USDC is growing. How much revenue can Circle retain?

Circle will release its financial report on November 4th. In the last quarter, distribution and transaction costs accounted for nearly 59% of its revenue and reserve income. However, the documents show that the amount retained by the company is still increasing, and new payment and blockchain products have brought different sources of revenue and expenditure.

• Circle has scheduled to release its third-quarter financial results on November 4th, and the financial report conference call will be held at 8 a.m. Eastern Time.
• Revenue and reserve income for the second quarter amounted to $701.315 million, while distribution, transaction, and other costs totaled $412.470 million.
• The difference between the two is 288.845 million US dollars, and the retained income rate before deducting operating expenses is 41.2%.
• The distribution costs related to Coinbase amounted to 324.6 million US dollars over the three months ending June 30.
• According to the interest rate model estimation of Circle, if the interest rate changes by 1 percentage point, the annual reserve income is expected to change by $737 million.

Circle retained $288.845 million in revenue and reserve income during the second quarter. Before deducting operating expenses, distribution, transaction, and other costs accounted for nearly 59% of the total. The company has scheduled the release of its third-quarter results for November 4th, and management will discuss the results at 8 a.m. on Wednesday Eastern Time. Previous financial reports provided a comparison showing how trading volume, interest rates, and payments made to partners affected the company's final remaining revenue.

According to Circle, the average circulation of USDC in the second quarter increased by about 25% year-on-year, while reserve income grew by 5.3%. The decline in the return on assets that support such stablecoins partially offset the benefits brought about by the expansion of the average balance.

USDC The distribution costs are quite substantial, but they did not consume all of the additional revenue. After deducting distribution, transaction, and other costs, the remaining revenue increased by about 15%, which is faster than the overall revenue and reserve revenue growth rate of 6.6%.

Circle Separately listed revenue does not equate to profit. Employee salaries, technical expenses, legal costs, and other operating expenses still need to be paid from this amount, and then the impact of other revenues and taxes must also be taken into consideration.

The income from Circle depends on the balance, interest rate, and distribution terms.

The company earns interest and dividends from the assets corresponding to stablecoins. In its Q2 10-Q report, Circle stated that reserve income is recognized before distribution costs; therefore, the income reported does not represent the actual amount retained by the company after payments to partners.

The document shows that over the three months ending June 30, reserve income amounted to 667.733 million US dollars, which is higher than the 634.274 million US dollars from the same period last year. Other income amounted to 33.582 million US dollars, bringing the total income and reserve income to 701.315 million US dollars.

In the second quarter, the average circulating volume of USDC was 76.524 billion US dollars, which is higher than the 61.039 billion US dollars in the comparable period. The balance at the end of the quarter was lower than this average, at 73.269 billion US dollars.

Average circulation measures the daily average balance that supports reserve income during the reporting period. The circulation at the end of each quarter records the amount that was still in circulation on the last day; therefore, the rate of change between the two may differ.

The reserve yield rate published by Circle is 3.5% after rounding, which is lower than the 4.1% from a year ago. In the performance announcement, the company described this change as a decrease of 66 basis points using more precise underlying data.

The company stated that the yield on its reserve assets was close to the guaranteed overnight financing rate at that time. Therefore, when the yield declines, the additional income generated by the expansion of the USDC balance may not be as substantial as it would be if only the increase in circulation volume were considered.

Reserve income is not a fee charged every time someone makes a transfer of USDC. Other incomes of Circle include transactions and subscription services, but the earnings from reserve assets depend on their balance and return rate.

The balance sheet will present the resources held by stablecoin holders separately from the company's own cash on hand. As of June 30, Circle disclosed approximately $73.2 billion in cash and cash equivalents that are specifically set aside for stablecoin holders.

The file explanation states that this balance sheet item is different from the USDC liquidity. It includes reserves of EURC and access-denied tokens, does not include resources that support the company's own holding of USDC, and is affected by the timing of minting, redemption, and settlement.

According to the document, Circle Reserve Fund held a segregated balance of $61.9 billion on June 30th. Circle calculates its holding share based on the net asset value of the fund and includes the announced dividend income in the reserve income.

