According to Woofun AI, Circle Internet Corp. (CRCL.US) released its third-quarter 2026 earnings report before the US market opened on November 4, with both revenue and earnings per share exceeding market expectations. This marks the company's first improvement after two consecutive quarters of missing expectations. Despite the strong financial data, the stock price reaction was muted, ultimately closing at $76.12 with a total market value approaching $20 billion. Market sentiment quickly returned to rationality after a brief spike, reflecting investors' cautious attitude toward growth quality. Behind this contrast lies the underlying concerns about the core business fundamentals strongly offset by one-time gains from new businesses, giving this earnings report a complex structural character rather than a simple signal of performance reversal. The deeper contradiction is that although overall financial indicators improved, the core driver of growth did not come from traditional stablecoin reserve income, but instead relied on the token presale of an immature new public blockchain. The sustainability of this dependency path has become a market focus. At the same time, the company streamlined its workforce while expanding new businesses, further intensifying speculation about its strategic priorities, making this earnings report not just a listing of financial data but a microcosm of Circle's strategic transformation amid intensifying stablecoin competition.
The core variable driving the revenue beat was the massive one-time income from the presale of ARC, the native token of its public blockchain Arc. Circle's third-quarter total revenue reached $865 million, up 17% year-over-year. Continuing operations net income was $226 million, adjusted EBITDA was $317 million, and diluted earnings per share was $0.84, comprehensively surpassing the market's previous expectations of $802 million in revenue and $0.40 in earnings per share. According to data compiled by Woofun AI, other income reached as high as $207 million, surging 627% year-over-year, of which $182 million came directly from the ARC token presale. The ARC presale was completed in two rounds, raising approximately $242 million in total. CFO Jeremy Fox-Geen explained on the conference call that because revenue is recognized based on performance milestones, approximately 75% of the presale revenue was recognized in the third quarter as tokens were delivered and the Arc mainnet launched. This income carried no corresponding distribution costs, directly boosting profit levels, bringing revenue less distribution costs (RLDC) to $453 million, up 55% year-over-year. The RLDC margin jumped from 41% in the second quarter to 52% including the ARC presale. Adjusted EBITDA equaled 70% of RLDC, or approximately 50% excluding the ARC presale impact; if revenue is used as the denominator instead, the two figures are 36.6% and 15.6% respectively. This gap reveals the fragility of the current profit structure, namely that high margins are highly dependent on non-recurring one-time capital injections rather than improvements in daily operational efficiency.
However, when stripping away the halo of the ARC presale, Circle's core business revenue and profit actually showed a year-over-year decline. Based on the financial data, excluding the presale, third-quarter revenue was approximately $683 million, down about 8% year-over-year and below the levels of the previous two quarters; adjusted EBITDA was approximately $135 million, down about 21% year-over-year; pre-tax profit was only about $46 million, a new low for the year. This decline was mainly attributed to the contraction of reserve income. Third-quarter reserve income was $658 million, down 8% year-over-year, with the reserve return rate falling 61 basis points year-over-year to 3.54%. Although average circulation grew 8%, it could not fully offset the negative impact of declining interest rates. Additionally, other non-presale business income was only $25 million, down 11% year-over-year, which Fox-Geen attributed to fewer blockchain integration projects monetized in the quarter. Profit margins were also under pressure. Excluding the presale, the RLDC margin was 39.7%, down about 150 basis points from the second quarter; the net reserve margin declined about 80 basis points quarter-over-quarter to 37.8%. Fox-Geen noted this was due to the first full quarter of the revenue-sharing arrangement with Hyperliquid. An offsetting factor was that USDC retained on Circle's own platform rose to $13.9 billion, up 36% year-over-year, with its share of circulation rising to 18.1%. Even including presale revenue, net income only grew 5% year-over-year, mainly due to the high base effect of approximately $61.3 million in income tax benefits in the same period last year. Signs of weakening core cash-generating capability are evident, reflecting that in a downward macro interest rate cycle, the profit space of the traditional stablecoin business model is being compressed.
