After the stock price soared 10 times, Circle's first earnings report was full of highlights and concerns
Author: Umbrella, David, Deep Tide TechFlow
Just last night, stablecoin USDC issuer Circle handed over its Q2 report card.
As its first financial report after its IPO, the data in it provides an important basis for the market to assess the true value of this "first stablecoin stock". By analyzing key financial metrics in depth, we can gain a clearer picture of Circle's growth momentum and potential challenges.
USDC is expanding strongly, but the revenue structure is single
Judging from the information disclosed in the financial report, the following data needs to be focused on.
Core Business Indicators: USDC's Strong Expansion
First of all, the most significant thing in the financial report is the growth of USDC's circulation and market share.
As of the end of Q2, USDC circulation reached $61.3 billion, a 90% year-over-year surge and a 49% year-to-date increase. As of August 10, this figure has climbed further to $65.2 billion, a data that shows its continued growth momentum. In terms of stablecoin market share, USDC holds a solid market share of approximately 28%, solidifying its position as the second-largest stablecoin.
Secondly, USDC trading activity has seen explosive growth.
USDC's on-chain trading volume reached $5.9 trillion, a year-on-year increase of 540%. This explosive growth in this metric not only reflects the rapid expansion of USDC usage scenarios but also reveals an important trend in the entire stablecoin ecosystem transitioning from a mere store of value to a payment and settlement tool.
Financial Performance: Strong revenue growth but structural imbalances
showed Q2 total revenue of $658 million, 53% year-on-year increase, including:
- Reserve interest income: $634 million (96.4%), up 50% year-on-year Subscription
- and service revenue: $24 million (3.6%), up 252% year-on-year Under
this revenue structure, Circle's dependence on reserve interest income can still be seen. Despite a 252% increase in subscription service revenue, its absolute value is still small.
Circle is highly dependent on reserve yields from the Fed's high-interest rate environment, and its reliance on a single income stream poses its greatest operating risk. Once the Fed enters a rate cut cycle, Circle's profitability will face a severe test.
Another point that is easy to overlook is that the high fees of IPOs overshadow actual operational performance.
If we only look at the total, then Q2 Circle's net loss reached $482 million. This figure is large in absolute terms, but when distilled down:
IPO-related non-cash expenses totaled $591
million- Equity incentive expenses: $424 million
- Convertible bond fair value adjustments: $167
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $126 million, an increase of 52% year-over-year.
In other words, after excluding IPO-related expenses, Circle's actual operating performance remains solid. The adjusted earnings indicators show that the company's core business has maintained healthy growth, which also explains why the stock price did not fall but rose after the release of the earnings report.
The pressure to cash out under high valuations
was also on the same day as the earnings report, when Circle announced a secondary issuance of 10 million shares.
Based on the day's closing price of $163.21, the offering will raise $1.63 billion. Compared to the IPO price of $31, early investors returned more than 426%, and the cash amount exceeded $1 billion.
Among them, Circle's CEO Allaire has sold 357,800 shares but still maintains 23.9% of the voting rights.
Based on the above financial report data, it can be seen that the network effect of USDC is accelerating. But at the same time, Circle's challenges are equally significant:
theover-reliance on the interest rate environment in its revenue structure, the emergence of competitors (such as PayPal's PYUSD), and regulatory uncertainty are all issues that must be faced.
The Q2 earnings report provides a basis for assessing whether Circle is overvalued, but the final judgment also requires observing the performance of the next few quarters, especially Circle's ability to respond to changes in the interest rate environment.
Strategic Transformation: Circle's Path to Diversification
The strategic moves disclosed by Circle in its Q2 earnings report and subsequent conference call also clearly outline the company's path to transform from a stablecoin issuer to an integrated financial infrastructure provider.
This may also be in response to the single revenue structure disclosed in the financial report.
Circle's announcement of the launch of its self-developed blockchain called Arc in the second half of 2025 quickly became a focal point in market discussions. According to official disclosures, Arc is an open public chain designed for stablecoin finance, using USDC as the native gas fee token, focusing on application scenarios such as payments and foreign exchange.
Interestingly, stablecoin giants seem to have chosen the same path in unison.
USDT issuer Tether is developing Stable, payment giant Stripe has teamed up with top VC Paradigm to launch Tempo, the race around stablecoin payment chains has begun, and just today, OKX announced that the upgrade of X Layer will also enter the payment chain track.
In this competition, Circle's advantages are obvious: Circle has a unique compliance advantage compared to Tether, which is facing regulatory pressure, and the GENIUS Act promoted by the Trump administration has cleared policy barriers for it; Compared to Stripe, which has experience in payments, Circle has the network effect of USDC's 24% market share and a trust base of more than 1,800 institutional customers.
The deeper business logic is that the launch of Arc directly responds to Circle's biggest weakness - over-reliance on interest income.
Currently,up to 96% of Circle's revenue comes from Treasury interest on USDC reserves, and this reliance will become an Achilles heel when the rate cut cycle comes. By taking control of the blockchain infrastructure, Circle can not only access on-chain transaction fees but also open up new yield models such as staking, while reducing reliance on third-party blockchains and reducing growing distribution costs.
In addition to launching the self-developed public chain Arc, Circle also mentioned in its Q2 earnings report and conference call that it will deepen cooperation with companies such as Binance, FIS, and Corpay.
This includes the promotion of the use of Circle wallet technology with Binance and the use of the tokenized market fund USYC on Binance's institutional trading products as yield and over-the-counter collateral; The combination of global foreign exchange and USDC with Corpay provides 7x24 settlement and other services for businesses around the world; Partnering with FIS enables U.S. financial institutions to offer domestic and cross-border USDC payments through FIS's Money Movement Hub, combining Circle's blockchain-native infrastructure with FIS's real-time payments to unlock compliant digital dollar transactions faster and lower cost.
In addition to the above three companies, Circle also mentioned the direction of cooperation with mainstream exchange OKX and fintech company Fiserv in its financial report.
Overall, Circle's Q2 earnings report gives us a portrait of a company in a critical transition period. It is not only a leader in the stablecoin track, enjoying the growth dividends brought by the USDC network effect; Another fintech company facing structural challenges must complete the reshaping of its business model before the arrival of the downward interest rate cycle.
As the star company of this year's stock market, Circle really deserves it. But beneath the aura of the first stablecoin stock, investors need to be soberly aware of the challenges it faces. From a single stablecoin issuer to a global digital financial infrastructure provider, this path of transformation is fraught with uncertainties. It remains to be seen if Circle can continue the myth of a 10x surge in stock price after the IPO.