Circle Annual Revenue of $2.7 Billion Yet Net Loss, Coinbase Is the Biggest Winner Behind USDC

Author: insights4vc

Translation: Shen Chao TechFlow

Shen Chao Guide: Circle has gone public on the NYSE, with the stock ticker CRCL. But what kind of business is this company really in? This article, based on its FY2025 annual report, breaks down Circle’s revenue structure, reserve fund model, revenue-sharing arrangements with Coinbase, and the growth status of USDC and EURC.

The core conclusion: Essentially, Circle is a rate-sensitive financial infrastructure company that earns interest on reserves, not software platform subscription or trading fees. This judgment directly impacts its valuation logic.

Full text below:

To understand Circle, it should first be positioned as a “reserve income company,” rather than a scaled software or payment fee platform. Its profit model heavily depends on stablecoin balances, short-term interest rates, and the portion of reserve income actually retained after paying out large revenue shares.

FY2025 data clearly illustrates this: total revenue plus reserve income amounts to $2.747 billion, with reserve income contributing $2.637 billion, and other income only $110 million. Therefore, Circle’s recent financial performance mainly depends on three variables: the average circulation of USDC, the actual yield on reserves, and the economic structure of partnership revenue sharing (especially the contract with Coinbase).

Total revenue and reserve income in FY2025 grew from FY2024’s $1.676 billion to $2.747 billion, a strong increase. Reserve income rose from $1.661 billion to $2.637 billion, and other income from $15 million to $110 million. Even so, Circle’s net loss attributable to common shareholders in FY2025 still reached $70 million, with operating expenses soaring, including payroll costs of $845 million.

Figure: Key financial metrics for Circle FY2025

The core debate for 2026 is not whether Circle is expanding its footprint, but whether this expansion can truly be reflected in financial data. The key variables remain: whether USDC balances can continue to grow, how reserve yields will evolve in a declining interest rate environment, whether distribution costs will remain high long-term, and whether the scaling of new revenue streams like CCTP, CPN, and USYC can keep pace with the growth of the reserve base.

At this stage, Circle’s strategic boundaries are clearly expanding, but the core investment framework remains unchanged: it is still a rate-sensitive financial infrastructure company driven primarily by reserve income, not a diversified platform monetizing through subscription or trading fees.

Circle Business Overview

Circle is a fintech company listed on the NYSE, ticker CRCL. The company filed its FY2025 annual report (10-K) on March 9, 2026, covering the period ending December 31, 2025. The balance sheet shows “Stablecoin Holders’ Deposits” at $74.9 billion, directly indicating that the company’s core economic activity remains managing the scale of reserve-backed stablecoins, rather than a traditional software model.

From an analytical perspective, Circle can be broken down into four layers:

1. Stablecoin issuer, with main products USDC and EURC; liabilities are the circulating stablecoins, assets are reserves held separately for users.
2. Reserve fund income business, monetizing reserves through interest and dividends.
3. Developer, payment, and infrastructure layer, focused on expanding stablecoin use cases and transaction density.
4. A broader strategic layout around “Internet financial systems,” including Arc, Circle Payment Network (CPN), and tokenized asset infrastructure.

However, disclosed data indicates that the actual financial impact currently still comes mainly from the reserve income model, not from scaled software or trading fee businesses. FY2025 total revenue plus reserve income is $2.747 billion, with reserve income contributing $2.6368 billion, and non-reserve income being relatively limited.

This distinction is critical for valuation. Circle’s strategic narrative is broadening, but its revenue structure does not support a “software platform re-rating” story. Previously disclosed data shows that in 2024, “Other Products” revenue accounted for only 1% of total revenue, though management also indicated that other income would accelerate in 2025, with Q4 2025 other income reaching $37 million, a year-over-year increase of $34 million. This is a positive signal but not enough to challenge the core profitability driven by reserve balances, reserve yields, and partner economic structures.

Another strategic pillar is regulatory positioning. Circle disclosed that in December 2025, it received conditional approval from the OCC to establish a national trust bank, named First National Digital Currency Bank, N.A. Management described this as an important step to strengthen USDC infrastructure and potentially expand regulated custody and reserve management capabilities. This could enhance regulatory sustainability and institutional confidence in reserve governance, but it is not yet a disclosed profit driver.

Business Model and Economic Structure

Circle’s business model is determined by two variables: the size of circulating stablecoins and the yield on reserves. The company explicitly defines reserve income as a function of reserve balances and reserve returns.

