Circle’s November 4 earnings will follow a quarter in which distribution and transaction costs absorbed nearly 59% of revenue and reserve income. Its filings show that the amount retained still grew, while new payments and blockchain products bring different sources of income and expense.
Summary
- Circle has scheduled its Q3 results for November 4, with an earnings webcast at 8 am ET.
- Q2 revenue and reserve income reached $701.315 million against $412.470 million in distribution, transaction and other costs.
- The difference was $288.845 million before operating expenses, a 41.2% retained-revenue margin.
- Coinbase-related distribution costs were $324.6 million during the 3 months ended June 30.
- Circle’s rate model estimates a $737 million annual reserve-income change for a hypothetical 1-percentage-point rate move.
Circle has scheduled its third-quarter results for November 4 after retaining $288.845 million of second-quarter revenue and reserve income before operating expenses, with distribution, transaction and other costs taking nearly 59% of the total.
Circle’s earnings announcement says management will discuss the results at 8 am ET on Wednesday. Its previous financial statements provide the comparison for how circulation, interest rates and payments to partners affect the income left inside the company.
USDC’s average circulation grew by roughly 25% year on year in Q2, while reserve income rose 5.3%. Lower returns on the assets backing the stablecoin offset part of the benefit from the larger average balance.
The cost of distributing USDC was substantial, but it did not consume all the additional income. Revenue retained after distribution, transaction and other costs grew approximately 15%, faster than the 6.6% rise in total revenue and reserve income.
Circle reports that retained-revenue measure separately from profit. Staff, technology, legal work and other operating expenses still have to be paid from it, followed by the effects of other income and tax.
Circle’s earnings turn on balances, rates and distribution terms
The company earns interest and dividends on assets held against its stablecoins. In its Q2 Form 10-Q, Circle says reserve income is recorded before distribution costs, so the reported income does not represent the amount retained after paying partners.
The filing puts reserve income at $667.733 million for the 3 months ended June 30, compared with $634.274 million a year earlier. Other revenue was $33.582 million, taking total revenue and reserve income to $701.315 million.
Average USDC circulation was $76.524 billion over the quarter, against $61.039 billion in the comparable period. The quarter-end balance was lower than that average, at $73.269 billion.
Average circulation measures the daily balances supporting reserve income across the reporting period. Quarter-end circulation records what remained outstanding on the final day, and the two can move at different rates.
Circle’s published reserve return rate was rounded to 3.5%, down from 4.1% a year earlier. Its results announcement gives the change using more precise underlying data as a decline of 66 basis points.
The company says returns on its reserve assets are close to the prevailing secured overnight financing rate. A larger USDC balance can therefore generate less additional income than circulation growth alone might suggest when yields fall.
Reserve income is not a fee charged each time someone transfers USDC. Circle’s other revenue includes transaction and subscription services, but the reserve assets earn according to their balances and returns.
The balance sheet keeps resources held for stablecoin holders separate from the company’s ordinary cash. At June 30, Circle reported approximately $73.2 billion in cash and cash equivalents segregated for stablecoin holders.
The filing explains that this balance-sheet category differs from the USDC circulation figure. It includes reserves for EURC and access-denied tokens, excludes resources backing corporate-held USDC, and can be affected by minting, redemption and settlement timing.
The Circle Reserve Fund held $61.9 billion of the segregated balance at June 30, according to the filing. Circle accounts for its holding at the fund’s net asset value and records declared dividend income within reserve income.
The reserve principal is held to meet obligations to token holders. It is not the same as revenue earned on those assets or cash the company has retained after paying its expenses.
The company’s filing warns that the relationship between interest rates and demand for USDC is uncertain. It does not assume that lower yields automatically produce a compensating rise in circulation.
Circle retained 41.2 cents from each dollar before operating costs
Subtracting Q2 distribution, transaction and other costs of $412.470 million from total revenue and reserve income of $701.315 million leaves $288.845 million. Dividing that difference by $701.315 million gives a retained-revenue margin of approximately 41.2%.
Circle calls the amount revenue less distribution costs, or RLDC, although its definition subtracts transaction and other costs as well. The label should not be read as a calculation involving distribution payments alone.
The same calculation for Q2 2025 uses $658.078 million in revenue and reserve income and $406.942 million in the relevant costs. It leaves $251.136 million, or approximately 38.2% of the total.
