Circle Internet Group Faces Stock Decline Amid Solid Earnings
Circle Internet Group, the issuer of the stablecoin USDC, witnessed a decline of over 6% in its share price following the release of its latest quarterly earnings report. Despite announcing robust figures, the company’s shares fell as analysts pointed to several underlying issues that could impact future performance.
In the earnings report, Circle revealed that the circulation of USDC surged by an impressive 90% year-on-year, reaching US$61.3 billion (approximately AU$93.9 billion). Moreover, the company experienced a 53% increase in total revenue and reserve income, totalling US$658 million (about AU$1.01 billion).
However, despite these strong numbers, analysts from Mizuho Securities expressed concerns about the slower-than-expected growth of USDC. The firm had initially anticipated that USDC would achieve a 40% compound annual growth rate. Still, the actual quarterly growth rate lagged at only 6%, falling short of these projections.
Key factors influencing the stock’s performance include:
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Rising Distribution Costs: The distribution costs associated with USDC increased significantly—rising from 39% of the reserve pool in 2022 to 64% by the second quarter of 2025. This rise in costs has directly impacted the company’s profit margins.
- Broader Macroeconomic Challenges: Analysts highlighted the influence of economic trends on investor sentiment. A slower increase in US consumer prices, reported at 2.7% year-on-year in July, has raised expectations of possible interest rate cuts. This scenario poses a threat to Circle, as the company relies on elevated interest rates for its revenue.
Mizuho Reassesses Circle’s Stock Target
In light of these factors, Mizuho has adjusted its price target for Circle’s shares from US$85 (AU$130.2) to US$84 (AU$128.8) while maintaining an Underperform rating. This revision stems from concerns regarding margin compression and the sluggish growth of USDC. Currently, Circle’s shares are trading around US$100 (AU$153.2) with a market capitalisation of US$41.1 billion (AU$62.9 billion).
Mizuho’s senior analyst Dan Dolev remarked that Circle’s post-IPO valuation seems inflated in comparison to the actual adoption of USDC. While recent policy shifts in the US have facilitated stablecoin usage, Dolev noted that the practical adoption of USDC has not met expectations.
Despite the significant year-on-year growth in circulation and revenue, Circle’s shares are under pressure due to a combination of slower growth, escalating costs, and an elevated valuation, leading analysts to adopt a cautious outlook on the company’s short-term performance.
Related Update: Circle is exploring the opening of a bank to expand its services into traditional financial custody services, indicating a strategic move to bolster its market presence despite current challenges.
