Shares of Circle Internet Group, which is the issuer of USDC steiblcoin, fell by more than 10% in trading on November 12 after the publication of the report for the third quarter. So far, the company has managed to beat expectations, but investors are concerned that its profits will decline in the future, Bloomberg writes.
Circle's revenue rose more than 66% year-on-year to $740 million. Analysts, according to Bloomberg, had expected $707.4 million. The revenue growth was helped by an increase in the volume of USDC stablecoins in circulation: the number of tokens has more than doubled over the past year. Net income from continuing operations soared more than 200% to $214 million, or $0.64 per share. At the same time, operating expenses rose 70% year-over-year, mainly due to higher labor costs, the agency explains.
There is now about $75 billion in USDC in circulation, making the token the second most capitalized stablecoin after Tether (USDT), which has about $183 billion in circulation.
What worries investors
Investors are concerned that a Fed rate cut will negatively impact future earnings, Bloomberg explains. Circle earns most of its profits on interest income from U.S. government bonds, which are used to back its stablecoin. Circle said in a report that the yield on its reserves fell 96 basis points to 4.15% in the third quarter ended Sept. 30.
"The third quarter is acceptable. But the outlook for the fourth quarter implies a slowdown and difficulties with growth," Mizuho Securities analyst Dan Dolev wrote in a research note cited by the agency.
Investors also noticed that distribution, transaction and other costs rose 74%, Bloomberg wrote. This is due to higher USDC distribution fees and higher average USDC balances on the Coinbase platform, as well as other partnerships, Circle noted.
"Investors are likely wary of rising distribution costs," Baird analyst David Koning wrote. He added that "revenue minus distribution costs" margins could be around 35% in the fourth quarter, up from 38% to 40% in the first three quarters. That's despite Circle raising its full-year margin outlook to 38%, the top end of its previous range, Bloomberg noted.
The company also said it is considering launching its own token on the Arc blockchain, Circle's recently unveiled project focused on bringing traditional financial institutions into the onchain economy. More than 100 companies are already participating in Arc's test network.
Context
Circle went public in June, and its shares rose sharply amid high interest in stablecoins - digital assets pegged 1:1 to the U.S. dollar. That growth was fueled by expectations of the signing of the first federal law to regulate such tokens, the GENIUS Act. Circle's listing turned its founder Jeremy Allaire into a billionaire and was seen as a pathway for other cryptocurrency companies, Bloomberg notes. Following Circle, cryptocurrency exchange Bullish went public, and in September trading in Gemini shares began.
This article was AI-translated and verified by a human editor
