Circle (CRCL.US) relies on ARC pre-sale to boost performance; USDC circulation under pressure, 5% staff layoffs

According to Woofun AI, Circle (CRCL.US) released its Q3 2026 financial report before the U.S. stock market opened on November 4. Both revenue and earnings per share exceeded market expectations, marking the company's first improvement after two consecutive quarters of disappointing results.

Despite the impressive financial data, the stock price remained flat, ultimately closing at $76.12 with a total market capitalization close to $20 billion. Market sentiment quickly returned to rationality following a brief spike, reflecting investors' cautious attitude toward the quality of growth. This contrast stems from underlying concerns about core business fundamentals and the strong offsetting effect of one-time gains from new business, giving this earnings report a complex structural characteristic rather than a simple turnaround signal. A deeper contradiction lies in the fact that, although overall financial metrics have improved, the core driver of growth is not from traditional stablecoin reserve income, but instead relies on the still-maturing public chain token presale. The sustainability of this dependency path has become a focal point for the market.

At the same time, while expanding new business lines, the company also carried out staff reductions, further intensifying external speculation on its strategic priorities. This financial report, therefore, is not just a presentation of numbers but also a reflection of Circle’s strategic transformation amid intensifying stablecoin competition.

The main factor driving revenue beyond expectations is the massive one-off income generated from the presale of ARC, the native token of its public chain Arc. In Q3, Circle’s total revenue reached $865 million, up 17% year-on-year. Operating profit was $226 million, adjusted EBITDA was $317 million, and diluted earnings per share were $0.84, all far exceeding previous market expectations of $802 million in revenue and $0.40 EPS.

Woofun AI's compiled data shows that other income soared to $207 million, a year-on-year increase of 627%, with $182 million directly resulting from the ARC token presale. The ARC presale was completed in two rounds, raising approximately $242 million in total. CFO Jeremy Fox-Geen explained during the earnings call that, since revenue is recognized by performance milestones, about 75% of the presale income was recognized in Q3 as tokens were delivered and the Arc mainnet launched. This income carries no corresponding distribution costs, directly boosting profits, making post-distribution revenue (RLDC) $453 million, up 55% year-on-year. RLDC profit margin jumped from 41% in Q2 to 52% (including the ARC presale). Adjusted EBITDA equaled 70% of RLDC, or about 50% after excluding the ARC presale; when calculated against revenue, the two metrics are 36.6% and 15.6%, respectively. This gap reveals the fragility of the current profit structure, as high-profit margins are highly reliant on non-recurring one-time capital injections, rather than improvements in day-to-day operating efficiency.

However, stripping away the aura of the ARC presale, Circle’s core business revenue and profits actually showed a year-on-year decline. Based on financial data, excluding the presale, Q3 revenue was about $683 million, a decrease of approximately 8% year-on-year, and lower than the prior two quarters. Adjusted EBITDA was about $135 million, a year-on-year decline of about 21%. Pre-tax profit was only about $46 million, hitting a new low for the year.

This decline is primarily due to shrinking reserve income: Q3 reserve revenue was $658 million, down 8% year-on-year. The reserve yield dropped by 61 basis points year-on-year to 3.54%. Although average circulation increased by 8%, it failed to fully offset the negative impact of falling interest rates.

In addition, other non-presale business revenue was only $25 million, down 11% year-on-year. Fox-Geen attributed this to a reduction in realized blockchain integration projects during the quarter. Profit margins were also under pressure, with post-presale RLDC profit margin at 39.7%, down about 150 basis points from Q2; net reserve profit margin fell about 80 basis points sequentially to 37.8%. Fox-Geen noted this was the first full quarter with the Hyperliquid sharing arrangement in place. The offsetting factor was that USDC balances retained on the company’s own platform rose to $13.9 billion—a 36% year-on-year increase—accounting for 18.1% of circulation. Even including presale income, net profit rose only 5% year-on-year, mainly due to a high base from an approximately $61.3 million tax benefit in the same period last year. The weakening of the core business’s cash generation is evident, reflecting how the traditional stablecoin business model’s profitability space is being squeezed in a macro environment of falling interest rates.

With reserve yield fluctuating with interest rates, circulation scale becomes a key metric that Circle can actively pursue, but this metric performed poorly in Q3. At the end of Q3, USDC circulation was $73.9 billion, flat year-on-year, and the quarter’s average circulation was even lower than in Q2.

Meanwhile, total stablecoin supply rose 8% year-on-year to about $274 billion, leading to USDC’s market share dropping to 27%, a year-on-year decrease of 183 basis points, with a significantly larger drop than in Q2. Competitive pressure mostly stemmed from the yield-sharing stablecoin Open USD, announced by Open Standard at the end of June and officially launched at the end of September, initiated by more than 140 institutions including Visa (V.US), Mastercard (MA.US), Stripe, and expanded to over 200 partners upon launch. This has sparked concerns that USDC’s distribution advantage may be eroded. CEO Jeremy Allaire stated during the call that Circle will continue to increase distribution investment and acknowledged that there is a trade-off between partner incentives and circulation growth. The latest example is a five-year agreement signed with Binance, with Binance also investing $100 million in Circle, and Fox-Geen stated that there are no upfront fees for this renewal.

Although Binance recently faced a security incident, Allaire pointed out that Binance has seen about $2.5 billion net inflow in the past 24 hours. Allaire attributed the flat circulation to weakness in the crypto market but emphasized that usage is still growing: USDC, with 27% supply share, supported 79% of stablecoin transaction volume (up from 66% year-on-year). On-chain transaction volume for the quarter reached $13.9 trillion, a 49% year-on-year increase, with minting and redemption totaling $208 billion—a quarterly record. Circle continues to target a 40% annual compound growth rate for circulation over multiple years, and Fox-Geen expects usage growth to drive circulation recovery over the long term, highlighting the company’s shift from purely pursuing scale to emphasizing activity and penetration rates.

