By Pritam Biswas and Atharva Singh
Aug 5 (Reuters) - Stablecoin issuer Circle beat Wall Street estimates for second-quarter profit on Wednesday, driven by increased adoption of its USDC token, but a miss on revenue expectations dragged its shares down nearly 4% in early trading.
Demand for stablecoins strengthened during the quarter after renewed Middle East tensions increased market volatility, prompting investors to shift some funds from riskier crypto assets into stablecoins.
Circle's strategic partner,
cryptocurrency exchange Coinbase, highlighted those industry headwinds last week when it reported a slump in its trading volumes.
Stablecoins are cryptocurrencies designed to maintain a fixed value, usually against the U.S. dollar, with USDC ranking as the world's second-largest dollar-backed stablecoin behind Tether's USDT.
Circle's USDC circulation rose 19% in the second quarter to $73.3 billion and the stablecoin's onchain transaction volume jumped 151% on a year-on-year basis.
"Circle’s second-quarter results illustrate the company’s resilience in the face of dour crypto markets, in our opinion, and accompanying announcements suggest difficult-to-replicate market leadership and momentum," analysts at William Blair said in a note.
VOLUMES OFFSET FALLING YIELDS
However, reserve return rate - the yield generated by the cash and short-term U.S. Treasuries backing its USDC stablecoin — dropped by 66 basis points in the second quarter to 3.5%.
Higher circulation volumes helped offset the drop in returns. Circle Chief Financial Officer Jeremy Fox-Geen has previously noted the company is built to navigate multiple interest rate cycles.
"We would rather have lower rates because it will help accelerate investment and accelerate capital," said Fox-Geen in an interview with Reuters, when asked about the potential future impact of monetary policy changes.
"We are not a bank where we are at the mercy with a fixed set of assets as to the vagaries of interest rates."
Wall Street expects stablecoins to become one of the biggest themes within finance in the coming years and the next multi-trillion-dollar market opportunity.
The company reported a net income of 18 cents per share attributable to common shareholders in the quarter ended June 30, compared with analysts' estimates of 17 cents per share, according to LSEG-compiled data.
ADOPTION GROWS, REVENUE MISSES
"The bigger story is adoption. The company is making moves to become the financial plumbing for tokenized assets, AI agents, and the next generation of digital payments," said David Bartosiak, stock strategist at Zacks Investment Research.
The New York-based company strengthened its regulatory standing after receiving approval for a U.S. national trust bank charter, allowing it to operate under federal oversight and reinforcing its push to serve institutional customers.
Circle has also expanded its payments infrastructure and settlement services as banks, fintech firms and other institutions increasingly adopt stablecoins for cross-border transactions.
Shares of the stablecoin issuer have shed nearly 20% so far in 2026. The stock was up nearly 8% in trading before the bell.
Circle's revenue and reserve income rose 7% to $701.3 million in the quarter ended June 30, missing estimates of $717.5 million. The company's USDC circulation also fell marginally on a sequential basis.
"Our quarterly financial results reflect the current rate environment and a crypto market that has slowed – both are conditions outside our network. But near-term activity tells a different story," said Jeremy Allaire, Co-Founder, CEO, and Chairman at Circle.
(Reporting by Atharva Singh and Pritam Biswas in Bengaluru; Editing by Devika Syamnath)
