Circle, the world’s second biggest issuer of stablecoins, saw its shares dive more than 8% after its first quarterly earnings announcement as a public company. The stock dip came even though the circulation of Circle’s flagship USDC coin has more than doubled, while revenue grew 66% from last year.
Despite better than expected revenue and earnings, Circle investors appeared to be spooked by declining returns on the reserves that back its stablecoin, and provide the vast majority of the company’s income. In its Q3 earnings, Circle revealed that its reserve rate of return is now 4.2%. Meanwhile, operating expenses jumped 70% since last year and are expected to continue to rise.
“Stock is likely to decline as FY25 guide implies lower 4Q ‘other’ revenue and higher adjusted operating expenses,” said Dan Dolev, a senior analyst at Mizuho, in a note.
Circle debuted on the stock market in June to roaring success. Its stock rallied 250% in its first two days, the biggest two-day ‘pop’ since 1980. The company hit an all-time high of almost $300 a few weeks after it launched and is down roughly 70% since then to its current valuation of just over $87.
This year has brought stablecoins to the mainstream, thanks in large part to the Genius Act, a piece of legislation signed by President Donald Trump in July. The law created a regulatory framework for stablecoins in the United States, leading both Wall Street and Silicon Valley to increase adoption of tokens, which are pegged 1:1 to the U.S. dollar.
Circle has ridden the recent tailwind of eased regulation, but the company has long been prominent in crypto circles. CEO Jeremy Allaire founded the company in 2013 and endured the crypto winter in 2022-2023. In early 2024, the company began the process to go public.
On Wednesday, the stablecoin giant said it was exploring the launch of a native token on its recently announced blockchain network called Arc. The company said that over 100 companies have joined the launch.
Though its stock tumbled on Wednesday, some analysts expressed optimism in Circle’s long-term outlook and said that its growth would outpace lower reserve rates.
“We see USDC emerging as the commercial standard over the next several years,” wrote Andrew Jeffrey, an analyst at William Blair, in a note. “Financial performance can outrun lower rates as USDC market cap grows.”
