC (USDC.e) on Polygon to native USDC over the coming months. This development reflects Circle’s broader effort to reduce reliance on bridged liquidity and expand the native issuance of USDC across chains. Native issuance enhances redemption transparency, reduces operational complexity associated with cross-chain bridges, and better aligns with a regulatory-first approach. At the same time, the very need for this migration highlights the structural challenges facing stablecoins: fragmented bridged and cross-chain liquidity remains a barrier to adoption—not merely a technical footnote.

Overall, USDC is a hybrid instrument: first, a primary settlement asset for exchanges and venues; second, an on-chain high-speed dollar for collateral, liquidity routing, and crypto market infrastructure; and third, emerging as a new institutional settlement rail through specific integrations. Evidence of payment rail growth is improving, particularly with Visa settlements, Intuit integration, and Circle’s broader infrastructure development. However, the primary economic driver disclosed by Circle remains reserve income generated from USDC reserves, rather than explicit transaction fees from payment activity.

EURC

EURC is strategically important, even though its direct economic contribution remains limited. The European regulatory context is particularly relevant here. MiCA (EU Regulation 2023/1114) came into effect in 2023, with rules for asset-referenced tokens and electronic money tokens applicable as of June 30, 2024, and the broader framework fully effective as of December 30, 2024. The significance of this timeline is that euro-denominated stablecoins are gaining a "regulatory compliance rating" earlier than many adjacent crypto asset services, enhancing institutional confidence in regulated issuers and exchanges supporting compliant euro stablecoin products.

Circle disclosed that, as of December 31, 2025, the circulating supply of EURC was 309,608,590. By March 16, 2026, the Circle EURC page showed a circulating supply of €382.8 million. This implies an increase of approximately €73 million in EURC supply from year-end to mid-March, representing a growth rate of about 23.6%. While the absolute volume remains small compared to USDC, the growth rate is meaningful, indicating that EURC is gaining momentum from a relatively low base.

The overall market size of euro-denominated stablecoins remains small. According to Reuters in September 2025, citing data from the Bank of Italy, the total amount of euro-denominated stablecoins was only about $620 million, compared to a global stablecoin issuance of approximately $300 billion at the time. Even with subsequent growth, Circle’s March 2026 report of €382.8 million in circulating EURC supply suggests that EURC is likely among the top euro-denominated stablecoins by supply.

Circle positions EURC as MiCA-compliant, supporting Avalanche, Base, Ethereum, Solana, and Stellar, and commits to publishing attestation reports monthly. Strategically, EURC’s value to Circle may exceed its current direct financial contribution: it helps Circle establish a regulatory presence in Europe, supports on-chain euro-dollar workflows alongside USDC, and provides option value as digital currency policy priorities intensify in Europe. Reports from Reuters at the end of 2025 also indicate growing interest among European institutions and policymakers in developing alternatives to dollar-dominated stablecoin infrastructure, reinforcing the argument for this option value.

Over the next 12 to 24 months, EURC is better viewed as an enabling layer rather than an independent profit driver. Its underlying scale is under €500 million, and Circle does not separately disclose EURC’s revenue figures. For EURC to become financially material, it may require three things: substantial growth in euro-denominated circulating supply, adoption beyond crypto-native capital markets for payments and finance, and a distribution model that avoids the heavy economic splits seen in the USDC model. In other words, EURC may already be strategically important, but it is not yet a core financial driver.

Circle's FY2025 financial data further confirms: the company is primarily a reserve income business. Total revenue combined with reserve income reached $2.747 billion in FY2025, up from $1.676 billion in FY2024. Of this, reserve income amounted to $2.637 billion (compared to $1.661 billion in FY2024), while other income totaled $110 million (compared to $15 million in FY2024). The year-over-year growth is almost entirely attributable to the expansion of reserve income, rather than a broad shift in revenue structure toward software or transaction fee models.

Chart: Circle FY2025 Revenue Structure

Chart: Circle FY2025 Cost Structure Breakdown

The cost structure is also a key component of the underwriting framework. Distribution and transaction costs for FY2025 amounted to $1.662 billion, up from $1.011 billion in FY2024. Operating expenses rose from $492 million to $1.179 billion, with compensation expenses reaching $845 million (up from $263 million the prior year). This confirms that the gross profitability generated by higher reserve income has been significantly offset by substantial partner payouts and sharply rising operating costs.

