After the stock price soared 10 times, the highlights and hidden worries in Circle's first financial report

From a single stablecoin issuer to a global digital financial infrastructure provider, this transformation path is full of variables.

Authors: San, David, Shenchao

Just last night, Circle, the issuer of the stablecoin USDC, released its Q2 financial results.

As its first earnings report after the IPO, the data provides the market with an important basis for evaluating the true value of this "first stablecoin stock". By in-depth analysis of key financial indicators, we can more clearly see Circle's growth momentum and potential challenges.

USDC expands strongly, but the revenue structure is single

From the information disclosed in the financial report, the following aspects of data need to be focused on.

Core business indicators: USDC expands strongly

First of all, the most notable in the financial report is the double growth of USDC's circulation and market share.

By the end of Q2, the circulation of USDC reached 61.3 billion US dollars, a year-on-year surge of 90%, and an increase of 49% year-to-date. As of August 10, this figure has further climbed to 65.2 billion US dollars, which shows its continuous growth momentum. In terms of stablecoin market share, USDC firmly holds about 28% of the market share, consolidating its position as the second largest stablecoin.

Secondly, the transaction activity of USDC has seen explosive growth.

The on-chain transaction volume of USDC reached 5.9 trillion US dollars, a year-on-year surge of 540%. The explosive growth of this indicator not only reflects the rapid expansion of USDC's use scenarios, but also reveals an important trend that the entire stablecoin ecosystem is transforming from a simple value storage to a payment and settlement tool.

Financial performance: strong revenue growth but structural imbalance

The financial report shows that the total revenue in Q2 reached 658 million US dollars, a year-on-year increase of 53%, of which:

Reserve interest income: 634 million US dollars (accounting for 96.4%), a year-on-year increase of 50%

Subscription and service income: 24 million US dollars (accounting for 3.6%), a year-on-year increase of 252%

Under this revenue structure, we can still see Circle's dependence on reserve interest income. Although the subscription service income has a high growth rate of 252%, its absolute value is still small.

Circle is highly dependent on the reserve income brought by the Federal Reserve's high interest rate environment, and the dependence on a single source of income constitutes its biggest operational risk. Once the Federal Reserve enters a rate cut cycle, Circle's profitability will face a severe test.

In addition, a point that is easily overlooked is that the high IPO fees have covered up the actual operating performance.

If we only look at the overall situation, Circle's net loss in Q2 reached 482 million US dollars. Although this figure is large in absolute value, if we strip it out:

Total non-cash expenses related to IPO: 591 million US dollars

Stock-based compensation expenses: 424 million US dollars

Convertible bond fair value adjustment: 167 million US dollars

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was 126 million US dollars, a year-on-year increase of 52%.

In other words, after excluding IPO-related expenses, Circle's actual operating performance remains stable. The adjusted profit indicators show that the company's core business maintains healthy growth, which also explains why the stock price rose instead of falling after the financial report was released.

Cash-out pressure under high valuation

On the same day as the financial report was released, Circle announced a secondary offering of 10 million shares.

Based on the closing price of 163.21 US dollars on that day, this offering will raise 1.63 billion US dollars. Compared with the IPO price of 31 US dollars, the return rate of early investors exceeds 426%, and the cash-out amount exceeds 1 billion US dollars.

Among them, Circle's CEO Allaire has sold 357,800 shares, but still maintains 23.9% of the voting rights.

Comprehensive analysis of the above financial report data shows that the network effect of USDC is accelerating. But at the same time, Circle's challenges are also significant:

Over-reliance on the interest rate environment in the revenue structure, the continuous emergence of competitors (such as PayPal's PYUSD), and the uncertainty of regulatory policies are all issues that must be faced.

The Q2 financial report provides a basis for evaluating whether Circle is overvalued, but the final judgment still needs to observe the performance in the next few quarters, especially Circle's ability to respond when the interest rate environment changes.

Strategic transformation: Circle's road to diversified breakthrough

The strategic initiatives disclosed by Circle in the Q2 financial report and the subsequent conference call also clearly outline the company's transformation path from a stablecoin issuer to a comprehensive financial infrastructure provider.

This may also be a response to the problem of a single revenue structure disclosed in the financial report.

Circle announced that it will launch its self-developed blockchain named Arc in the second half of 2025, and this news quickly became the focus of market discussions. According to official disclosure, Arc is an open public chain designed specifically for stablecoin finance, with USDC as the native Gas fee token, focusing on application scenarios such as payments and foreign exchange.

Interestingly, the stablecoin giants seem to have chosen the same path不约而同.

Tether, the issuer of USDT, is developing Stable; payment giant Stripe has joined hands with top VC Paradigm to launch Tempo. The competition around stablecoin payment chains has already started, and just today, OKX announced that it will upgrade X Layer and also enter the payment chain track.

In this competition, Circle's advantages are obvious: compared with Tether, which is facing regulatory pressure, Circle has unique compliance advantages, and the "GENIUS Act" promoted by the Trump administration has cleared policy obstacles for it; compared with Stripe, which has rich payment experience, Circle has the network effect brought by USDC's 24% market share and the trust foundation of more than 1,800 institutional clients.

The deeper business logic is that the launch of Arc directly responds to Circle's biggest weakness - over-reliance on interest income.

Currently, 96% of Circle's revenue comes from the treasury bond interest of USDC reserves, and this reliance will become a fatal weakness when the rate cut cycle comes. By controlling the blockchain infrastructure, Circle can not only obtain on-chain transaction fees, but also open up new revenue models such as staking, while reducing reliance on third-party blockchains and reducing the increasing distribution costs.

In addition to launching the self-developed public chain Arc, Circle also mentioned in the Q2 financial report and conference call that it will deepen cooperation with enterprises such as Binance, FIS, and Corpay.

This includes promoting the adoption of Circle's wallet technology with Binance and the use of the tokenized market fund USYC on Binance's institutional trading products as income and over-the-counter collateral; combining global foreign exchange with USDC with Corpay to provide 7x24 settlement services for enterprises around the world; cooperating with FIS to enable US financial institutions to provide 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 faster and lower-cost compliant digital dollar transactions.

In addition to the above three companies, Circle also mentioned in the financial report the cooperation direction with mainstream exchange OKX and financial technology company Fiserv.

Overall, Circle's Q2 financial report shows us a portrait of a company in a critical transformation period. It is a leader in the stablecoin track, enjoying the growth dividends brought by the USDC network effect; it is also a fintech company facing structural challenges, which must reshape its business model before the interest rate downward cycle comes.

As a star company in the stock market this year, Circle is indeed worthy of the name. But under the aura of the first stablecoin stock, investors need to clearly recognize the challenges it faces. From a single stablecoin issuer to a global digital financial infrastructure provider, this transformation path is full of variables. Whether Circle can continue the myth of a 10-fold surge in stock price after the IPO, let's wait and see.

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