Reserve capital is held to fulfill obligations to token holders, and it is not equivalent to the income generated by these assets or cash, nor is it equivalent to the cash remaining after the company pays its expenses.

Company documents warn that the relationship between interest rates and the demand for USDC is not certain. The documents do not assume that lower yields will automatically lead to a sufficient increase in circulation to offset it.

Circle retains 41.2 cents for every $1 of revenue before deducting operating costs.

With total revenue and reserve income of $701.315 million, minus $412.470 million in distribution, transaction, and other costs for the second quarter, there is a remaining amount of $288.845 million. Dividing this difference by $701.315 million yields a retained income ratio of approximately 41.2%.

Circle refers to this indicator as "revenue minus distribution costs," which is RLDC, but in reality, its definition also deducts transactional and other costs. This name should not be interpreted as referring only to the calculation of subtracting distribution payments.

Using the same method to calculate for the second quarter of 2025, the revenue and reserve income amounted to 658.078 million US dollars, with related costs at 406.942 million US dollars, leaving a surplus of 251.136 million US dollars, which is approximately 38.2% of the total amount.

Therefore, the retained amount increased by $37.709 million year-on-year, representing a growth of 15.0%. Based on the unrounded data from the document, the retention rate increased by about 3 percentage points.

This improvement indicates that we cannot simply describe the entire distribution business in the second quarter as a deterioration in profit margins. Circle paid a total amount that was higher, but the cost category only increased by 1.4%, while revenue and reserve income increased by 6.6%.

Operating expenses amounted to $254.486 million, reducing the retained amount to an operating profit of $34.359 million. The net profit from continuing operations, after including other income and taxes, was $48.214 million.

Operating profit and net profit include costs that are not taken into account in the calculation of RLDC. The fact that a company retains more revenue after distribution does not mean that its expenditures on product development, hiring employees, or meeting regulatory requirements will decrease.

The report in November will provide a set of new actual data. The comparison for the second quarter is merely a benchmark and does not imply that profit margins will improve again.

Coinbase never generates income solely from exchange balances.

The updated agreements between Circle and Coinbase continue the business relationship established by both parties in August 2023. Management stated in the previous financial reporting cycle that this arrangement has been renewed under the original terms until 2029.

The description in the file indicates that Coinbase is entitled to a distribution related to USDC held on its platform, and this distribution is calculated after the portion reserved by the issuer of Circle. Coinbase will also receive a portion of the income linked to ecosystem growth after payments are made to approved third-party participants.

Therefore, if only the exchange balance visible with Coinbase is multiplied by the reserve yield, a part of the content stipulated in the contract will be overlooked, and it will also be impossible to restore the distribution fees confirmed with Circle.

The distribution costs related to Coinbase recorded in the second quarter amounted to 324.6 million US dollars, which is lower than the 332.3 million US dollars in the same quarter of 2025. Despite an increase in total distribution, transaction, and other costs for Circle, this amount still decreased by 7.7 million US dollars, or approximately 2.3%.

The costs related to Coinbase account for approximately 78.7% of this category of merger costs. This calculation is derived by dividing $324.6 million by $412.470 million, and it does not imply that every remaining dollar was paid to another distributor.

Transaction costs include blockchain fees, while other costs cover expenditures related to products such as USYC. The document presents these items together with the payments made to promote the distribution of USDC.

Circle indicates that adding distributors may increase future costs, and the business terms between different partners may vary. The company expects that distribution expenses will be affected by both reserve income and the balance of USDC.

The company cannot control the behavior of every exchange or wallet that distributes USDC. Partners may change the prominence, incentive measures, or availability of competitive stablecoins in their own products.

Where USDC is placed will affect the distribution of reserve income.

The definition of “platform” by Circle includes Circle Mint accounts, USDC held by companies, as well as non-hosted wallets provided through its own services. It is not limited to a single exchange-style wallet or a set of company addresses.

The document states that on the Circle platform, the average daily proportion of USDC is used to calculate its share of reserve income under the Coinbase protocol. The company discloses the average proportion on a daily weighted basis separately, rather than the dollar balance at the end of each quarter.

