Circle's core business is shrinking
A $182M token presale masked an 8% drop in Circle's underlying revenue as USDC reserve yields fell and market share slipped to 27%.
Circle beat earnings estimates by double on Tuesday, posting $0.84 diluted EPS against a $0.42 forecast. The beat came almost entirely from a one-time event: a $182 million revenue recognition tied to the presale of ARC, the token for its new blockchain.
The reserve business is losing ground
Strip out the ARC sale and the picture changes fast. Total revenue would have fallen year over year, not risen, and the company's underlying engine, the interest income on USDC reserves, is under pressure from two directions at once: lower yields and a shrinking share of the stablecoin market.
- Reserve income fell 8% to $657.6 million even as average USDC circulation rose 8%, per Cointelegraph.
- The reserve return dropped 61 basis points year over year to 3.5%.
- USDC's share of the stablecoin market fell 1.83 percentage points to 27% by the end of September.
- Adjusted EBITDA excluding the ARC contribution was about $135 million, down 21% from $171 million a year earlier.
- Circle cut roughly 5% of its workforce alongside the earnings release.
A one-time sale is covering a structural gap
The default read on this quarter is simple: Circle beat expectations, stock reaction aside. The numbers underneath say something tighter.
A single presale covered a gap that would otherwise have shown up as a year-over-year revenue decline. That gap is structural, not cyclical.
USDC's reserve yield depends on rates Circle doesn't control, and competition is growing. Open Standard's Open USD, backed by Coinbase, Stripe, Visa, Mastercard and Shopify, launched on Solana by September 30 with a model that shares reserve economics directly with partner businesses.
Circle's own payments network and its Arc chain are supposed to become the next engine. Both are still pre-revenue in any meaningful sense.
CFO Jeremy Fox-Geen told the earnings call to expect material payments-network revenue in 2027, not this year or next. Staking rewards from Arc depend on a proof-of-stake transition also targeted for 2027.
That leaves a multi-year window where the core stablecoin business keeps compressing while the replacement revenue hasn't arrived yet. The ARC presale bought Circle one good quarter on paper. It didn't change the trajectory of the business that still generates three-quarters of its revenue.
What to track next
The next two or three quarters will show whether Circle's diversification is real or whether reported results keep leaning on episodic items.
- Reserve income and the reserve yield in Q4, to see if the 3.5% rate keeps falling as rates stay flat.
- USDC's share of total stablecoin supply, now at 27%, against growth in Open USD and other distributed-yield rivals.
- Any disclosed CPN (payments network) revenue figure before the 2027 target Fox-Geen set on the call.