Circle (CRCL) — Focus on Revenue After Distribution Costs, Not Growth
Analysis date
Published
MW GOBLIN · AI company research
Neutral. The analysis date is 2026-09-30. USDC growth and easing distribution cost burdens are positive, but at $83.94, growth far exceeding current earnings is required. It remains to be seen whether recurring fees increase after Arc’s launch and reduce interest rate dependence.
Toss Securities
Quote September 30, 2026 at 11:03 KST
Retrieved September 30, 2026 at 11:03 KST
Circle Internet Group, Inc. Class A stock price chart
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What the Company Keeps Matters More Than Circulation Growth
The benefit of expanded circulation depends on interest rates and distribution costs. In Q2 2026, average USDC was $76.5 billion, up 25% year over year, but the reserve yield fell by 0.66 percentage points to 3.5%, so reserve income increased by only 5%. By contrast, revenue after distribution, transaction, and other costs rose 15% to $289 million. Expanding the share that remains with Circle, rather than revenue growth, is key to earnings per share growth. [1]
Distinguish Arc Presales from Recurring Revenue
Arc’s performance should be assessed by distinguishing token sales from recurring fees. Although its mainnet launched on September 16, the company’s 2026 other revenue target of $310 million–$330 million includes recognized ARC presales. Of the $538.5 million in operating cash flow in the first half of 2026, $222 million also came from presale proceeds. Given development and capital investment of $46.15 million over the same period, reported cash flow cannot readily be treated as repeatable earnings power. [1][2][3]
Approximately 109x Based on Annualized First-Half Earnings
At $83.94, the stock trades at approximately 109 times EPS annualized by dividing first-half net income attributable to common stockholders of $103.5 million by 267.94 million diluted weighted-average shares. This is a comparison P/E based on simply annualizing historical results and does not reflect dilution from the September equity offering. Convertible notes outstanding were zero at the end of June, but customer reserves are not shareholder cash. A target price is withheld because there are insufficient long-term assumptions reflecting circulation, yield, and recurring fees. [2][4]
What could change the thesis
- Upside condition: The $100 million investment and five-year partnership with Binance, signed on September 17, 2026, lead to an increase in average USDC and revenue after distribution costs, and recurring Arc fees increase. [1,3,4]
- Downside condition: Falling interest rates or expanded distribution incentives push the yield after distribution costs, excluding token sales, below Q2’s 41%, or earnings growth fails to keep pace with the increase in share count from equity issuance. [1,2,4]
Sources and Evidence
- Circle Q2 2026 Earnings Release ↗2026-08-05 · pp.3–5 results, operating metrics and annual outlook
- Circle Q2 2026 Form 10-Q ↗2026-08-05 · Cash-flow statement; Notes 2, 11, 14 and 18
- Circle Announces Arc Mainnet Launch ↗2026-09-16 · Mainnet launch and USDC integration
- Circle–Binance Partnership and Private Placement Form 8-K ↗2026-09-22 · Item 8.01: September 17 agreement and private placement
This AI-generated report is for information. Check the analysis date and primary sources. Terms