As of June 30, the Circle platform held $12.442 billion of USDC, which is approximately 17% of the circulating volume of $73.269 billion. During that quarter, the platform's daily weighted share was 19.5%.

17% and 19.5% are not two competing estimates of the same observation value. The former is calculated using the balance at the end of the quarter, while the latter measures the structure for the entire period using the weighting method described in the document.

Compared to the second quarter of 2025, the daily weighted proportion has increased from 7.4% to 19.5%. Circle considers the balance structure as a factor in the economic efficiency of distribution arrangements.

According to previous reports by crypto.news, management stated that Coinbase held 30% of the USDC circulation at the end of the second quarter. This figure represents the balance on the last day, rather than a weighted average used for economic calculations during that period.

The company stated that growth through channels that do not require third-party incentive payments can reduce distribution costs. Even if the number of USDC in circulation increases by the same amount, growth through partners with commercial incentives may lead to different outcomes.

Public data does not disclose the precise retention rates for each individual customer or business partner. The consolidated financial results aggregate these arrangements over the entire quarter.

Changes in interest rates will affect both the payments of partners and reserve income.

The interest rate sensitivity table for Circle is based on a average reserve yield of 3.49% in June, and simulates changes of 1 percentage point. The model estimates that annual reserve income will change by $737 million, while related distribution and transaction costs will change by $360 million.

Subtract the latter from the former to get $377 million before any other effects. If interest rates rise, this amount will increase according to the model; if interest rates fall, it will decrease.

This table assumes that the USDC volume will remain at the level of June 30 for the next 12 months, with the reserve configuration remaining unchanged. It also assumes that changes in interest rates occur at the beginning of this period and are evenly applied to the reserve assets.

This is not a prediction regarding the Federal Reserve's next decision, third-quarter performance, or subsequent demand for USDC. Circle clearly states that it is not possible to reliably predict how customers will adjust their balances in response to changes in interest rates.

The same file also simulated a 2 percentage point change in interest rates, showing a change in reserve income of $1.475 billion and a related change in costs of $720 million. Under these assumptions, the difference is $755 million.

The company uses these scenarios to describe interest rate exposures, rather than committing to corresponding profit changes. Operating expenses, taxes, other revenues, and business changes will still affect the final results.

This sensitivity analysis indicates that if the decline in gross reserve income is assumed to be a proportional decline in retained income, it will overestimate the impact of the model. Some payments from partners will change along with the income on which they are based.

Conversely, if the yield rises, Circle will not retain every additional dollar of gross reserve income. Its distribution agreement will allocate a portion of the earnings to companies that support the use of USDC.

The Hyperliquid protocol reveals the competition in distribution.

JPMorgan's assessment of the Hyperliquid transaction suggests that competition for large USDC balances may squeeze the revenue retained by Circle and Coinbase. In a research report in July, the bank downgraded its profit forecasts, but it still expects USDC related profits to grow until 2027.

The analysis focuses on the commercial terms used to maintain USDC's core position in a major trading venue. The bank believes that platforms with large balances can secure a larger proportion of reserve income.

Circle Management has described a growing network of partners who will be incentivized to integrate and distribute USDC. Company documents state that future arrangements may adopt different terms depending on negotiations and market conditions.

Therefore, distribution payments are one of the business costs associated with reaching users, and it does not necessarily mean that the issuer loses control over the reserves. The reserve assets are still subject to the custody and safeguard arrangements of the issuer.

The results for the second quarter provide a fact that contradicts the simple narrative of “inevitable erosion of profit margins.” Despite distribution costs and lower reserve returns, retained earnings and the RLDC profit margin have still improved year-over-year.

Circle indicates that the use of its network has gone beyond encrypted speculation, extending to payments, settlements, and institutional services. The management's view is that more uses and more access channels will, in the long run, help to drive growth in balances and revenue.

The financial impact depends on how much the company earns from these activities and how much it needs to pay to carry them out. Higher turnover alone does not explain the rates, the duration of balances, or the relevant distribution terms.

