Market Daily: Circle's revenue growth includes a large ARC presale contribution

Revenue composition changes the interpretation of growth

Circle's third-quarter results filed with the SEC, released November 4, report $658 million of reserve income and $207 million of other revenue. The latter includes the ARC presale. Subtracting that contribution from the $865 million headline leaves $683 million, an arithmetic comparison rather than an alternative accounting result.

Income from assets backing a stablecoin depends on both the amount held and the return earned. Token-presale revenue has a different source and basis for assessing repeatability. A quarter can show stronger reported growth while its reserve-income component contracts. Circle's disclosed figures show exactly that combination.

Reserve income declined 8% year over year while average USDC circulation rose 8%. The reserve return rate was 3.5%, down 61 basis points. More USDC therefore did not fully offset the weaker return on reserves. This illustrates rate sensitivity without establishing a forecast for the next quarter or explaining CRCL's share price.

The fair counterargument is that the presale belongs in reported revenue. Building a network can create additional business, and a new revenue source may be strategically meaningful. The question is how much future income it can support and what obligations accompany it. Removing one item from revenue does not produce adjusted profit: expenses, distribution costs and recognition rules also matter.

Costs complicate the headline

Distribution, transaction and other costs were $412 million, down 8%, while operating expenses were $245 million, up 16%. Adjusted EBITDA reached $317 million, up 85%; net income from continuing operations rose 5% to $226 million. These measures describe different parts of the business and cannot be treated as interchangeable growth rates.

Lower distribution costs can support earnings when reserve income weakens. Product investment can absorb part of that improvement. Assessing durability therefore requires examining reserve balances, reserve returns, distribution arrangements and operating investment together. The ARC contribution belongs alongside that analysis.

Average USDC circulation was $73.3 billion during the quarter; quarter-end circulation was $73.9 billion. The average rose 8% year over year, while the end-of-period measure was unchanged. A balance at one date and an average across a period answer different questions. Neither is a current November supply reading.

Circle reports $13.9 trillion of quarterly USDC onchain transaction volume, up 49% year over year. This gross activity does not measure unique customers, merchant sales or capital newly invested in crypto. Repeated movement of the same balances can raise turnover without equivalent growth in supply. The activity increase cannot be treated as equivalent growth in payment adoption.

The combination remains useful: the circulation base and frequency of movement need separate tracking. Higher turnover may support demand for settlement infrastructure. Translating that into an earnings forecast requires evidence about the types of transfers and associated revenue. A large settlement figure can coexist with modest reserve growth.

The central test is whether activity creates durable income beyond the reserve cycle. Reserve yields can fall while a network becomes more useful. Monetizing that usefulness through recurring services could reduce dependence on interest rates; a large presale alone does not demonstrate that transition.

A clearer breakdown of recurring service revenue and its relationship to costs would strengthen the case. Continued reliance on episodic token sales while reserve income declines would weaken it. These are conditional interpretations of the disclosed model, rather than predictions of token performance or immediate market direction.

A later filing explaining recognition terms, associated obligations and the repeatability of ARC-related revenue would improve the assessment. Comparable quarterly data on circulation, reserve returns and distribution costs would show whether the reserve business stabilizes. The current results justify separating these revenue engines before assigning durable growth to their combined total.