Against the backdrop of reserve return rates fluctuating with interest rates, circulation scale has become a key indicator that Circle can actively pursue, but this indicator showed weakness in the third quarter. At the end of the third quarter, USDC circulation was $73.9 billion, flat year-over-year, with average circulation during the quarter even lower than the second quarter. Meanwhile, total stablecoin supply grew 8% year-over-year to approximately $274 billion, causing USDC's market share to fall to 27%, down 183 basis points year-over-year, a significantly larger decline than in the second quarter. Competitive pressure mainly came from Open USD, a revenue-sharing stablecoin announced by Open Standard at the end of June and officially launched at the end of September, with sponsors including Visa Inc. (V.US), Mastercard Inc. (MA.US), Stripe, and over 140 other institutions. At launch, the number of partners had expanded to over 200, raising market concerns about the erosion of USDC's distribution advantages. CEO Jeremy Allaire said on the conference call that Circle will continue to increase distribution investment and acknowledged the trade-off between partner incentives and circulation growth. The latest example is a five-year agreement signed with Binance, with Binance simultaneously investing $100 million in Circle. Fox-Geen said the renewal did not involve upfront fees. Despite Binance's recent security incident, Allaire noted that Binance had recorded approximately $2.5 billion in net inflows over the past 24 hours. Allaire attributed the flat circulation to the weak crypto market but emphasized that usage continues to grow: USDC, with a 27% supply share, carried 79% of stablecoin transaction volume (compared to 66% in the same period last year). On-chain transaction volume during the quarter reached $13.9 trillion, up 49% year-over-year, with minting and redemption totaling $208 billion, a quarterly record. Circle still maintains its multi-year target of 40% compound annual growth rate in circulation. Fox-Geen expects usage growth to drive circulation recovery in the long term, showing that the company is shifting from purely pursuing scale to pursuing activity and penetration.
In the same quarter when core business revenue declined, Circle underwent organizational restructuring, cutting approximately 5% of its workforce and recording $9.15 million in restructuring expenses, mainly cash expenditures such as severance pay. The company stated that the adjustment aims to align the organizational structure with its operating model and strategic priorities. According to Circle's annual report, as of the end of 2025, the company had approximately 1,100 employees. Based on this estimate, the layoffs involved about 55 positions. Notably, the layoffs did not lead to cost contraction. Fox-Geen said adjusted operating expenses grew year-over-year, mainly due to investments in Arc and AI-related infrastructure, as well as marketing spending including the Chelsea sponsorship. Third-quarter marketing expenses doubled year-over-year to $11.3 million, and IT infrastructure expenses grew about 90% year-over-year, showing that while reducing labor costs, the company significantly increased capital expenditure on technology infrastructure and brand influence. Additionally, Circle announced in September that CFO Jeremy Fox-Geen will step down by the end of the year, and the company is searching for a successor. This senior management change comes at a critical juncture in the company's strategic transformation and may signal further adjustments in future financial strategy and management priorities. Investors need to watch the new CFO's specific measures on cost control and revenue diversification after taking office.