Public documents do not provide a complete income statement for each distribution partnership individually. Unless the company discloses sufficient data for recalculation, any estimate of the profit impact of a particular transaction remains merely an estimate.

Payment volume does not equal payment revenue.

Circle reports that in the second quarter, the trading volume on the USDC chain reached 14.8 trillion US dollars, a year-on-year increase of 151%. This trading volume statistic refers to activities involving the use of that token and does not equate to the revenue confirmed by Circle, nor does it represent the reserve balance at any given point in time.

The same USDC can be transferred repeatedly, yet the underlying US dollar reserves remain the same amount each time. Each transfer is counted, resulting in a turnover scale that far exceeds the circulation volume, but it does not add an additional US dollar to the reserves with each transfer.

Other revenues from Circle increased by 41.1% in the second quarter, reaching $33.582 million. Nevertheless, they still account for only about 4.8% of the total revenues and reserve earnings of $701.315 million.

The company's managed payment product allows banks and payment companies to interact at the fiat currency level, while Circle is responsible for the stablecoin processes behind the transactions. This product was launched in April, and the company is in charge of activities such as minting, destroying, and payment orchestration.

Circle revealed that as of the end of the second quarter, the annualized trading volume of Circle Payments Network calculated over the past 30 days was 14.7 billion US dollars, and it was stated that 175 financial institutions had joined.

Annualizing the 30-day observation value simply converts the recent pace into an annual rate, which does not imply that $14.7 billion has actually flowed through that network over a full 12-month period.

"Joining" is also a type of coverage indicator, which is different from the number of institutions that actually process payments at a specific frequency at a given point in time. Circle does not consider each joined institution to generate the same volume of transactions or revenue.

The document describes transaction revenues as coming from activities based on usage, transaction volume, or events, including certain redemptions and infrastructure services. The company has not set a single, unified commission rate for all USDC transfers.

Arc raises another question about when income is recognized

The Arc mainnet of Circle was launched on September 16th, during the third quarter. This network uses USDC to pay transaction fees and brings the company's stablecoins, payment, and infrastructure products to another operational platform.

In the launch announcement, Circle described the phased rollout of institutional verifiers and integrations, which involve payments, transactions, and tokenized assets. The company stated that network-level optional privacy features are still under development.

This announcement does not guarantee that all institutions involved or currently under evaluation will generate confirmed revenue for Circle. Technical feasibility, commercial adoption, and accounting recognition are different stages.

Circle The second-quarter documents also include an earlier ARC token finance project. Note 11 records an agreement to sell 807.5 million tokens at $0.30 each, for a total revenue of approximately $242.2 million, of which $222 million has been received in this quarter.

The company records these earnings as deferred income, and the uncollected portion is listed as accounts receivable. Its accounting policy states that they will only be recognized as other income once the performance obligations stipulated in the purchase agreement are fulfilled.

Therefore, the cash received in the second quarter will not be automatically credited to other revenues for that quarter. The document's handling method distinguishes between the payment date and the period during which the related obligations are to be fulfilled.

This annotation also includes a purchase of $25 million from the entity associated with IDG Capital. If this purchase is added to the $242.2 million, it would result in double-counting.

This pre-sale also affected another indicator in the financial statements: cash flow from operating activities. According to the Circle report, the cash inflow from operations in the first half of 2026 was 538.5 million US dollars, which is higher than the 303.7 million US dollars in the same period last year.

Management attributed most of this $234.8 million improvement to changes in working capital, including $222 million in token sales received in the second quarter. The company also noted separately that net profit after non-cash adjustments improved by $41.1 million, but this was partially offset by higher cash operating expenses.

The period covered by the six-month cash flow data is different from that of the three-month revenue data. The cash received from pre-sales cannot be considered as duplicate inclusion of quarterly service fees, nor can it be added back to the already recognized revenue.

Circle recorded an investment cash outflow of $57.2 million in the first half of the year, which included $35.8 million in capitalized software development expenses. Capitalizing such expenses means recording an asset whose cost will be recognized over time, rather than being immediately recognized as an operating expense in the income statement.