The retained amount consequently grew $37.709 million, or 15.0%, between the two quarters. The margin improved by approximately 3 percentage points using the unrounded filing values.
| Q2 measure | 2025 | 2026 |
| Revenue and reserve income | $658.078 million | $701.315 million |
| Distribution, transaction and other costs | $406.942 million | $412.470 million |
| Amount retained before operating expenses | $251.136 million | $288.845 million |
| Retained-revenue margin | 38.2% | 41.2% |
The improvement is evidence against describing the whole distribution business as a worsening margin problem in Q2. Circle paid more in total, but the cost category grew 1.4% while revenue and reserve income grew 6.6%.
Operating expenses of $254.486 million reduced the retained amount to operating income of $34.359 million. Net income from continuing operations was $48.214 million after other income and tax.
Operating and net profit include costs that remain outside the RLDC calculation. A company can retain more after distribution while spending more to build products, hire staff or meet regulatory obligations.
The November report will supply a new set of actual figures. The Q2 comparison establishes a baseline, not a forecast that the margin will improve again.
Coinbase receives income through more than balances on its exchange
Circle’s renewed Coinbase agreement preserves a commercial relationship established in August 2023. Management said during the previous earnings cycle that the arrangement renewed on existing terms through 2029.
The filed description gives Coinbase an allocation linked to USDC held on its platform after Circle’s issuer retention. Coinbase receives a share tied to ecosystem growth outside its own platform after payments to approved third-party participants.
A calculation that multiplies Coinbase’s visible exchange balance by a reserve yield would therefore omit part of the contractual arrangement. It would not reproduce the distribution expense recognised by Circle.
The Q2 filing records $324.6 million in Coinbase-related distribution costs, compared with $332.3 million in the same quarter of 2025. The amount fell $7.7 million, or roughly 2.3%, even as Circle’s total distribution, transaction and other costs rose.
Coinbase-related costs represented approximately 78.7% of that combined Q2 cost category. The calculation divides $324.6 million by $412.470 million and does not establish that every remaining dollar was paid to another distributor.
Transaction costs include blockchain fees, while other costs include expenses associated with products such as USYC. The filing groups those items with the payments made to encourage USDC distribution.
Circle says adding distributors can raise its future costs and that commercial terms may differ between partners. It expects distribution expenses to respond both to reserve income and to the location of USDC balances.
The company does not control every action taken by an exchange or wallet that distributes USDC. A partner can change the prominence, incentives or accessibility of a competing stablecoin within its own products.
Where USDC sits affects the division of reserve income
Circle’s platform definition includes Circle Mint accounts, company-held USDC and non-custodial wallets offered through its own services. It is not confined to a single exchange-style wallet or a list of corporate addresses.
The filing says the daily proportion of USDC held on Circle’s platform is used to calculate its reserve-income share under the Coinbase agreement. It publishes a daily weighted-average percentage separately from the quarter-end dollar balance.
Circle held $12.442 billion on its platform at June 30, equivalent to approximately 17% of the $73.269 billion in circulation. Its weighted-average on-platform share during the quarter was 19.5%.
The 17% and 19.5% figures are not competing estimates of the same observation. One divides the final day’s balances, while the other measures the mix over the period using the filing’s weighting method.
The comparison with Q2 2025 shows the weighted-average share rising from 7.4% to 19.5%. Circle identifies the balance mix as a factor in the economics of its distribution arrangements.
As crypto.news previously reported, management said Coinbase held 30% of USDC circulation at the end of Q2. The figure measured the final day’s balances, unlike the weighted average used in the period’s economics.
The company says growth through channels requiring no third-party incentive payments can reduce distribution costs. Growth through commercially incentivised partners can produce a different result even when the number of USDC in circulation rises by the same amount.
Its public figures do not disclose an exact retained percentage for every individual customer or commercial partner. The aggregate financial results combine those arrangements across the quarter.
A rate change affects partner payments as well as reserve income
Circle’s interest-rate sensitivity table models a 1-percentage-point change from an average June reserve yield of 3.49%. It estimates an annual reserve-income movement of $737 million and a corresponding distribution and transaction cost movement of $360 million.
Subtracting the second movement from the first gives $377 million before other effects. A rate rise would add that amount under the stated model, while a rate fall would remove it.
The table assumes USDC circulation stays at its June 30 level for the following 12 months. It holds the reserve allocation constant and assumes the rate change happens at the beginning of that period and affects the reserve assets equally.
It is not a forecast of the Federal Reserve’s next decision, Q3 earnings or the subsequent demand for USDC. Circle expressly says it cannot reliably predict how customers will change their balances in response to rates.
The same filing models a 2-percentage-point rate movement, producing $1.475 billion in reserve-income change and $720 million in associated cost change. The resulting difference is $755 million under those assumptions.
The company uses these scenarios to describe exposure to rates, not to promise an equivalent profit change. Operating expenses, taxes, other income and changes in the business would still affect the final result.