On the new business front, Allaire called Arc Circle's biggest platform bet since USDC. The Arc mainnet launched on September 16, operated by 11 founding validator nodes, with over 100 institutions and applications connected, including financial institutions such as Bank of New York Mellon Corp. (BNY.US) and HSBC Holdings plc (HSBC.US) and Visa Inc. (V.US), as well as DeFi protocols like Aave and Uniswap. As of late October, on-chain assets were approximately $1.5 billion. During the third quarter, Circle completed the genesis minting of 10 billion ARC tokens, becoming the first publicly listed company to mint a network token for a new L1 blockchain, with Circle holding 25% of them. Arc plans to transition to PoS in 2027. Fox-Geen introduced three monetization methods: staking rewards are expected to be the most important recurring income, with Circle staking its ARC holdings after PoS and earning rewards as a validator; the company may also selectively sell ARC, with proceeds directly recognized as profit; ARC distributed to ecosystem participants will be recognized as revenue at market value, with an equal distribution cost recorded. He noted that under US accounting standards, the value of ARC held by Circle is only recognized upon sale or distribution and is not currently reflected in the financial statements. According to Circle's filing with the SEC, ARC held by second-round presale investors has a lock-up period of at least one year after Arc transitions to PoS, and cannot be freely transferred until at least 2028. If key milestones are not achieved, Circle may need to refund presale proceeds. Against the backdrop of the Binance hack, Allaire positioned security as Arc's selling point, arguing that Arc, operated by known institutions, better meets financial institutions' security requirements than permissionless public blockchains, attempting to build differentiated competitive advantages through institutional endorsement. The payment business CPN became another highlight, with its annualized payment volume based on the past 30 days reaching $41.3 billion at the end of the third quarter, up more than 15 times year-over-year and nearly 3 times compared to the end of June. As of October 30, this figure had exceeded $58 billion. In September, Circle announced the acquisition of Singapore-based cross-border payment platform Tazapay for $400 million in Class A shares, with the transaction expected to close in 2027. Tazapay's annualized payment volume exceeds $25 billion, with approximately 60% already involving stablecoins, which will significantly strengthen Circle's presence in the Asian market. Allaire stated that Asia is the most active region on Circle's platform, and the company is in contact with the Hong Kong government, expressing confidence in entering Hong Kong's offshore stablecoin regulatory framework. Fox-Geen revealed that the company has begun charging fees on some CPN traffic and expects CPN to contribute substantial revenue in 2027 after Tazapay is integrated. However, Allaire emphasized that Circle's goal is to lower the unit cost of payments and will not replicate the fee structure of the traditional payment industry, aiming to gain market share through scale effects and efficiency improvements rather than short-term high fees. This strategy helps build a long-term moat in fierce payment competition while also laying the foundation for future revenue diversification.
Looking ahead to the full year, Circle maintained all guidance unchanged, with full-year other income guidance of $310 million to $330 million and RLDC margin of 41.7% to 43.7%, both including recognized ARC presale revenue. Based on this, fourth-quarter other income excluding ARC would be approximately $30 million to $50 million, higher than $25 million in the third quarter. Fox-Geen expects it to recover as blockchain integrations increase. On the margin side, the RLDC margin for the first three quarters was approximately 45.5%. If the full year falls within the guidance range, based on a rough estimate of approximately $700 million in fourth-quarter revenue, the fourth-quarter RLDC margin would be approximately 29% to 38%, below the approximately 40% level of previous quarters. Fox-Geen confirmed the fourth-quarter margin decline when answering questions from Goldman Sachs Group Inc. (GS.US) analysts, stating that excluding ARC, the full-year RLDC margin will be close to the midpoint of the original guidance of 38% to 40%, with the decline mainly due to Binance's incentive arrangement being fully included for a quarter for the first time. The fourth quarter is also the first quarter in which both the Hyperliquid revenue-sharing arrangement and the renewed Binance partnership are fully included simultaneously. Fox-Geen called these two partnerships investments in distribution, aimed at driving USDC circulation and RLDC growth in the long term. On the expense side, full-year adjusted operating expense guidance was maintained at $570 million to $585 million, with fourth-quarter expenses expected to be approximately $149 million to $164 million, higher than $139 million in the third quarter. In response to a retail shareholder question about non-interest income contribution, Allaire responded that CPN monetization, Tazapay integration, and Arc's transition to PoS will jointly drive revenue diversification, marking Circle's transformation from a single reserve income model to a diversified Web3 infrastructure service provider. Although this process is accompanied by short-term margin fluctuations, in the long run it helps reduce dependence on macro interest rate policy and enhance risk resilience.
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