Circle’s $865 Million Quarter Gets a Boost From ARC Token Sales

Circle recorded $865 million in third-quarter revenue and reserve income on Nov. 4, with ARC token presale revenue offsetting weaker earnings from USDC reserves. Net income from continuing operations increased 5% year over year to $226 million.

The results show growth, but much of the increase came from recognizing token-sale revenue. Circle’s reserve business earned less despite higher average USDC circulation, highlighting its continued sensitivity to interest rates. 

ARC Presale Provides a Significant Revenue Boost

Other revenue reached $207 million, including $182 million from the presale of ARC, the token for Circle’s Arc blockchain. The presale supplied approximately one-fifth of total revenue and reserve income, helping offset the decline in reserve earnings.

Institutional investors agreed to buy approximately $242 million in ARC tokens. Circle had received $222 million by June 30 but initially held that money outside reported revenue, recognizing a substantial portion in the third quarter. Receiving cash and counting it as revenue happened at different times. 

For shareholders, this makes the source of growth important: token presale revenue is different from fees earned repeatedly as customers use a service. The quarter’s contribution does not establish that Circle will earn another $182 million from ARC sales every three months.

More USDC Activity Does Not Guarantee Higher Income

Reserve income declined 8% year over year to $658 million as the reserve return rate fell by 0.61 percentage points. Average USDC circulation rose 8% to $73.3 billion, but additional reserves could not fully compensate for lower returns.

Circle can therefore earn less from its stablecoin business even when more USDC circulates. Higher circulation supports its earning potential, while lower interest rates can work against it.

USDC on-chain transaction volume increased 49% year over year to $13.9 trillion. This shows more transfer activity, including tokens moving repeatedly, rather than an equivalent increase in Circle’s revenue.

Lower Distribution Payments Help Offset Spending

Distribution, transaction, and other costs fell 8% year over year to $412 million, mainly because of lower distribution payments. Circle retained more income before operating expenses, supporting profitability alongside the ARC contribution.

Operating expenses rose 16% to $245 million. Circle attributed the increase mainly to administration, depreciation and amortization, IT infrastructure and marketing, partly offset by lower stock-based compensation.