Measuring operating leverage, RLDC is more useful than top-line revenue. Circle disclosed an RLDC of $1.083 billion for FY2025, up from $659 million in FY2024; the RLDC margin remained at 39% in both years. This stable margin is notable: it indicates that distribution costs have expanded broadly in line with reserve income, and higher interest rates and larger balances have not translated into a structurally more favorable retained economics model. In other words, Circle has achieved growth, but its core retained economic share after distribution has not materially improved.

Clearer operational leverage signals appear in management’s adjusted metrics rather than GAAP reporting. Circle disclosed adjusted operating expenses of $508 million for FY2025 and guided for adjusted operating expenses of $570 million to $585 million in FY2026 under the new definition. This indicates the company plans to continue investing in growth rather than shifting to a near-term harvesting mode.

Figure: Key Items from Circle's FY2025 Balance Sheet

The balance sheet also supports a specific interpretation of the business model. As of December 31, 2025, Circle reported $75.068 billion in cash and cash equivalents segregated for stablecoin holders, and $74.913 billion in stablecoin holder deposits. This structure aligns with a reserve-backed issuance model built around segregated balances, rather than a traditional loan-based balance sheet model.

Analytically, this makes Circle structurally more akin to a narrow-margin business rather than a high-commission fintech, with the key qualification that reserves are described as being held for token holders and intended to achieve bankruptcy remoteness under Circle’s disclosed structure.

As we enter Q1 2026, the interest rate environment is no longer as favorable as it was during the peak of this cycle. On March 16 and 17, 2026, the Federal Reserve’s effective federal funds rate was 3.64%, and SOFR was 3.65%. Circle’s own sensitivity framework uses the average yield of 3.64% in December 2025 as a reference point. This implies that the reserve return environment at the beginning of 2026 remains significantly lower than the 5.0% reserve yield disclosed for FY2024 and is closer to levels seen at the end of 2025, meaning that if Circle wishes to maintain reserve income growth, balance growth must shoulder a greater burden.

The start of Q1 2026 was at least constructive in terms of balance growth. Circle disclosed that, as of March 16, 2026, USDC circulation reached $79.2 billion, up from $75.266 billion at year-end; EURC increased from €309.6 million at year-end to €382.8 million. This suggests that the average stablecoin balance in Q1 may have improved compared to Q4 exit levels, partially offsetting the low-yield environment.

Management’s FY2026 guidance points to continued diversification of the revenue mix, but no fundamental change in the economic model. Specifically: other revenue of $150 million to $170 million, RLDC profit margins of 38% to 40%, and adjusted operating expenses of $570 million to $585 million. The signal has two layers: first, management expects non-reserve revenue to grow; second, even under their own guidance, these revenues remain relatively small compared to the reserve revenue engine.

Bull case scenario. USDC circulating supply continues to expand through Q1 and Q2, driven by increased institutional settlement usage, higher on-chain velocity, and incremental distribution progress. Under this scenario, reserve income remains resilient even if actual yields remain at the short-end levels seen by late 2025 and early 2026. Distribution costs will rise accordingly, but the economic surplus retained after distribution may still be sufficient to absorb higher planned operating expenses while maintaining profit margins at or near guidance levels. This is essentially a scenario where "floating supply growth offsets yield compression." Current balance trends and an expanding ecosystem support this scenario, though it still depends on sustained trading volume and adoption momentum.

Base case. As trading activity and DeFi usage normalize, USDC circulation growth slows to a low single-digit quarter-over-quarter rate. Reserve yields remain anchored around 3% on the short end, broadly in line with the EFFR and SOFR. Under this scenario, reserve income stabilizes and slightly increases (depending on average balances), but distribution costs remain elevated due to unchanged partner revenue-sharing structures. As a result, RLDC profit margins stay within the company’s guided range of 38% to 40%, with modest top-line growth but limited structural margin expansion.

Bear market scenario. USDC circulation stagnates or declines due to reduced risk appetite, outflows from exchanges, or market share pressures, while interest rates fall further from already low levels. According to Circle’s own sensitivity framework, lower yields reduce reserve income and mechanically lower some distribution costs, but the net effect is still a weakening of RLDC. This issue is more severe because Circle enters FY2026 with a higher fee structure in place, meaning weaker float and lower yields expose the company more directly to the dual pressures of partner concentration risk and operational cost rigidity.