The sensitivity illustrates why treating a decline in gross reserve income as an equal decline in retained income would overstate the modelled effect. Some partner payments change alongside the income on which they are based.
The opposite holds for a rise in yields: Circle would not retain every additional dollar of gross reserve income. Its distribution agreements allocate part of that benefit to the firms supporting USDC use.
Hyperliquid’s agreement shows the competition for distribution
JPMorgan’s Hyperliquid deal assessment argued that competition for large USDC balances could pressure the income retained by Circle and Coinbase. The bank lowered earnings forecasts in a July research note while continuing to expect USDC-related earnings growth through 2027.
Its analysis concerned the commercial terms used to keep USDC central to a major trading venue. The bank argued that platforms with substantial balances can seek a larger share of reserve income.
Circle’s management has described a growing network of partners that receive incentives to integrate and distribute USDC. Its filing says future arrangements may have different terms as negotiations and market conditions change.
A distribution payment is therefore part of the commercial cost of reaching users, not necessarily evidence that the issuer has lost control of its reserves. The reserve assets remain subject to the issuer’s custody and safeguarding arrangements.
The Q2 results provide an opposing fact to a simple account of inevitable margin erosion. Retained revenue and the RLDC margin both improved year on year despite the distribution costs and lower reserve returns.
Circle says its network’s use extends beyond crypto speculation into payments, settlement and institutional services. Management’s case is that more uses and more access can support growth in balances and revenue over time.
The financial effect depends on what the company earns from that activity and what it pays to obtain it. Higher turnover alone does not specify the fee rate, the duration of balances or the distribution terms attached to them.
The public filing does not provide a complete separate profit and loss account for each distribution partnership. An estimate of a particular deal’s earnings effect remains an estimate unless the company discloses enough figures to reproduce it.
Payments volume is not the same as payments revenue
Circle reported $14.8 trillion in USDC onchain transaction volume for Q2, a year-on-year rise of 151%. The volume figure counts activity using the token; it is not the amount Circle recorded as revenue or a measure of the reserve balance at a single point in time.
A USDC can be transferred repeatedly while the dollar backing it remains in reserve. Counting each transfer produces turnover that can be much larger than circulation without creating a new reserve dollar each time.
Circle’s other revenue grew 41.1% to $33.582 million in Q2. Even after that growth, it accounted for approximately 4.8% of the combined $701.315 million revenue and reserve-income total.
The company’s managed payments offering lets participating banks and payment firms interact in fiat while Circle manages the stablecoin process behind the transaction. It was introduced in April, with the company handling activities such as minting, burning and payment orchestration.
Circle reported $14.7 billion in annualised Circle Payments Network volume based on the trailing 30 days at the end of Q2. It said 175 financial institutions were enrolled.
Annualising a 30-day observation expresses that recent pace as a yearly rate. It does not establish that $14.7 billion had already passed through the network during a completed 12-month period.
Enrollment is another measure of reach, distinct from the number of institutions processing payments at a particular frequency. Circle has not presented every enrolled institution as generating the same transaction volume or revenue.
The filing describes transaction revenue as arising from usage-based, volume-based or event-driven activity, including certain redemptions and infrastructure services. It does not assign a single universal take rate to all USDC transfers.
Arc introduces a separate question about when income is recognised
Circle’s Arc mainnet launch took place on September 16, during Q3. The network uses USDC for transaction fees and brings the company’s stablecoin, payments and infrastructure products onto another operating platform.
In its launch announcement, Circle described a phased rollout of institutional validators and integrations involving payments, trading and tokenised assets. It said network-wide opt-in privacy remained in development.
The release does not establish that the entire list of participating or exploring institutions generates recognised revenue for Circle. Technical availability, commercial adoption and accounting recognition are separate stages.
Circle’s Q2 filing contains an earlier financial entry involving ARC tokens. Note 11 records agreements to sell 807.5 million tokens at $0.30 each, producing approximately $242.2 million in aggregate gross proceeds, of which $222 million had been received during the quarter.
The company recorded the proceeds as deferred revenue, with unpaid amounts in accounts receivable. Its accounting policy says recognition as other revenue occurs when the performance obligations in the purchase agreements are satisfied.
Cash received in Q2 therefore did not automatically appear as Q2 other revenue. The filing’s treatment leaves a distinction between the payment date and the period in which the relevant obligations are fulfilled.
The note includes a $25 million purchase by an entity affiliated with IDG Capital within the aggregate total. Adding that purchase to the $242.2 million would count it twice.
