Circle Crushes EPS Estimates On ARC Token Presale, But Stalled USDC Economics Undercut The Beat

Circle Internet Group delivered a headline blowout for the third quarter. It earned $0.84 per share against a $0.42 consensus and a $0.45 Earnings Whisper number, an 86.7% surprise. Revenue and reserve income of $864.89 million topped the $801.61 million estimate by 7.9%. Earnings grew 31.3% year over year and revenue rose 16.9%. The quality of the beat deserves scrutiny, though. The single largest driver was $182 million of revenue recognized from the ARC token presale, which management had flagged in advance. Beneath it, the core stablecoin franchise stalled. That is the central tension: Circle is building an increasingly credible payments and blockchain platform while the reserve-income engine that funds it has stopped growing.

The income statement shows how much the token sale did. Other revenue jumped 627% to $207 million. Excluding Arc, other revenue was just $25 million, down from $42 million in the first quarter and $34 million in the second, as blockchain integration fees shrink. Reserve income, still the bulk of the business, fell 8% to $658 million. The reserve return rate dropped 61 basis points to 3.5%, and 8% growth in average USDC only partly offset it. The reported RLDC margin of 52% and the 85% jump in adjusted EBITDA to $317 million both carry the presale. Excluding Arc, RLDC margin slipped to 39.7% from 41.2% in the second quarter. GAAP net income from continuing operations rose only 5% to $226 million. Other income fell to $20 million from $72 million a year ago, and the year-ago quarter included a $61 million tax benefit. The release also disclosed a roughly 5% workforce reduction and $9.1 million in restructuring charges.

The call drew a sharp contrast between momentum in new initiatives and softness in the legacy model. Several growth metrics are accelerating:

• Cross-border payments: Circle Payments Network annualized volume reached $41 billion at quarter-end and $58 billion by October 30, up from $23 billion in late July. Enrolled financial institutions rose to 205.
• Minting and redemption: USDC mint and redeem activity hit a record $208 billion for the quarter.
• Usage share: USDC's share of stablecoin transaction volume climbed to 79% from roughly 70% in June.

USDC in circulation, however, ended the quarter at $73.9 billion, flat year over year. Average circulation fell 4% sequentially, and stablecoin market share slipped 183 basis points to 27%. Net reserve margin declined about 80 basis points to 37.8% because of the Hyperliquid arrangement. Management indicated the fourth quarter will absorb a full quarter of Binance incentives, implying a further step-down. Management also signaled that CPN take rates will be kept deliberately low, so transaction volume may not convert into revenue quickly.

The catalyst list is long and real. Arc mainnet launched September 16 with more than 100 institutions and applications, and roughly $30 billion of USDC has moved on it since launch. Binance signed a new five-year agreement and committed a $100 million equity investment. The $400 million all-stock Tazapay acquisition, which brings more than $25 billion in annualized volume, is expected to close in 2027, and management expects material CPN revenue that year. The GENIUS Act takes effect in January 2027. Bears have legitimate ammunition as well:

• CFO Jeremy Fox-Geen is departing.
• A security breach affecting Binance raises the risk of exchange outflows.
• USYC balances and onchain volume both declined sequentially.
• Operating expenses are trending to the high end of the $570-$585 million range.

Guidance was reaffirmed rather than raised, and the forecast pointed to revenue below Street estimates. Other-revenue guidance of $310-$330 million against $282 million recognized year to date implies a modest fourth quarter. The ex-Arc RLDC margin is guided to the midpoint of 38-40%.

Investor sentiment improved heading into the report but remained negative, rising from -0.26 to -0.17. Shares closed at $75.22 the day before the release. That is 21.4% above the open following the August report, but the gain hides a round trip. The stock surged to a $103.28 high on September 3 around the Arc launch, then gave back much of that move. It sat 27.2% below that peak and 12.5% below its $85.99 200-day moving average. The Earnings Whispers trend readings are mixed: sequential growth and momentum are positive, while AVWAP remains negative. That fits a stock where enthusiasm has been repeatedly sold into.

The bottom line is that Circle's quarter looks far stronger on the headline than in the core. The EPS beat rests largely on a one-time token presale, while circulation, reserve yield and ex-Arc margins all moved the wrong way, with further margin pressure guided for the fourth quarter. The call preserved a credible long-term growth story through CPN, Arc, Binance and Tazapay. Until those initiatives produce recurring revenue large enough to offset a stagnant reserve base, the investment setup is more complicated than an 86.7% surprise implies.

Read our earnings preview for Circle Internet Group, Inc.: https://www.earningswhispers.com/article/CRCL/21689

This earnings review was originally published on Earnings Whispers.

This article is for informational purposes only and is not investment advice. Earnings Whispers and its staff may hold positions in the securities mentioned. It is AI-assisted, based on proprietary Earnings Whispers data and company reports, and edited by Earnings Whispers staff.