Circle Q2 FY2026 Results: Revenue Misses, USDC Ends the Quarter Lower

Before U.S. markets opened on Aug. 5 (Beijing time), stablecoin issuer Circle released its fiscal Q2 2026 earnings. Circle reported total revenue and reserve income of $701 million for the quarter, below the Street's $717 million estimate, but up 7% year over year. Adjusted EBITDA came in at $143 million, up 8% year over year. Net income from continuing operations was $48 million, topping the $43 million consensus, and improving by $530 million from a year earlier. Shares of CRCL jumped in premarket trading after the release before giving back gains. As of 20:45, the stock was at $61.55, down 2.84% in premarket. Key takeaways 1) Revenue missed, but the slide appears to have stabilized Total revenue and reserve income of $701 million undershot expectations, yet marked a rebound after last quarter's dip. The company's recent quarterly path showed a turn from declines back to growth ($579 million → $658 million → $740 million → $770 million → $694 million → $701 million). Reserve income remained the engine of results. It reached $668 million in Q2, up 5% year over year and 2% sequentially. 2) Average USDC supply rose, but quarter-end supply fell Circle tied reserve income growth largely to USDC supply. The quarter showed a split trend: average circulation increased, while the ending balance contracted. Average USDC outstanding in Q2 was $76.5 billion, up 25% year over year and about 2% from Q1's $75.2 billion. At quarter end, outstanding USDC stood at $73.3 billion, up 19% year over year but down roughly 4.8% from the prior quarter-end level of $77.0 billion. The numbers suggest the largest outflows occurred near quarter end. While overall supply is still expanding, the marginal trend bears watching. Market share also slipped. USDC represented 27% of USD stablecoins at quarter end, down 66 basis points year over year. With industry supply contracting, USDC did not gain share and instead saw modest net outflows. 3) Other revenue eased sequentially, but FY2026 guidance was raised sharply Excluding reserve income, 'other revenue' was $34 million, up 41% year over year but down 19% quarter over quarter, snapping a five-quarter growth streak ($21 million → $24 million → $29 million → $37 million → $42 million → $34 million). Circle raised its FY2026 other-revenue outlook from $150–$170 million to $310–$330 million, nearly doubling the range, and said the guide includes recognized ARC token presale revenue. On the Q1 earnings call, Circle said it will recognize ARC tokens held at fair value as 'other income' once presale obligations are met, with a direct impact on RLDC and adjusted EBITDA. That implies other income could be materially higher over the next several quarters as ARC is recognized. Investors should note this looks closer to a one-off accounting gain than recurring subscription or services revenue. Excluding ARC, the trajectory of core other revenue remains a key watch item. 4) RLDC margin held firm as distribution costs stayed controlled RLDC (Revenue minus Distribution Costs) remained one of the most resilient profitability indicators in the report. In Q2, RLDC was $289 million, up 15% year over year. The RLDC margin was 41%, up 302 basis points year over year, flat sequentially, and higher than recent quarters (38% → 39% → 40% → 41% → 41%). Circle managed the margin despite year-over-year pressure on reserve yields tied to the Federal Reserve's cut to the federal funds rate, mainly by keeping distribution costs in check. Distribution and transaction costs totaled $410 million, up 1% year over year, well below the 5% growth in reserve income. Management also lifted full-year RLDC margin guidance from 38–40% to 41.7–43.7%, again including the impact of ARC presale revenue. That means second-half margin metrics may carry a nonrecurring component. 5) Distribution remains the biggest cost line; product investment is rising Distribution and transaction costs remained Circle's largest expense, at $410 million in Q2, with year-over-year growth of 1% and quarter-over-quarter growth kept within 1%. GAAP operating expenses were $254 million, down 56% year over year, largely reflecting a difficult comparison to last year's $435 million stock-based compensation charge tied to the IPO. On an adjusted basis, operating expenses rose 23% year over year to $146 million, reflecting continued spending on product development, infrastructure, and AI. General and administrative expense increased to $66.3 million, IT infrastructure costs rose to $16.4 million, and depreciation and amortization more than doubled to $29.9 million. Management has pointed to ongoing investments linked to initiatives such as Arc, Agent Stack, and CPN. Business updates: Platform strategy continues Arc mainnet launch date set Circle said the Arc mainnet will launch on Sept. 16. Initial validators are expected to include major traditional finance names, including BlackRock, DTCC, Galaxy, Visa, Mastercard, and Standard Chartered Bank. BlackRock's tokenized money market fund BUIDL will be deployed on Arc, and DTCC plans to support tokenization of assets held by DTC on Arc. The disclosure suggests Arc is moving from roadmap to real institutional participation. Circle is positioning Arc not only as USDC infrastructure, but as a bridge connecting stablecoins, RWAs, and traditional financial institutions. CPN growth accelerates Circle's Payments Network (CPN) expanded quickly in the quarter. Over the past 30 days at quarter end, annualized transaction volume rose to $14.7 billion, up about 76% from $8.3 billion in Q1. Connected financial institutions increased from 136 to 175, a 29% sequential gain. CPN's revenue contribution remains limited for now, but the growth in volume and participants points to early network effects. Regulatory milestones Circle said it received approval from the U.S. Office of the Comptroller of the Currency (OCC) to establish Circle National Trust, making it among the first stablecoin issuers to secure a U.S. federal trust bank charter. Its application to establish Circle New York Trust was also approved by the New York State Department of Financial Services (NYDFS). For a company that emphasizes compliance as a competitive edge, the two approvals strengthen Circle's standing in the U.S. financial system and provide a firmer base for custody, payments, and institutional finance expansion. Do the results settle Wall Street's valuation split? Ahead of earnings, Wall Street had already diverged on Circle's outlook. On Aug. 3, Morgan Stanley downgraded the stock from 'Equal Weight' to 'Underweight' and cut its price target to $38 from $106. TD Cowen initiated coverage with a 'Buy' rating and an $82 target. This earnings report offers ammunition for both views. Points that align with Morgan Stanley's concerns remain: quarter-end USDC supply fell sequentially, market share did not improve, and Circle's revenue base is still dominated by reserve yields. The raised other-revenue guide is largely tied to ARC presale recognition rather than clear acceleration in payments, API, or RWA revenue, leaving near-term profitability sensitive to USDC growth and interest rates. At the same time, TD Cowen's platform thesis gained new support: Arc now has a firm launch date and notable TradFi participants, CPN is scaling, and the federal trust bank charter is secured. These initiatives are not yet primary revenue drivers, but they broaden Circle's platform narrative. The clearest conclusion from the quarter is that Circle is pushing deeper into a platform-oriented strategy. Whether that strategy can translate into durable, non-interest income streams and ultimately justify a digital financial infrastructure valuation will likely take several more quarters to prove.