FY2025 reserve income was $2.6368 billion, up from $1.6611 billion in FY2024. In comparison, FY2025 other income was only $109.8 million (FY2024: $15.2 million), with subscription and service revenue at $84.8 million as the largest non-reserve item. This confirms that Circle’s profit structure is highly sensitive to interest rates and balance growth, even as auxiliary income starts from a low base.

Reserve management is conservative. Circle disclosed that as of June 30, 2025, approximately 87% of USDC reserves were held in the Circle Reserve Fund—a government money market fund compliant with 2a-7 rules, managed by BlackRock and custodied by BNY Mellon. The rest is held in cash accounts serving USDC holders, mainly at globally systemically important banks. The reserve-building logic prioritizes liquidity, capital preservation, transparency, and compliance, rather than maximizing yield.

Circle’s economic structure is also deeply influenced by distribution arrangements, especially the agreement with Coinbase. Reserve income is recognized in gross, but the company makes extensive downstream payments through distribution and trading costs. This means a significant portion of gross reserve income is paid out via contractual distribution layers before operational expenses.

Data shows that FY2025 net income after distribution costs (RLDC) was $1.083 billion, while total revenue plus reserve income was $2.747 billion; the difference indicates that most gross monetization is paid out through distribution layers.

This is crucial for modeling. Circle is not a pure beneficiary of rising interest rates or USDC balance growth—growth in reserve monetization does not translate one-to-one into retained profitability. According to earlier sensitivity disclosures, with an average reserve yield of 4.26% as of June 30, 2025, a 100 basis point change would alter reserve income by approximately $618 million, but distribution and trading costs would also change by about $315 million. This means a large part of reserve upside is shared with distribution partners, leaving only the residual after operational costs flowing into RLDC. For institutional analysis, RLDC is a more useful intermediate profit measure than gross reserve income.

The reported profitability quality in FY2025 is also significantly affected by non-core and non-cash items. Circle disclosed a net loss of $70 million from continuing operations, but adjusted EBITDA was $582 million. The gap mainly results from high equity-based compensation tied to IPO-related vesting conditions—Circle explained that at the time of FY2025 reporting, a $424 million equity incentive expense was recorded, triggered by the IPO vesting conditions being met at NYSE listing, specifically RSU performance conditions. Therefore, GAAP net profit is not the best indicator of fundamental economics or profitability.

The most critical factor is the arrangement with Coinbase, which is the most important and often underestimated aspect of its business model.

When USDC was launched in 2018, Circle and Coinbase jointly formed a consortium to govern the stablecoin. This structure was dissolved in 2023, with Circle taking sole issuance rights. However, Coinbase retained a highly favorable revenue-sharing agreement.

Figure: USDC reserve fund sharing structure between Circle and Coinbase

Under the agreement, all reserve income generated on USDC held on Coinbase’s platform is 100% retained by Coinbase; reserve income from other channels is split 50/50. In 2024, out of $1.01 billion in total distribution costs, $908 million was paid to Coinbase. In other words, for every dollar Circle earns, about $0.54 flows to a company that neither issues USDC nor manages its reserves. By early 2025, Coinbase held 22% of USDC’s total supply, up from 5% in 2022. As USDC becomes more concentrated at Coinbase, Circle’s payment burden also increases.

In summary, at this stage, Circle should be viewed as a rate-sensitive financial infrastructure company driven mainly by stablecoin reserve income, not a software platform primarily monetizing through subscription or trading fees. The platform’s option value is becoming clearer, especially with the expansion of Arc, CPN, and non-reserve income streams. But the disclosed FY2025 revenue structure still supports an analytical framework centered on reserve balances, reserve yields, and distribution sharing mechanisms. Until non-reserve income accounts for a significant share, reserve income remains the main driver of Circle’s profitability sensitivity and valuation debate.

Deep Dive into USDC and EURC

USDC

USDC is the core economic engine for Circle entering 2026. In FY2025, Circle disclosed that as of December 31, 2025, USDC circulation was $75.266 billion. Subsequently, Circle’s USDC product page showed that as of March 16, 2026, circulation was $79.2 billion. From year-end to mid-March, USDC circulation increased by about $3.9 billion, roughly 5.2%. Not explosive growth, but it indicates that net expansion continues on a solid base established in 2025.

Figure: USDC supply (Source: Allium)

Circle’s FY2025 indicates a strong growth year for USDC. In Q4 2025, USDC circulation grew 72% year-over-year to $753 billion, and on-chain USDC transaction volume surged 247% to $11.9 trillion. The average USDC circulation for the year was $64.87 billion, higher than FY2024’s $33.34 billion, but FY2025’s reserve yield was 4.1%, lower than FY2024’s 5.0%. The key takeaway: revenue expansion in 2025 relied on balance growth, not yield improvements, as reserve yields declined YoY.