Circle is most accurately characterized as a regulated digital currency network operator with two tiers—a financially dominant core of issuer and reserve management, and a strategically important but economically non-dominant periphery of applications, interoperability, and developer services. This distinction matters because, until non-reserve revenues become significantly larger, Circle’s valuation, profit sensitivity, and risk profile remain closely tied to monetary policy and the structure of the stablecoin market.

The most important strategic option currently is the Circle Payment Network (CPN). Circle launched this concept in April 2025 and disclosed that, as of February 20, 2026, 55 financial institutions have registered, and 74 are undergoing qualification review, with an annualized transaction volume equivalent to $5.7 billion on a 30-day basis. These represent meaningful early signals of network formation and institutional interest. However, without disclosure of fees, revenue contribution, or margins, CPN remains easier to justify strategically than financially.

Another credible non-reserve monetization pathway is interoperability tools. Circle disclosed the launch of CCTP V2 in March 2025, which will generate transaction fees when customers opt to use its fast transfer functionality. This represents one of the stronger non-reserve monetization pathways, as it prices specific technical capabilities rather than relying solely on eventual usage translating into value. Nevertheless, Circle’s disclosed FY2025 transaction revenue line remains small, and its current contribution is negligible compared to reserve income.

The USYC segment that Circle entered through its acquisition of Hashnote is also strategically significant. Circle describes USYC as representing shares in an on-chain money market fund, primarily used as collateral in digital asset markets, and discloses that it earns fees from it, including performance fees.

This is a logical extension of USDC, as it addresses the demand for interest-bearing collateral and margin that stablecoins alone cannot fully satisfy. However, the market currently lacks separate public disclosures regarding USYC’s assets, income, or profitability, making it more of a strategic building block than a standalone driver that can be independently modeled.

In terms of competition, Circle’s most direct rival in the USD stablecoin space remains Tether. According to a Reuters report in February 2026, USDT’s circulating supply is approximately $184 billion, giving Tether a substantial scale advantage.

Circle’s differentiation remains clear: its public company disclosure standards, reserve asset constraints that better align with emerging regulatory requirements, and stronger positioning with regulated institutions and payment networks. In this sense, Circle’s competitive advantage lies less in absolute scale and more in institutional credibility and regulatory readability.

Another competitor is PayPal’s PYUSD. On March 17, 2026, PayPal announced the expansion of PYUSD to 70 markets worldwide. The strategic relevance of PYUSD lies in its integration within a global consumer and merchant payment distribution network, offering a distinctly different market entry advantage compared to Circle’s exchange- and infrastructure-focused expansion approach.

Circle's current advantages are deeper USDC liquidity, greater scale, and stronger integration with the crypto market; PYUSD's differentiation lies in its native wallet and merchant distribution embedded within mainstream payment platforms.

The competitive landscape in Europe may become more challenging in the future. According to Reuters, several major European banks, including ING, UniCredit, and BNP Paribas, have formed a company to launch a euro-backed stablecoin in the second half of 2026, while policymakers have publicly discussed strengthening a euro-denominated digital currency to counter the dominance of the U.S. dollar.

This poses a medium-term competitive threat to EURC, as bank-led euro stablecoins can combine regulatory credibility with embedded corporate and banking distribution. As of March 2026, this remains more a future competitive risk than an immediate supply-side alternative.

Circle's FY2025 data still supports the assessment of it primarily as a reserve income business—profits are driven by stablecoin balances, reserve yields, and partner economic structures, with software or payment monetization contributing far too little to disrupt this model.

USDC and EURC continue to expand, and new initiatives such as CCTP, CPN, and USYC have improved the strategic narrative, but these businesses remain financially insignificant relative to the reserve income base.

Therefore, the core underwriting framework remains focused on growth in floating balances, interest rate sensitivity, and the structural weight of distribution costs, particularly those tied to Coinbase.

Chart: Circle Internet Group Inc — Consolidated Income Statement

Figure: Circle Internet Group Inc. — Consolidated Balance Sheet (1)

Figure: Circle Internet Group Inc — Consolidated Balance Sheet (II)