Circle Q2 Earnings Preview: What USDC Growth Means for the Stablecoin Market

 

When Circle reports second quarter results before the open on August 5, the question is no longer whether it is growing but whether growth has peaked. Consensus calls for roughly $720 million in revenue and earnings of about $0.165 per share, but the more revealing number is supply. USDC circulation ended the second quarter near $73 billion, down from $77 billion at the end of the first quarter, a sequential decline. Circle's stock closed at $61.36 on July 29, far below earlier highs, with Bernstein cutting its price target 25% from $190 to $140 ahead of the print and Clear Street lowering its target from $157 to $128. The harder backdrop is competitive. In July, a consortium of more than 140 companies including Visa, Mastercard, Coinbase and BlackRock launched Open USD with a revenue-sharing model that directly attacks the reserve income economics Circle depends on. This report is therefore not just about one company's quarter. It is the first real test of whether the entire stablecoin business model is being repriced.

 

 

 

Circle reports second quarter 2026 results on Wednesday, August 5, with a live webcast at 8 a.m. ET, and analyst consensus calls for revenue near $720.44 million and EPS of about $0.165.

 

USDC supply ended the second quarter at roughly $73 billion, down from $77 billion at the end of Q1, though average supply rose modestly from about $75 billion to $76 billion, a divergence between period-end and average balances.

 

First quarter results showed USDC circulation of $77 billion up 28% year over year and on-chain transaction volume of $21.5 trillion up 263%, with total revenue of $694 million up 20% but net income of $55 million down 15%.

 

More than 95% of Circle's revenue comes from interest on reserve assets, with the model reducing to USDC circulation multiplied by short-term Treasury yields, leaving it acutely exposed to both supply and rates.

 

The competitive landscape shifted structurally when Open USD launched with fee-free minting and redemption plus reserve revenue sharing, a direct inversion of Circle's profit logic, and Circle's stock fell about 17.55% on the day of that announcement.

 

 

Circle's business model is close to singular in its simplicity. Per insights4vc's model breakdown, reserve asset interest income roughly equals USDC circulation multiplied by short-term US Treasury yields, and that line accounts for more than 95% of total revenue. Any analysis of Circle therefore collapses into two variables, supply and rates, and both moved unhelpfully in the second quarter.

 

On rates, the Fed held at 3.50% to 3.75% on July 29 in a 9 to 3 vote, effectively removing cuts from the 2026 picture, which near term actually supports reserve income. The pressure comes from supply. Per TheStreet via AOL, USDC supply ended the second quarter at approximately $73 billion, down from $77 billion in Q1, prompting Bernstein to cut its price target 25% from $190 to $140 ahead of earnings.

 

 

Looking back at Circle's first quarter release, the data showed clear divergence. USDC circulation of $77 billion grew 28% year over year, on-chain transaction volume of $21.5 trillion grew 263%, total revenue of $694 million grew 20% and adjusted EBITDA of $151 million grew 24%. Those are strong figures. Net income, however, came in at just $55 million, down 15% year over year.

 

The margin damage sat in costs. Reserve income of $653 million rose 17%, driven primarily by 39% growth in average USDC circulation but partly offset by a 66 basis point decline in the reserve return rate. Meanwhile total distribution, transaction and other costs rose 17% to $407 million, and adjusted operating expenses of $136 million jumped 32%. On the call, management noted that circulation was flattish sequentially. Revenue growing while profit shrinks is precisely the trend the second quarter must confirm or refute.

 

 

 

The difference between $73 billion at quarter end and roughly $76 billion in average supply is not a technicality but a directional indicator. Reserve income is driven by average balances, so second quarter revenue may still look respectable, while the lower ending balance means the third quarter starts from a weaker base. If the report confirms this divergence, second half expectations will have to come down.

 

 

This ratio was 41.4% in the first quarter, up 1.5 percentage points year over year, against full year 2026 guidance of 38% to 40%. It directly reflects Circle's bargaining power with distribution partners, especially its revenue sharing arrangement with Coinbase. With Open USD entering the market pitching revenue sharing, whether Circle is forced to concede more economics to channel partners will show up here first.