Circle also disclosed operational metrics indicating USDC is a high-turnover monetary tool rather than static collateral. In FY2025, USDC minting was $257.5 billion, redemptions $226.1 billion; stablecoin market share at year-end was 28% (based on third-party market cap data); and the number of active wallets at year-end was 6.8 million (per Circle’s own definition). The large minting and redemption volumes relative to the end-of-period stock suggest high transaction turnover, likely from exchange settlements, liquidity routing, collateral management, and DeFi flows, rather than simple buy-and-hold reserve assets. Circle has not publicly provided detailed breakdowns of these use cases.

The narrative of USDC as a payment instrument is gaining credibility, but still in early stages compared to the reserve income model. Visa has launched USDC settlement functionality in the US with select card-issuing and acquiring partners, supporting settlement of some Visa obligations on specific blockchains outside traditional banking hours. Circle views this as proof that USDC can serve as a continuous settlement asset, not just a native crypto trading tool. Although the scale is still small relative to Visa’s overall network, this is one of the clearest signals that USDC is being positioned as part of real-world payment infrastructure.

Partnerships for consumer and SME ecosystems are expanding. On December 18, 2025, Circle announced a partnership with Intuit to integrate USDC into TurboTax, QuickBooks, and Credit Karma. Strategically, this supports the argument that Circle is pushing USDC beyond trading venues and crypto-native users into mainstream financial workflows. But monetization remains opaque—Circle has not disclosed pricing, commission rates, or revenue-sharing details for these integrations, so progress at the distribution level should not be mistaken for high-margin payment revenue.

On market structure, Circle and Polymarket announced on February 5, 2026, that Polymarket will migrate from bridging USDC (USDC.e) on Polygon to native USDC over the coming months. This indicates a broader push to reduce reliance on bridged liquidity and increase native USDC issuance across chains. Native issuance can improve redemption transparency, reduce cross-chain operational friction, and align with regulatory priorities. However, this migration also highlights structural challenges: fragmentation of cross-chain liquidity and the friction of bridging remain issues rather than mere technical details.

Overall, USDC is a hybrid tool: primarily a settlement asset for exchanges and venues; a high-velocity on-chain dollar used for collateral, liquidity routing, and infrastructure; and increasingly an emerging institutional settlement track through specific integrations. Evidence of growth in payments is improving, especially with Visa settlement, Intuit integration, and broader infrastructure development. But the main economic driver disclosed remains reserve-based reserve income, not explicit transaction fee monetization from payment activities.

EURC

EURC is strategically important, though its direct economic contribution remains limited. The European regulatory environment is particularly relevant here. The MiCA regulation (EU 2023/1114), effective in 2023, applies to asset-referenced tokens and electronic money tokens from June 30, 2024, with broader implementation from December 30, 2024. This schedule means euro-pegged stablecoins are among the first to gain “regulatory compliant and rated” status, boosting confidence among regulated issuers and exchanges supporting compliant euro stablecoins.

Circle disclosed that as of December 31, 2025, EURC circulation was approximately 309.6 million euros. By March 16, 2026, the circulation was 382.8 million euros. From year-end to mid-March, EURC grew by about 73 million euros, roughly 23.6%. While the absolute volume remains small compared to USDC, the growth rate is meaningful, indicating EURC is gaining traction from a low base.

The overall euro stablecoin market remains small. Reuters reported in September 2025, citing Italian banking data, that total euro stablecoins were about $620 million, while global stablecoin issuance was around $300 billion. Even with future growth, Circle’s reported circulation of 382.8 million euros as of March 2026 suggests EURC could rank among the leading euro stablecoins by supply.

Circle positions EURC as compliant with MiCA, supporting Avalanche, Base, Ethereum, Solana, and Stellar, with monthly proof reports promised. Strategically, EURC’s value to Circle may exceed its current direct financial contribution: it helps establish a European regulatory foothold, supports on-chain euro-dollar workflows alongside USDC, and provides optionality as European digital currency policies evolve. A Reuters report at the end of 2025 noted increasing attention from European institutions and policymakers to alternatives to dollar-dominated stablecoin infrastructure, supporting the optionality argument.

