Circle delivered its first quarterly earnings report since going public, showing the hallmarks of a high-growth company: strong core business metrics, but accounting profits heavily weighed down by massive non-cash expenses.

Circle's total revenue and reserve revenue surged 53% year over year to $658 million, driven primarily by a significant increase in USDC circulation. However, the company posted a net loss of $482 million, largely due to $591 million in IPO-related non-cash expenses, including $424 million in stock-based compensation. Adjusted EBITDA rose 52% year over year to $126 million, beating market expectations of $121.1 million, indicating stable profitability in its core operations.

USDC circulation expanded rapidly, reaching $61.3 billion at the end of the quarter, a 90% increase from a year earlier, and further climbing to $65.2 billion as of August 10. The company's share of the stablecoin market grew to 28%, up 595 basis points year over year. Platform business also accelerated, with USDC balances on the platform soaring 924% to $6 billion. Distribution costs rose 64% year over year to $407 million, mainly due to increased holdings by partners such as Coinbase.

Looking ahead, management expects USDC circulation to maintain a compound annual growth rate of 40% over multiple years. For fiscal year 2025, the company projects other revenue of $75–85 million and adjusted operating expenses of $ 475–490 million. Following the earnings release, Circle's U.S. shares jumped nearly 8% in pre-market trading.

Following the report, Circle's stock once surged nearly 8% in pre-market trading.  

IPO Expenses Skew Financial Results

Circle's Q2 net loss of $482 million appears alarming at first glance, but $591 million in non-cash expenses were the primary culprit—$424 million from IPO-triggered stock compensation and $167 million from convertible note revaluations due to stock price gains.  

The more business-reflective adjusted EBITDA reached $126 million, up 52% YoY, with a 50% adjusted EBITDA margin, highlighting the high profitability of its stablecoin operations. This "profitable but loss-making" dynamic is common for tech companies in their first post-IPO quarter.  

USDC Growth Is Still Strong, But Competition Also Heats Up

USDC circulation hit $61.3 billion, up 90% YoY, capturing 28% of the fiat-backed stablecoin market share. By August 10, this figure climbed further to $65.2 billion. Meaningful wallet counts grew 68% to 5.7 million, indicating an expanding user base.  

However, reserve yield fell 103 bps YoY to 4.1%, reflecting shifting interest rate conditions. Meanwhile, the average daily weighted share of USDC on Circle's platform was 7.4%, up 536 bps YoY but still low, suggesting most USDC circulates on third-party platforms.  

Circle's core revenue—reserve income—reached $634 million, up 50% YoY, driven by an 86% increase in average USDC circulation, though partially offset by the declining reserve yield.  

This drop in reserve yield highlights how interest rate fluctuations impact Circle's business model. As a holder of short-term Treasuries and money market funds, Circle's earnings are directly tied to Fed policy. While the current 4.1% yield remains healthy, investors should monitor potential pressure in a rate-cutting cycle.  

Rising Distribution Costs Raise Concerns

Q2 distribution costs jumped 64% YoY to $407 million, outpacing revenue growth and reducing RLDC (Revenue Less Distribution Costs) margin from 42% to 38% YoY.  

Management attributed this to USDC circulation growth and new distribution agreements with partners like Coinbase. This trend warrants close attention—while partnerships drive scale, rising costs could erode margins. Circle's FY2025 RLDC margin guidance of 36–38% suggests this pressure will persist.  

Regulatory Tailwinds, But Risks Remain

The passage of the **GENIUS Act** established a federal framework for payment stablecoins, a long-term positive for Circle's compliance positioning. As an early adopter of regulatory standards, Circle may further solidify its competitive edge.  

However, Circle's risk disclosures acknowledge challenges: Growing competition from yield-bearing digital assets; Potential stablecoin run risks; Operational disruptions; Evolving regulations.  

Management remains optimistic, projecting a 40% CAGR for USDC circulation. FY2025 guidance includes $75–85 million in other revenue, RLDC margins of 36–38%, and adjusted operating expenses of $475–490 million.  

From a valuation perspective, Circle presents an intriguing mix of growth potential and execution risks. While the expanding stablecoin market offers major opportunities, margin pressures, regulatory uncertainty, and rising competition remain key concerns. Investors should watch whether Circle can sustain growth while improving profitability—and whether its strategic shifts deliver as promised.