Lower yields cut Circle's interest income; a token presale lifted its quarter

The money Circle earns from parking customers' dollars shrank in the third quarter, and a token presale covered the gap. Circle, which issues the USDC dollar token, reported on Nov. 4 that income from the reserves behind USDC fell 8% to $657.6 million, while total revenue and reserve income rose 17% to $864.9 million [2]. Of that total, $182 million came from the presale of its new ARC token [2].

The mechanism

USDC is a digital token that Circle promises to redeem one-for-one for U.S. dollars. To back that promise, Circle holds reserves of cash and short-term assets, and it keeps the interest those reserves earn. That interest, which Circle calls reserve income, is the bulk of its business: $657.6 million of the quarter's $864.9 million [2].

Reserve income depends on two things: how much USDC is outstanding and what the reserves earn. Circle's "reserve return rate," the annualized yield it earns on those reserves, was 3.5% in the quarter, down 0.61 percentage point from a year earlier [2]. Average USDC in circulation rose 8% to $73.3 billion, but that growth didn't make up for the lower yield. The filing says reserve income fell "primarily from a 61 bps decline in the Reserve Return Rate, partially offset by 8% growth in average USDC in Circulation" [2].

Circle's other line of revenue moved the other way. "Other revenue" rose 627% to $207.3 million [2]. The filing says the jump came "from the ARC token presale ($182 million), partially offset by lower subscription and services revenue" [2]. A presale is a sale of tokens before they trade freely; ARC is the token for Arc, the blockchain network Circle launched publicly on Sept. 16 [2].

The evidence

The filing's own lines make the split plain.

Source: Circle Form 8-K, Exhibit 99.1, statement of operations and key results tables, Nov. 4, 2026 [2]. Year-ago USDC dollar levels and reserve return rate are not given in the release.

Take the presale out and the growth goes away. By Le Coin's arithmetic, subtracting the filing's stated $182 million presale from total revenue and reserve income leaves about $682.9 million, against $739.8 million a year earlier, down about 7.7% [2].

Costs helped the bottom line. Distribution, transaction and other costs fell 8% to $411.6 million, "mostly from decreased distribution payments," the filing says [2]. Circle tracks what's left after those costs as revenue less distribution costs, which rose 55% to $453 million, or 52% of total revenue and reserve income, up from 39% a year earlier [2]. Operating expenses rose 16% to $244.9 million [2].

Net income from continuing operations rose 5% to $226.0 million [2]. The year-ago figure included a $61.3 million income tax benefit; this quarter carried a $2.2 million tax expense [2]. Diluted earnings per share were $0.84, against $0.64 [2].

Adjusted EBITDA, a non-GAAP measure, meaning one that isn't defined by standard accounting rules, rose 85% to $316.7 million [2]. Circle changed that measure's definition in the first quarter of 2026, and the filing says the increase reflects "the ARC token presale revenue and lower distribution costs" [2].

Reserve income has stayed below its late-2025 level all year. It was $658 million in the third quarter, against $668 million in the second quarter, $653 million in the first and $733 million in the fourth quarter of 2025, the release's quarterly table shows [2]. Over nine months, total revenue and reserve income was $2.26 billion, against $1.98 billion a year earlier [2].

USDC itself stood still on the year. The amount in circulation at quarter-end was $73.9 billion, which the release shows as 0% change from a year earlier [2].

The objection

Circle would argue the presale isn't noise. ARC is part of its strategy: the release says Circle completed the "genesis mint" of 10 billion ARC tokens and calls Arc's launch "the most significant product launch in Circle's history since USDC" [2]. Its company guidance also counts presale revenue as part of the year. Circle said its guidance was "unchanged," including other revenue of $310 million to $330 million for fiscal 2026, a figure it notes "includes recognized ARC token presale revenue" [2].

The quarter also showed growth elsewhere. Average USDC rose 8%, USDC minted rose 31% to $104 billion, and Circle said it signed a definitive agreement to acquire Tazapay, a Singapore cross-border payments firm, in a deal "expected to close in 2027, pending regulatory approvals" [2]. Binance announced a $100 million equity investment in Circle, according to the release [2].

And net income did rise, even after a quarter with restructuring costs: Circle cut its workforce by about 5% and booked $9.1 million in restructuring expenses [2].

The tell (Le Coin's view)

Circle's core business is a bet on interest rates, and this quarter shows how much that bet matters. With USDC flat at quarter-end and the reserve yield 0.61 percentage point lower, the income from reserves fell even as average circulation grew. The 17% headline rests on a token sale Circle itself describes as a presale. The line to watch in later filings is reserve income, not total revenue.

Sources

• [1] Circle Internet Group, Inc., Form 8-K, Item 2.02, accession 0001876042-26-000309, accepted Nov. 4, 2026, 6:26 a.m. ET, https://www.sec.gov/Archives/edgar/data/1876042/000187604226000309/ ; accessed 6:42 a.m. ET Nov. 4.
• [2] Circle Internet Group, Inc., Exhibit 99.1, "Circle Reports Third Quarter 2026 Results," Nov. 4, 2026, https://www.sec.gov/Archives/edgar/data/1876042/000187604226000309/finalq3epr-110326.htm ; accessed 6:42 a.m. ET Nov. 4.

Holding the Corner.

Not financial advice.