Barron: Why Circle Stock Is Falling After the Earnings

Circle Internet Group

CRCL

-8.10%

stock fell on Wednesday after the issuer of theUSDC

USDCUSD

0.00%

stablecoin posted better-than-expected quarterly earnings but updated its full-year outlook to reflect higher expenses.

Circle reported earnings of 64 cents a share for the third quarter, surpassing Wall Streets call for 20 cents. Revenue totaled $739.8 million, up 66% from last year and above analysts consensus estimate of $706.7 million.

USDC in circulation reached $73.7 billion by the end of September, more than double the circulation a year ago. Circle primarily makes money through interest on its USDC reserves, which are held in a registered money-market fund.

Circle stock fell about 5% in early trading Wednesday. Shares were up more than 200% from theirJune initial public offeringprice of $31 as of Tuesdays close, but down 63% from their record high on June 23.

The companys updated full-year outlook may be weighing down shares. Circle raised its 2025 forecast for non-reserve revenue, such as subscriptions and services, to a range with a midpoint of $95 million from a previous estimate of $80 million.

However, its cost forecast rose by even more. Circle anticipates a range of $495 million to $510 million in operating expenses in 2025, up from past guidance of $475 million to $490 million.

Part of that may be due to spending on the companys planned launch of its Arc blockchain network, which has already lined up partners such as BlackRock, HSBC and Visa. In addition, Circle said it is considering launching its own token on the network.

Fluctuations in short-term interest rates may also be weighing on Circle, which generates income fromU.S. dollar

USDEUR

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reserves that back its stablecoin. The Federal Reserve cut rates in September and October and is widely expected to do so again in December and several times more in 2026. Lower rates could reduce interest income.

Still, Circle executives remain optimistic that the company will benefit from longer-term adoption of stablecoins and other cryptocurrencies. Circle Chief Financial Officer Jeremy Fox-Geen said in an interview withBarronsthat stablecoins are the beginning of a megatrend in the world of finance and that the long-term growth potential is more important than short-term fluctuations.

The rise of the internet financial system will bring massive benefits to businesses around the world, Fox-Geen said.

The market is currently dominated by Circle and its larger rivalTether

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+0.03%

, the issuer of theUSD Token(USDT), which is also pegged to the U.S. dollar.

Circle CEO Jeremy Allaire noted on a conference call with analysts that the regulatory clarity in Washington, thanks to the passage of theGenius Actthis summer, will boost the market. Even though the Genius Act could lead to more competition in the stablecoin issuance market, Allaire doesnt seem too concerned.

Overall, the stablecoin market continues to grow strongly and we continue to gain share, Allaire said on the call, adding that the market remains one where there are two leading issuers and several much smaller players. He added that the stablecoin business will likely turn out to be a winner take most market structure.

Wall Street seems to agree. Jacob Zuller, an analyst at tech research firm Third Bridge, said in a report Wednesday after Circles earnings release that Circle is best positioned to capture the US market given their regulatory moat and do not view Tethers USDT as a threat given their lack of transparency and minimal liquidity.