USDC circulation rose 19% but 95% of Circle’s revenue still comes from reserve interest. AI agent payments and the Arc token launch are bets on a new model.
Circle’s second-quarter earnings Wednesday laid bare a familiar tension. USDC circulation rose 19% from a year earlier to $73.3 billion. On-chain transaction volume hit $14.8 trillion, up 151%. But revenue grew just 7%, to $701 million, and nearly all of that came from interest earned on reserve assets.
Wall Street has been circling the same question for months. Can Circle build a business that does not depend on the Federal Reserve’s rate path? The company’s own numbers show how far it still has to go.
Reserve income – the interest Circle earns on the Treasuries and cash backing USDC – accounted for $668 million, or about 95% of total revenue. That figure rose only 5% year over year because the return rate fell 66 basis points to 3.5%, even as average circulation expanded 25%. Other revenue, which includes subscription and services fees, climbed 41% but remained a slender $34 million.
The threat to Circle’s economics is more than a rate cycle. A consortium-backed rival stablecoin called Open USD is trying to persuade distributors to switch by offering them a share of reserve income. Analysts who cover the stock say that could compress Circle’s margins over time, especially if USDC circulation stagnates.
Circle’s share of the fiat-backed dollar stablecoin market slipped to 27% at the end of the quarter, down 66 basis points from a year earlier. The company minted $83 billion of USDC during the period and redeemed $87 billion – a churn rate that illustrates how quickly stablecoin balances can move.
Jeremy Allaire, Circle’s chief executive, largely sidestepped direct references to competitors on the earnings call. He pointed instead to network scale. The company now works with more than 15 banking partners and over 150 commercial distribution partners. Management also said roughly 70% of the institutions that signed up for the new consortium already use USDC.
“We received our federal trust bank charter. Arc is launching on public mainnet September 16. We launched the Agent Stack to put programmable money at the center of the agentic economy. The institutions using USDC today, like BlackRock, BNY, and Standard Chartered, aren’t piloting. They are expanding,” Allaire said.
The most revealing statistic from the quarter may not have been a dollar figure. USDC circulation increased 19% year over year while the broader digital asset market declined roughly 40%. Management cited that divergence as evidence that USDC is becoming less tied to crypto trading cycles and more linked to enterprise payments, settlement and financial infrastructure.
The Circle Payments Network processed an annualized $14.7 billion in volume during the final 30 days of the quarter, up 76% from the prior period. The network now includes 175 financial institutions, a 29% sequential increase.
The company is pursuing a similar strategy in artificial intelligence commerce. Circle said its Agent Stack already supports more than 900 paid services. USDC accounts for 99.3% of payment volume using the x402 agent-payment protocol. Management said future updates would let autonomous agents not only spend money but also earn it.
Allaire did not present AI commerce as an immediate revenue driver. He argued instead that it would eventually lift stablecoin balances, payment velocity and the use of Circle’s broader infrastructure.
Circle revised its 2026 other-revenue guidance upward from $150 million to a range of $310 million to $330 million. Part of that increase comes from a presale of its planned ARC token, so the jump does not reflect purely recurring operating income.
The risk that eats at Circle’s valuation is a slow loss of distribution partners to Open USD or another competitor. If USDC’s market share keeps slipping and interest rates fall at the same time, reserve income would shrink from both sides. A sustained crypto bear market would also slow payment volume growth.
On the positive side, Circle’s new trust bank charter could open doors with regulated institutions that have stayed on the sidelines. Arc’s September 16 launch will test whether tokenized assets generate the kind of settlement demand Circle needs. And if AI agents begin using USDC at scale, the economics would shift from a static balance sheet to a transaction-driven model.
For now, Circle remains a reserve-income company that is placing aggressive bets on becoming something else. The next proof point is Arc. The one after that is harder to predict.
JPMorgan Chase & Co. shares closed at $359.93 Wednesday, up 0.67%. The bank is one of several traditional institutions Circle has partnered with to distribute USDC.
Arc launches on Ethereum mainnet September 16. Circle’s next quarterly report will show whether network effects are growing faster than competitive pressure.
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