The cash outflows from financing include a decrease of approximately $2 billion in deposits from stablecoin holders, which is mainly related to the reduction in the circulation of USDC in the first half of the year. Therefore, redemptions will appear in different sections of the cash flow statement, rather than in the operating profits generated from reserve assets.

The performance for November may provide updated information on these obligations and their accounting treatment. The announcement of the mainnet launch in September alone does not warrant any confirmation of subsequent revenue amounts, timing, or repeatability.

Circle is not only building infrastructure but also distributing USDC.

After obtaining approval from the National Trust Bank in July, the company added a federal custody measure to its operational plan. The initial business description included providing custody services for Circle and its related parties; further institutional services as well as possible reserve management would depend on the scope of approval and operational work.

This license does not convert USDC into ordinary bank deposits, nor does it grant token holders federal deposit insurance. It relates to the activities that institutions are allowed to carry out and the manner in which they are regulated.

Circle indicates in the document that with the development of stablecoin regulations, legal, compliance, product, and engineering resources will still be significant costs. Its operating expenses include technical infrastructure, salaries, professional services, as well as depreciation or amortization.

Operating expenses in the second quarter decreased year-on-year, largely due to the impact of comparisons regarding stock-based compensation related to IPO for 2025. Circle stated in its earnings release that adjusted operating expenses increased by 23% to $146 million.

These two cost indicators reflect different accounting treatments. A decrease in the total amount of GAAP does not necessarily indicate that the ongoing cash costs of all business functions have also decreased.

Management previously stated that rather than distributing quarterly dividends, they prefer to reinvest the funds in products, infrastructure, and strategic opportunities. This stance was disclosed during the previous financial reporting cycle and is part of their capital allocation policy, rather than a commitment to future returns.

The shareholder Q&A platform arranged by Circle will close at 9 a.m. Eastern Time on November 3. The company stated that the financial report materials, replays, and written records for November 4 will be available through the investor relations website.

Focus Points

• Retained earnings: The amount remaining after deducting distribution, transaction, and other costs from total revenue and reserve income.
• Balance structure: USDC average circulation volume, as well as the weighted proportion held on the Circle own platform.
• Cooperating party payments: Costs related to Coinbase, as well as disclosure of other distribution arrangements.
• Non-reserve income: Confirmed payments, subscriptions, and infrastructure revenues, calculated separately from activity volume.
• Arc Accountant: Are there any updates regarding deferred token sales revenue and the performance obligations required for its recognition?

Frequently Asked Questions

Circle When will the next financial report be released?

Circle has scheduled the release of its third-quarter results for 2026 for November 4th. The conference call will be arranged for 8 a.m. Eastern Time in the United States.

Circle How much revenue was retained in the second quarter after deducting distribution costs?

Calculated based on the complete cost categories in the file, $701.315 million minus $412.470 million results in a remaining amount of $288.845 million. This figure is before operating expenses and does not represent net profit.

Circle Has the retention rate in the second quarter declined?

No. Based on precise data from the files, the retention rate is approximately 41.2%, which is higher than the 38.2% in the second quarter of 2025, representing a growth of about 15% in retained revenue.

How much did Circle pay to Coinbase?

File records show that over the three months ending June 30, the distribution costs related to Coinbase amounted to 324.6 million US dollars. This amount accounts for approximately 78.7% of the total distribution, transaction, and other costs.

Does more USDC traffic always bring proportionally more revenue?

No. Reserve returns and commercial distribution terms will both affect the outcome, and the average circulation volume is not the same as the balance at the end of the quarter.

What would happen if interest rates change by 1 percentage point?

Circle Based on the model estimates from June data, the annual reserve income is expected to change by $737 million, and the distribution and transaction costs are expected to change by $360 million. Assuming a fixed balance, etc., the difference is $377 million. This is not a performance forecast.

USDC Is the trading volume equal to the income of Circle?

No. The $14.8 trillion in on-chain transaction volume in the second quarter represents activities involving that token, while other revenues amounted to $33.582 million. Reserve revenues are listed separately.

Circle should immediately recognize the entire pre-sale cash from ARC as revenue?

No. In the second-quarter documents, these revenues are classified as deferred income, to be recognized only once the contractual performance obligations are met.