Over the next 12–24 months, EURC is better viewed as an enabling layer rather than an independent profit driver. Its scale is less than €5 billion, and Circle has not disclosed separate revenue data for EURC. To become financially significant, EURC would need three things: substantial growth in euro-pegged floating supply, adoption in payments and financial use cases beyond crypto-native markets, and a distribution path that avoids heavy economic sharing like USDC’s model. In other words, EURC is strategically important but not yet a core financial driver.

FY2025 Financial Analysis and Key Metrics

Circle’s FY2025 financials reaffirm that it is primarily a reserve income business—total revenue plus reserve income was $2.747 billion, up from $1.676 billion in FY2024. Reserve income was $2.637 billion (FY2024: $1.661 billion), and other income was $110 million (FY2024: $15 million). The year-over-year increase is almost entirely driven by reserve income expansion, not a broad shift toward software or trading fee revenue.

Figure: Revenue structure for Circle FY2025

Figure: Cost structure breakdown for FY2025

Cost structure is also a key component of the underwriting framework. Distribution and trading costs in FY2025 were $1.662 billion, up from $1.011 billion in FY2024. Operating expenses rose from $492 million to $1.179 billion, with payroll costs at $845 million (up from $263 million). This confirms that higher reserve income creates gross profitability, but a large share is shared with partners, and rising operating costs further absorb this.

For operational leverage, RLDC (net revenue after distribution costs) is more useful than top-line revenue. Circle disclosed FY2025 RLDC of $1.083 billion, up from $659 million in FY2024; the RLDC profit margin has been steady at 39% over two years. This stable margin indicates distribution costs generally scale with reserve income, and higher interest rates or larger balances do not translate into structurally better retained economics. In other words, Circle has achieved growth, but the core economic share retained after distribution has not materially improved.

A clearer signal of operational leverage appears in management’s adjusted metrics rather than GAAP. Circle disclosed FY2025 adjusted operating expenses of $508 million, with guidance for FY2026 of $570–585 million under the new definition. This suggests the company plans to continue investing in growth rather than shifting to a near-term harvesting mode.

Figure: Key items from Circle FY2025 balance sheet

The balance sheet also supports a specific interpretation of the business model. As of December 31, 2025, Circle reported $75.068 billion in cash and cash equivalents held for stablecoin holders, and $74.913 billion in stablecoin holders’ deposits. This structure aligns with a reserve-backed issuance model built around segregated balances, rather than a traditional loan-based asset-liability profile.

From an analysis perspective, this makes Circle more akin to a narrow-interest business rather than a high-commission fintech, with the key condition that reserves are described as held for token holders and intended to be bankruptcy-remote under Circle’s disclosed structure.

Q1 2026 Preview and FY2026 Bull, Base, Bear Scenarios

Entering Q1 2026, the interest rate environment is less favorable than the recent peak cycle. As of March 16–17, 2026, the effective federal funds rate was 3.64%, and SOFR was 3.65%. Circle’s sensitivity framework uses a 2025 December average yield of 3.64% as a reference. This implies that at the start of 2026, reserve returns are still significantly below FY2024’s 5.0%, closer to late 2025 levels, meaning that if Circle wants to sustain reserve income growth, balance growth must do more of the work.

The Q1 2026 starting point in terms of balances is at least constructive. Circle disclosed that as of March 16, 2026, USDC circulation was $79.2 billion, higher than the $75.266 billion at year-end; EURC increased from €309 million to €382.8 million. This suggests that average stablecoin balances in Q1 may have improved relative to Q4, partially offsetting the lower yield environment.

Management’s FY2026 guidance indicates continued diversification of revenue streams but no fundamental change in the economic model. Specifically: other income of $150–170 million, RLDC profit margin of 38–40%, and adjusted operating expenses of $570–585 million. The signals are twofold: first, management expects non-reserve income to grow; second, even according to their guidance, these revenues remain small relative to the reserve income engine.

Bull case: USDC circulation continues to expand in Q1 and Q2, driven by institutional settlement growth, higher on-chain velocity, and incremental distribution progress. In this scenario, even if actual yields remain at late 2025/early 2026 levels, reserve income can stay resilient. Distribution costs will also rise, but the retained economic share after distribution could still be sufficient to maintain or approach the guidance margins while absorbing higher operating costs. Essentially, this is a “floating balance growth offsetting yield compression” scenario. Current balance trends and ecosystem expansion support this, but it still depends on sustained transaction volume and adoption momentum.

Base case: As trading activity and DeFi usage normalize, USDC growth slows to low single-digit quarter-over-quarter increases. Reserve yields anchor around 3%, consistent with EFFR and SOFR. Reserve income stabilizes or slightly increases (depending on average balances), but distribution costs remain high due to partner sharing structures. RLDC margins stay within the 38–40% guidance range, with moderate top-line progress but limited structural margin expansion.

