"Circle, the world's second biggest issuer of stablecoins, saw its shares dive more than 8% after its first quarterly earnings announcement as a public company. The stock dip came even though the circulation of Circle's flagship USDC coin has more than doubled, while revenue grew 66% from last year. Despite better than expected revenue and earnings, Circle investors appeared to be spooked by declining returns on the reserves that back its stablecoin, and provide the vast majority of the company's income."
"In its Q3 earnings, Circle revealed that its reserve rate of return is now 4.2%. Meanwhile, operating expenses jumped 70% since last year and are expected to continue to rise. "Stock is likely to decline as FY25 guide implies lower 4Q 'other' revenue and higher adjusted operating expenses," said Dan Dolev, a senior analyst at Mizuho, in a note. Circle debuted on the stock market in June to roaring success. Its stock rallied 250% in its first two days, the biggest two-day 'pop' since 1980."
Circle reported Q3 results showing USDC circulation more than doubled and revenue increased 66% year-over-year, yet shares fell over 8% after the earnings release. The reserve rate of return that backs USDC dropped to 4.2%, reducing the core income stream. Operating expenses rose 70% year-over-year and are expected to continue increasing, pressuring profitability. Analysts noted FY25 guidance implies lower fourth-quarter other revenue and higher adjusted operating expenses. The company debuted publicly in June with a rapid stock rally but has since declined roughly 70% from its peak. Circle is exploring a native token on its Arc blockchain network.
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