Circle’s ARC token sale masks pressure on USDC income

Circle’s third-quarter disclosures showed $182 million in ARC token presale revenue turning an 8% year-over-year decline into 17% growth in total revenue and reserve income. The sale supplied roughly one-fifth of the headline $865 million total, so the reported improvement depended heavily on a discrete token transaction rather than recurring operations.

Diluted earnings per share reached $0.84, up from $0.64 a year earlier and double analysts’ expectations of $0.42. Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, rose 85% to $317 million.

Excluding ARC, revenue and reserve income stood at $683 million and adjusted EBITDA was approximately $135 million, down 21% from $171 million. In short, the token sale produced the quarter’s clearest improvement.

Why did USDC income fall despite balance growth?

USDC generates reserve income for Circle, tying revenue to prevailing yields and the amount of stablecoin outstanding. Average circulation rose 8% year over year, but lower reserve returns outweighed that growth. Reserve income fell 8% to $657.6 million as the reserve return dropped 61 basis points, or 0.61 percentage point, to 3.5%.

USDC ended September at $73.9 billion in circulation, while its stablecoin market share fell 1.83 percentage points to 27%. The sequential reserve return edged up from 3.48% in the second quarter, but remained below the year-earlier level.

The Federal Reserve raised its benchmark range by a quarter point in September to 3.75%–4%, still below the 4%–4.25% range set a year earlier. More stablecoins did not offset lower yields. The core business remains sensitive to both balances and interest rates.

Can payments and staking replace reserve income?

Circle launched its payments network in May 2025 to connect financial institutions with stablecoins used in cross-border settlement. Arc, Circle’s blockchain for financial applications, went live on public mainnet on Sept. 16, 2026. Its native ARC token is intended to support network security and governance as Arc moves toward proof of stake in 2027, while transaction fees are paid in USDC.

Circle also began charging for some payments-network activity. CFO Jeremy Fox-Geen said on the earnings call that the company expected material revenue from Circle Payments Network, or CPN, in 2027. Arc staking rewards could add another revenue stream after the proof-of-stake transition, although Circle acknowledged that outcome depends on network development.

CEO Jeremy Allaire described the broader strategy: “This is not just about payments, and it is not just about digital dollars. It is about multiple compounding flywheels on one platform.” He also said every new member, builder and asset makes the platform more valuable. The statement sets out a platform thesis, not evidence of cross-network demand.

Payments and staking can diversify revenue, but neither has yet established an earnings scale comparable to reserves. The 2027 targets remain contingent rather than booked.

How does competition change the pressure?

Competition is also becoming more structured. Open Standard’s Open USD was live on Solana by Sept. 30, with Coinbase, Mastercard, Shopify, Stripe and Visa as founding partners. The model distributes reserve earnings to partners after a management fee, giving businesses another option for accessing stablecoins and sharing their economics.

Partners can now participate directly in reserve economics rather than treating stablecoins only as a settlement rail. The competitive pressure is concrete because USDC already lost 1.83 percentage points of market share. Circle must show payment and staking revenue before reserve yields compress further.

What does the workforce reduction signal?

Circle’s earnings disclosures also included a workforce reduction affecting approximately 5% of employees. The company said the cut would align its organization with its operating model and strategic priorities. Against that backdrop, Circle shares were down 0.84% at $74.59 at 4:05 p.m. UTC on Nov. 4, according to Yahoo Finance.

The operating issue remains whether payments and staking can replace the earnings support now provided by USDC reserves. Neither outcome is assured: staking depends on network development, and payment revenue remains prospective. By 2027, Circle’s diversification case will be measurable: Arc must reach its proof-of-stake target, and CPN must produce material revenue.