Circle Internet Group (NYSE: CRCL) shares rallied 16.5% on Thursday, closing at $103.23, as investors focused on robust USDC circulation growth despite a challenging interest-rate environment. The stock touched an intraday high of $103.28 before settling slightly lower, with 22.2 million shares changing hands.
The surge came after Circle's quarterly filing revealed that average USDC circulation expanded 25.2% in the second quarter, adding $147.4 million to reserve income. However, a 66-basis-point decline in reserve yields removed $113.9 million, erasing 77% of that benefit. Net reserve income still increased by $33.5 million year-over-year, reaching $667.7 million.
Total revenue rose 6.6% to $701.3 million, while adjusted EBITDA climbed 8% to $143.5 million. Other revenue, excluding reserve income, jumped 41.1% to $33.6 million, but reserve income still accounted for 95.2% of the quarterly total. Distribution, transaction, and other costs consumed 58.8% of revenue, with payments to Coinbase alone reaching $324.6 million.
Revenue less distribution costs increased 15% to $288.8 million, and the margin widened by three percentage points to 41%. CEO Jeremy Allaire noted that results reflected "the current rate environment and a crypto market that has slowed," but pointed to recent activity as a sign of renewed momentum.
The broader crypto sector also saw gains, with Coinbase (COIN) rising 10.1% and Robinhood (HOOD) up 16.6%. The S&P 500 ETF (SPY) added 1.0%.
Looking ahead, the launch of Arc's public mainnet on September 16 is a key catalyst, with more than 100 institutions and ecosystem builders involved. Circle's equity value, based on Thursday's close, stands at approximately $26.1 billion, or 9.3 times annualized second-quarter revenue.
Risks include faster Federal Reserve easing, which would reduce reserve returns, and stablecoin redemptions that could shrink USDC. Tougher distribution terms and competition could also compress retained revenue. Despite these headwinds, the market is betting that circulation growth can outpace rate cuts and partner costs.
