Circle's third-quarter earnings beat rested on a $182 million ARC token presale, while reserve income from USDC fell. Clear Street expects the token contribution to shrink in Q4.
Circle's $182 million ARC token presale drove its third-quarter earnings surprise even as income from the reserves backing USDC declined. The stablecoin issuer reported adjusted EBITDA of $317 million, well above Wall Street's $218 million consensus estimate and Clear Street's $220 million forecast.
Revenue shrinks without the token sale
Clear Street said the beat was primarily driven by ARC presale revenue, which exceeded its $90 million projection by $92 million. Without that contribution, adjusted EBITDA would have been approximately $135 million, down from $143 million in the preceding quarter.
Revenue shows the same split. Circle reported a 17% increase in total revenue and reserve income to $865 million. Excluding the presale would have left approximately $683 million, below the $740 million recorded a year earlier.
Reserve income falls with yields
Circle's traditional reserve business stayed under pressure despite growing stablecoin adoption. Reserve income fell 8% to $658 million as the average yield on USDC reserves declined by 61 basis points to 3.5%, offsetting an 8% increase in average circulation.
Clear Street also pointed to the presale's outsized effect on profitability. Revenue less distribution costs reached $453 million, a 52.4% margin. Without ARC, the margin would have been approximately 39.7%, below the 41.2% recorded in the second quarter.
USDC usage grows as Circle awaits payments revenue in 2027
Usage kept rising. CEO Jeremy Allaire said USDC accounted for 79% of stablecoin transaction volume during the quarter, up from 66% a year earlier. Onchain transfers increased 49% to $13.9 trillion.
Circle expects its payments network to generate material revenue in 2027, although management has yet to provide a formal forecast. Meanwhile, Clear Street estimates that other revenue will decline to between $28 million and $48 million in the fourth quarter, reflecting the unusually large ARC contribution recognized in September.
Source: CryptoSlate
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