 

 

Circle guided to other revenue of $150 million to $170 million for 2026, with first quarter other revenue of $42 million, up $21 million year over year. This line represents Circle's effort to escape rate dependence, spanning subscription services, the Circle Payments Network and the enterprise blockchain Arc. Small relative to reserve income, its growth rate nonetheless determines whether Circle can evolve from a function of interest rates into a genuine payments infrastructure company.

 

 

What is really repricing Circle is not any single quarter but a competitor rewriting the rules. In July, Open USD launched, operated by an independent entity called Open Standard and backed by more than 140 companies including Visa, Mastercard, Coinbase, BlackRock, Stripe and Standard Chartered. Its core design lets businesses mint and redeem with no fees or volume limits while distributing most reserve income to participating partners after a management fee.

 

This directly inverts the issuer keeps the float model that built both Tether and Circle. On the day of the announcement, Circle's stock fell about 17.55%, with markets pricing the threat in real capital. Notably, Coinbase is simultaneously Circle's most important distribution partner and a participant in Open USD, a dual role that itself illustrates the rising bargaining power of distribution channels.

 

For traders, intensifying stablecoin competition shows up most directly in the choice of quote assets and where liquidity sits. Depth, fee structures and use cases across different stablecoins are diverging, and watching volume and liquidity across major stablecoin pairs on platforms such as MEXC offers a practical window into how this competition is actually progressing.

 

 

 

Circle's position can be summarized as near term results still resilient while long term assumptions get revised. Bernstein maintained an Outperform rating but cut its 2028 USDC supply estimate sharply from roughly $290 billion to about $170 billion, while lowering USDC reserve income estimates for 2026, 2027 and 2028 by around 17%, 18% and 13% respectively, adjusting for crypto market weakness. The firm still maintains a 32% compound annual growth rate in its ten year USDC model, expecting growth to come from payments, financial services, real-world asset tokenization and a role in the agentic economy.

 

For investors, this means the framework for evaluating Circle needs adjusting. The old question was how fast USDC grows. The new question is the quality of that growth, meaning how much comes from genuine payment and settlement demand versus collateral for crypto trading. The former is sticky and less cyclical while the latter swings violently with crypto cycles. The sequential decline in period-end supply exposes precisely the fragility of that second category.

 

 

 

Beyond the numbers, management's commentary on three topics matters more. First, a direct response to consortium stablecoin competition such as Open USD and the strategy against it. Second, whether distribution economics with partners like Coinbase face renegotiation. Third, commercialization progress at Circle National Trust, the federally chartered trust bank that received final approval from the Office of the Comptroller of the Currency, and at the enterprise blockchain Arc, both key sources of non-reserve revenue. Circle also recently acquired IBM's blockchain patent portfolio, adding more than 680 patent families, and the strategic intent behind that deserves explanation.

 

 

Rate risk comes first, since more than 95% of revenue depends on reserve interest, and once the Fed enters a cutting cycle, revenue can compress even if supply grows. Competitive risk follows, as broad acceptance of Open USD's revenue sharing model would systematically squeeze Circle's net interest margin. Cycle risk is equally real, since a meaningful share of USDC demand comes from crypto trading and market weakness transmits straight into circulation. Finally, valuation risk, since the stock has already fallen far from its highs with multiple firms cutting targets, and results below already-lowered expectations leave further downside.

 

 

What genuinely matters about this report is not whether Circle hits $720 million in revenue but that it will be the first financial verification of a bigger proposition, whether stablecoin issuance is a sustainably high margin business. Circle's model is essentially a quasi money market fund that cannot pay interest to most holders yet collects all the reserve interest. That model is lucrative without competition. Once Open USD distributes reserve income to ecosystem participants, Circle's moat degrades from technology and compliance to channels and inertia. The sequential decline in period-end supply may simply be the first data point in that evolution.

 

Two misreadings look likely. The first is equating the sequential drop in USDC circulation with USDC losing. Average quarterly supply actually edged higher, first quarter on-chain transaction volume surged 263% year over year, and management said USDC took a majority of on-chain utility share. Usage intensity and outstanding balance are different dimensions, and watching only the balance misses the structural shift. The second is treating the Open USD threat as Circle's immediate collapse. Open USD is not yet live in operation, the efficiency of consortium governance and real adoption are untested, and a list of 140 partners is not 140 partners actually using it.