The presale affected a further measure in the financial statements: cash generated by operations. Circle reported $538.5 million of operating cash inflow for the first 6 months of 2026, compared with $303.7 million a year earlier.
Management attributed most of the $234.8 million improvement to working-capital changes, including the $222 million in token-sale proceeds received during Q2. It separately identified $41.1 million of improvement in net income after non-cash adjustments, partly offset by higher cash operating expenses.
The six-month cash-flow figure and the three-month revenue figures cover different periods. The receipt of presale cash cannot be treated as a recurring Q2 service fee or added again to recognised revenue.
Circle recorded $57.2 million of investing cash outflow over the first half, including $35.8 million in capitalised software development. Capitalising that spending records an asset whose cost is recognised over time, separately from immediate operating expenses in the income statement.
Its financing cash outflow included a roughly $2 billion fall in deposits held for stablecoin holders, primarily associated with lower USDC circulation over the half-year. Redemptions therefore appear in a different part of the cash-flow statement from the operating income generated by reserve assets.
The November results may provide updated information about those obligations and their accounting treatment. The September mainnet announcement alone does not establish the amount, timing or recurring nature of any subsequent revenue recognition.
Circle is funding infrastructure as well as distributing USDC
The company’s national trust bank approval in July added a federal custody initiative to its operating plans. The initial business described custody for Circle and affiliates, with further institutional services and possible reserve management subject to the approved scope and operational work.
The charter does not turn USDC into an ordinary bank deposit or give token holders federal deposit insurance. It concerns the institution’s permitted activities and supervision.
Circle’s filing says legal, compliance, product and engineering resources are expected to remain important costs as stablecoin rules develop. Its operating expenses include technology infrastructure, compensation, professional services and depreciation or amortisation.
The year-on-year fall in Q2 operating expenses was heavily affected by the comparison with IPO-related stock compensation in 2025. Circle’s results release says adjusted operating expenses rose 23% to $146 million.
The two expense measures describe different accounting treatments. A fall in the GAAP total does not establish that the ongoing cash cost of every business function declined.
Management has said it prefers reinvestment in products, infrastructure and strategic opportunities to quarterly dividends. The position was disclosed during the previous earnings cycle and remains a capital allocation policy, not a guarantee of future returns.
Circle’s scheduled shareholder question platform closes at 9 am ET on November 3. The company says the November 4 earnings materials, replay and transcript will be made available through its investor relations website.
What to watch
Retained revenue: Total revenue and reserve income after distribution, transaction and other costs.
Balance mix: Average USDC circulation and the weighted share held on Circle’s own platform.
Partner payments: Coinbase-related costs and disclosure about other distribution arrangements.
Non-reserve income: Recognised payments, subscription and infrastructure revenue, separately from activity volumes.
Arc accounting: Any update to deferred token-sale proceeds and the obligations required for recognition.
FAQ
When does Circle report its next earnings?
Circle has scheduled Q3 results for November 4, 2026. Its webcast is set for 8 am ET.
How much Q2 revenue did Circle retain after distribution costs?
Using the filing’s full cost category, $701.315 million less $412.470 million leaves $288.845 million. The amount is before operating expenses and is not net profit.
Did Circle’s retained-revenue margin fall in Q2?
No. The calculation using exact filing figures gives approximately 41.2%, against 38.2% in Q2 2025, with retained revenue growing around 15%.
How much did Circle pay Coinbase?
The filing records $324.6 million in Coinbase-related distribution costs for the 3 months ended June 30. The amount represents approximately 78.7% of the combined distribution, transaction and other cost category.
Does more USDC circulation always mean proportionately more income?
No. Reserve returns and commercial distribution terms affect the result, and average circulation differs from the final day’s balance.
What would a 1-percentage-point rate change do?
Circle’s June-based model estimates an annual $737 million reserve-income change and a $360 million distribution and transaction cost change. The resulting $377 million difference depends on fixed-balance and other assumptions and is not an earnings forecast.
Is USDC transaction volume revenue for Circle?
No. Q2’s $14.8 trillion in onchain volume is activity using the token, while other revenue was $33.582 million and reserve income was reported separately.
Did Circle recognise all ARC presale cash as revenue immediately?
No. The Q2 filing recorded the proceeds as deferred revenue pending satisfaction of contractual performance obligations.
Disclaimer: This article is for information and educational purposes only and does not constitute financial or investment advice. Figures reflect regulatory filings and reporting available at the time of writing and change with each disclosure. Nothing here is a recommendation to buy, sell, or hold any security or asset. Always do your own research. Information is accurate as of November 2, 2026. Legal questions should be discussed with qualified counsel.
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