In the same quarter as its core business revenue declined, Circle underwent an organizational restructure, laying off about 5% of staff and recording $9.15 million in restructuring expenses, mainly for severance and related cash expenditures. According to Circle’s annual report, as of the end of 2025, the company had about 1,100 employees, so this layoff involves about 55 positions.

Notably, the layoffs did not reduce expenses. Fox-Geen noted that, post-adjustment, operating expense actually grew year-on-year, mainly due to investments in Arc and AI-related infrastructure, as well as marketing spending, including the Chelsea sponsorship. Q3 marketing expenses doubled year-on-year to $11.3 million, while IT infrastructure spending grew by about 90%, demonstrating that while reducing labor costs, the company significantly increased capital expenditure on technical infrastructure and brand influence.

In addition, 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 top management change at a critical point of strategic transformation could signal further adjustments in future financial strategy and management focus. Investors should pay attention to the new CFO’s specific actions on cost control and revenue diversification after taking office.

In terms of new business, Allaire stated Arc is Circle’s largest platform bet since USDC. Arc mainnet went live on September 16, operated by 11 founding validator nodes, with over 100 institutions and applications integrated, including BNY (BNY.US), HSBC (HSBC.US), Visa, as well as DeFi protocols like Aave and Uniswap. As of late October, on-chain assets totaled about $1.5 billion. During Q3, Circle completed the genesis minting of 10 billion ARC tokens, becoming the first listed company to mint network tokens for a new L1 blockchain, retaining 25% of that supply.

Arc plans to transition to PoS by 2027, and Fox-Geen outlined three monetization methods: staking rewards, expected to be the main recurring income as Circle will stake its ARC holdings and act as a validator to earn rewards post-PoS; opportunistic ARC sales, with proceeds directly recognized as profit; and ARC distributed to ecosystem participants will be recognized as income at market value, with an equal amount booked as distribution cost. He emphasized that under U.S. accounting rules, the value of Circle’s ARC holdings will only be recognized when sold or distributed, and is not currently reflected on the balance sheet.

According to Circle’s SEC filings, the second round of presale investors have their ARC locked for at least one year after Arc transitions to PoS, with the earliest free transfer in 2028. If key milestones are not met, Circle may have to return presale funds. Against the backdrop of the Binance theft, Allaire is promoting security as Arc’s selling point, contending that Arc — run by known institutions — can better meet the security requirements of financial institutions than permissionless public chains, trying to establish a differentiated competitive advantage through institutional endorsement.

The CPN payment business became another highlight, with its 30-day annualized payment volume reaching $41.3 billion at Q3’s end—a more than 15-fold year-on-year increase and nearly 3x growth from the end of June. As of October 30, the figure exceeded $58 billion. In September, Circle announced the acquisition of Singaporean cross-border payment platform Tazapay with $400 million in Series A shares, with the transaction expected to complete in 2027. Tazapay’s annualized payment volume exceeds $25 billion, with about 60% already involving stablecoins, substantially strengthening Circle’s presence in the Asian markets. Allaire noted that Asia is the most active region for the Circle platform, and the company is in contact with the Hong Kong government and is confident in joining Hong Kong’s offshore stablecoin regulatory framework. Fox-Geen revealed the company has begun charging fees for some CPN flows, and expects that after Tazapay's integration, CPN will contribute considerable revenue in 2027.

However, Allaire emphasized that Circle’s objective is to drive down unit costs of payments and not replicate traditional payment industry fee structures, seeking to gain market share through scale and efficiency rather than short-term high fees. This strategy helps build a long-term moat amid intense payment competition, while laying the foundation for future revenue diversification.

Looking ahead, Circle maintains its full-year guidance unchanged; full-year other income guidance is $310–330 million, RLDC profit margin at 41.7%–43.7%, both including recognized ARC presale income. Based on this, Q4 non-ARC other income is expected at $30–50 million, higher than Q3’s $25 million, and Fox-Geen expects it to rebound as blockchain integration projects increase. For profit margin, RLDC margin for the first three quarters was about 45.5%. If the full year falls within the guidance range, and with Q4 revenue roughly estimated at $700 million, the Q4 RLDC margin will be about 29% to 38%, lower than the roughly 40% level of previous quarters.

Fox-Geen, in response to questions from Goldman Sachs (GS.US) analysts, confirmed the Q4 margin decline, stating that excluding ARC, full-year RLDC profit margin will likely be close to the midpoint of the original 38%–40% guidance, with the decline primarily due to Binance’s incentive arrangement being fully recognized for the first time in a quarter. Q4 will also be the first quarter to fully recognize the Hyperliquid sharing arrangement and the renewed Binance partnership. Fox-Geen described both collaborations as distribution investments aimed at driving long-term growth in USDC circulation and RLDC. On the expense side, the full-year adjusted operating expense guidance remains at $570–585 million, with Q4 expected at $149–164 million, higher than Q3’s $139 million.

Responding to retail shareholder inquiries about non-interest income contribution, Allaire said that the monetization of CPN, the integration of Tazapay, and Arc’s shift to PoS will collectively promote revenue diversification, signaling Circle’s transformation from a single reserve-income model to a diversified Web3 infrastructure provider. Although this process brings short-term profit margin volatility, it will reduce reliance on macro interest rate policy and enhance risk resilience in the long run.