 

What investors should watch next is not the revenue figure but the direction of three ratios, revenue less distribution cost margin, non-reserve revenue as a share of total revenue, and genuine on-chain payment volume as a share of total transaction volume. Together these three determine whether Circle is a company held hostage by interest rates and crypto cycles or a payments infrastructure business taking shape.

 

The lesson for crypto and fintech more broadly is clear. The stablecoin industry is moving from a first phase where issuance alone was profitable into a second phase where sharing economics is the price of distribution. This closely mirrors how payments evolved from card network dominance toward multi-party revenue splits. The ultimate beneficiaries are end users and businesses, while for investors, valuing a stablecoin company will increasingly depend on how much economics it can retain in this redistribution rather than how much it issues.

 

 

 

Circle reports second quarter 2026 results on Wednesday, August 5, with a live video webcast at 8 a.m. ET to discuss financial results and business highlights. The webcast will be available through Circle's official YouTube and X channels, with materials, a replay and a transcript at circle.com/investors. Management will also answer selected shareholder questions submitted in advance through the Say Technologies platform, which opened July 29 and closes August 4.

 

 

Analyst consensus calls for revenue of roughly $720.44 million and EPS of about $0.165. For comparison, first quarter total revenue and reserve income was $694 million, up 20% year over year. The focus is less on whether revenue lands on target and more on the USDC circulation trend, margin direction and management's commentary on competition. Multiple firms cut targets ahead of the print, with Bernstein moving from $190 to $140 and Clear Street from $157 to $128.

 

 

According to analyst estimates, USDC supply ended the second quarter near $73 billion, down from $77 billion at the end of Q1, though average quarterly supply edged up from about $75 billion to $76 billion. The decline is tied largely to broad crypto market weakness, since a meaningful share of USDC demand comes from collateral and settlement in crypto trading. The distinction between period-end and average balances matters, as reserve income tracks average balances, so a lower ending balance mainly affects the next quarter's starting point.

 

 

More than 95% of Circle's revenue comes from interest on reserve assets, with the formula reducing to USDC circulation multiplied by short-term US Treasury yields. Holders generally earn no interest on USDC, though Circle has shared some yield with certain holders to drive adoption, while Circle invests the equivalent dollars in cash and short-term Treasuries and collects the interest. That makes profitability acutely sensitive to two variables, the scale of USDC circulation and the Fed's rate level, with either falling hitting revenue directly.

 

 

The threat is to the business model rather than the technology. Open USD is backed by more than 140 companies including Visa, Mastercard, Coinbase and BlackRock, and its core design lets businesses mint and redeem with no fees while returning most reserve income to participating partners after a management fee, directly inverting Circle's issuer keeps the reserves profit logic. Circle's stock fell about 17.55% on the announcement day. That said, Open USD is not yet operationally live, and governance efficiency and real adoption remain untested.

 

 

Most likely toward economic redistribution and layered coexistence. On one side, consortium stablecoins like Open USD compete for enterprise clients by sharing reserve income, compressing single issuers' net interest margins. On the other, Swift's tokenized deposit ledger with 17 banks represents a separate banking-system path. On regulation, the US GENIUS Act, EU MiCA and the UK's final framework have made compliance a baseline requirement. Future competition will play out across compliance, settlement efficiency and ecosystem incentives, with the sector shifting from high margin toward utility-like economics.

 

 

This content is provided for informational purposes only and does not constitute investment advice, financial advice, legal advice, tax advice or a recommendation to buy or sell any asset. Prices of crypto assets, equities and other financial instruments are highly volatile and may rise or fall sharply within short periods. Past performance is not indicative of future results. The earnings figures discussed here are pre-release market expectations and historical data, actual results may differ materially from expectations, and Circle's officially published financial reports should prevail. The data and information cited are drawn from public sources and, while reviewed with care, are not guaranteed to be complete or current. Users should conduct their own research, assess their individual risk tolerance and consult licensed professionals where appropriate before making any investment decision. The MEXC Crypto Pulse Team accepts no liability for any direct or indirect losses arising from the use of or reliance on this content.

 

 

The MEXC Crypto Pulse Team focuses on crypto market trends, on-chain narratives, fintech developments, and digital asset ecosystem research. The team tracks public market data, company announcements, third-party market platforms, and industry news sources to help users better understand market structure, risks, and opportunities.

 

 

 

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