Bear case: USDC circulation stagnates or declines due to risk aversion, outflows from exchanges, or market share pressures, while interest rates further decline from current levels. According to Circle’s sensitivity framework, lower yields reduce reserve income and mechanically lower some distribution costs, but overall RLDC weakens. This is more problematic because Circle has already committed to higher expense plans for FY2026, so a weakening balance and yield environment would expose the company to concentrated partner risks and rigid operating costs.

Strategic Positioning and Competitive Landscape

The most accurate qualitative description of Circle is: a regulated digital currency network operator with two layers—a currently dominant reserve management and issuance core, and a strategically important but not yet economically dominant application, interoperability, and developer services layer. This distinction is crucial because, until non-reserve income becomes significantly larger, Circle’s valuation, profitability sensitivity, and risk profile remain tightly linked to monetary policy and stablecoin market structure.

The most important strategic option currently is Circle Payment Network (CPN). Launched in April 2025, as of February 20, 2026, 55 financial institutions have registered, 74 are in qualification review, and the annualized transaction volume based on 30-day metrics reached $5.7 billion. These are meaningful early signals of network formation and institutional interest. However, without disclosure of fee rates, revenue contribution, or profit margins, CPN’s strategic value remains more evident than its immediate financial impact.

Another credible non-reserve monetization path is interoperability tools. Circle disclosed that in March 2025, it launched CCTP V2, enabling fast transfers that can generate transaction fees when used by clients. This is a strong non-reserve monetization path because it prices specific technical capabilities rather than relying solely on usage volume to generate value. Nonetheless, FY2025 transaction revenue remains small, with current contributions negligible compared to reserve income.

Circle’s USYC segment, acquired through the Hashnote purchase, is also strategically noteworthy. Circle describes USYC as representing on-chain money market fund shares, mainly used for collateral in digital asset markets, and discloses earning fees including performance fees. This is a reasonable extension of USDC, serving the need for yield-bearing collateral and margin requirements that stablecoins alone cannot fully address. However, there is no public disclosure of USYC assets, income, or profitability, so it functions more as a strategic building block than a standalone modeling driver.

In terms of competition, the most direct rival in the US dollar stablecoin space remains Tether. Reuters reported in February 2026 that USDT circulation was about $184 billion, giving Tether a significant scale advantage.

Circle’s differentiation remains clear: its listed company disclosure standards, reserve asset constraints aligned with emerging regulations, and stronger positioning with regulated institutions and payment networks. In this sense, Circle’s competitive advantage is less about absolute size and more about institutional credibility and regulatory transparency.

Another competitor is PayPal’s PYUSD. Announced on March 17, 2026, PayPal plans to expand PYUSD to 70 markets globally. PYUSD’s strategic relevance lies in its embedding within a global consumer and merchant payment distribution network, contrasting with Circle’s focus on exchanges and infrastructure. This provides a different market entry advantage.

Circle’s current strengths include deeper USDC liquidity, larger scale, and stronger integration with crypto markets; PYUSD’s differentiation is embedded wallets and merchant distribution within mainstream payment platforms.

The future competitive landscape in Europe may become more challenging. Reuters reported that major European banks—including ING, UniCredit, BNP Paribas—formed a consortium to launch a euro stablecoin in late 2026, and policymakers are openly discussing strengthening euro digital currency infrastructure to counter dollar dominance. This poses a medium-term competitive threat to EURC, as bank-led euro stablecoins could combine regulatory credibility with embedded enterprise and bank distribution. As of March 2026, this remains a future risk rather than an immediate supply-side alternative.

Conclusion

Circle’s FY2025 data continues to support the view that it is primarily a reserve income business—profitability driven by stablecoin balances, reserve yields, and partner economic structures, with software or payment monetization contributions still insufficient to overturn this structure.

USDC and EURC are expanding, and new initiatives like CCTP, CPN, and USYC improve the strategic narrative, but these are not yet significant in financial terms compared to the reserve income base.

Therefore, the core underwriting framework remains focused on balance growth, interest rate sensitivity, and the structural weight of distribution costs—especially the portion linked to Coinbase.

Figures: Circle Internet Group Inc — Consolidated Income Statement

Figures: Circle Internet Group Inc — Consolidated Balance Sheet (Part 1)

Figures: Circle Internet Group Inc — Consolidated Balance Sheet (Part 2)