Circle Internet Group CRCL

Key data

The business

Circle issues USDC, a stablecoin: one token worth one dollar, redeemable on demand. The dollars people hand over go into a reserve of short-term US Treasuries and cash, run alongside BlackRock, and Circle keeps the interest. That is nearly the whole engine. Reserve income is about 95% of revenue as of Q2 2026, down from 99% in 2024 as subscription, services and transaction fees grow, so the business is really a giant money-market fund wearing a payments coat. The moat is the network: USDC is the number-two stablecoin behind Tether, wired into exchanges, wallets and, increasingly, payments. The catch is that Circle rents its distribution. Coinbase takes a material share of reserve income under their sharing deal, plus the yield on every USDC parked on Coinbase. A user holding the coin earns nothing; Circle earns the yield on the bills behind it, then hands a portion to its partner. That spread, after the split, is the company.

The numbers

Revenue peaked in the December 2025 quarter and has been sliding since, even as the coin base grew.

Reserve income peaked at $733 million in the December 2025 quarter, fell to $653 million in March 2026, then recovered slightly to $668 million in June 2026, while USDC in circulation kept rising. The Fed's cuts are compressing the yield on the reserve faster than the float is filling in. Profit is sliding harder than revenue, from $214 million to $48 million, because the reserve income falls straight to the bottom while stock pay and the Coinbase split do not. Ignore the Q2 2025 loss; it is the IPO's one-time stock charge. The Q4 2025 quarter is derived from the annual filing less the nine months.

The one bright, small corner is everything that is not reserve income: subscription, services and transaction fees.

That line grew 41% year over year and roughly seven-fold in 2025, real proof the payments story is more than talk, but it is still under 5% of the whole. The math that matters is circulation times yield times Circle's share. Every 100 basis points the Fed cuts strips roughly $600 million of gross revenue per year unless circulation rises to plug the hole. The Street already sees the squeeze: it models FY2026 earnings of $1.05, below the $1.46 the last four quarters actually earned, then a rebound to $1.49 in 2027 that assumes circulation reaccelerates and rates settle. What this memo believes the market is not paying for correctly: 97 times earnings for a business whose earnings are set to fall this year only works if circulation compounds fast enough to outrun the cuts. The single print that settles it is reserve income turning back up quarter over quarter while the Fed is still cutting.

Management

Jeremy Allaire, founder, remains chief executive. The record on their own money is one-sided: 61 insider sales worth $31.4 million over twelve months, zero buys, led by a $4.6 million sale on September 1 and CFO Jeremy Fox-Geen's $4.05 million on August 21. Plan status is not disclosed, so read it as post-lockup selling into a stock up from its listing price. Pay leans heavily on stock, about 8% of revenue in comp, and there have been no buybacks since 2023. The balance sheet is a fortress the other way: $1.73 billion of cash and no debt.

How it fails or surprises you

Rate cuts. Each 100 basis points the Fed cuts strips roughly $600 million of gross revenue per year, and reserve income is already off its peak. If the Fed cuts through 2026, reserve income falls faster than the coin grows, and 97 times earnings becomes a much bigger number on a smaller base.

The Coinbase split. Coinbase takes a material share of reserve income and all the yield on USDC held on its platform. If it presses for more at renewal or pushes its own product, Circle's net take shrinks no matter how large circulation gets. This is the fact the case for owning it explains least.

Regulated adoption (right tail). The GENIUS Act clears banks and fintechs to use dollar stablecoins. If that doubles USDC circulation as real payments move onto it, reserve income scales past the rate drag and the fast-growing non-reserve line, up 41%, finally matters. The market is paying for growth but not yet for this step-change.

Closing thoughts

A specific print resolves this, so watch it: reserve income reaccelerating quarter over quarter while rates are still falling. If it turns up, circulation is winning and the multiple has a story. If it keeps drifting, you own a leveraged wager on the Fed not cutting, dressed as a growth stock. The near-term tail is fatter on the downside, where the rate cycle is against you today; the longer tail is fatter on the upside, where regulated adoption could swamp everything. What is at risk if rates keep falling is most of this year's earnings; what adoption is worth, if it lands, is a business several times today's size.

The bet is still that USDC, the digital dollar Circle runs, keeps growing, so more dollars sit in Circle's care, and the interest on those dollars stays high. It breaks if rates keep falling while circulation goes flat, and the one pair of numbers that tells you first is reserve income against USDC in circulation, quarter over quarter. If reserve income falls two more quarters while the coin base still rises, the rate drag is winning and the price is wrong.