NEW YORK, August 3, 2026, 08:07 EDT (U.S. premarket) – Circle shares traded lower after a decline in USDC, setting the stage for Wednesday’s anticipated earnings report.
- Circle declined 5.3% to $59.30 in premarket trading.
- USDC had a circulation of $71.8 billion as of July 30, representing a 6.8% decrease since March.
- Circle will announce its Q2 results on Wednesday at 8 a.m. ET.
Shares of Circle Internet Group NYSE:CRCL dropped 5.3% to $59.30 during Monday’s premarket session. Morgan Stanley NYSE:MS lowered its rating on the stock to Underweight from Equal Weight and reduced its price target sharply to $38 from $106.
The timing sets a higher standard for Wednesday’s earnings. Circle needs to demonstrate that its reserve mechanism can handle a reduced USDC base.
USDC supply was $71.8 billion on July 30, marking a decrease of $5.2 billion from March 31. The drop represented a 6.8% fall.
With the first-quarter reserve return rate, the reduced base makes a difference. This suggests around $182 million lower yearly gross reserve income. The estimated quarterly figure is $45.5 million prior to distribution expenses.
| USDC reserve-base comparison | Amount |
|---|---|
| USDC as of March 31 | $77.0 billion |
| USDC as of July 30 | $71.8 billion |
| Change | -$5.2 billion |
| Percentage change | -6.8% |
| Estimated annual income impact at 3.5% | -$182.0 million |
| Estimated quarterly impact | -$45.5 million |
The calculation assumes yields and other variables are constant. It does not incorporate variations in distribution costs and should not be viewed as company guidance.
This is not guidance for the second quarter. July 30 occurred after the quarter ended, so it primarily indicates the third-quarter pace. However, it remains important for management’s outlook.
The composition of Circle’s first-quarter results highlights the issue. Reserve income accounted for $653 million, making up 94% of total revenue. All other income sources totaled just $42 million.
| First-quarter operating comparison | Q1 2026 | Change from year earlier |
|---|---|---|
| Total revenue and reserve income | $694 million | up 20% |
| Reserve income | $653 million | increased 17% |
| Other revenue | $42 million | $21 million higher |
| Distribution, transaction and other costs | $407 million | up by 17% |
| Revenue less distribution costs | $287 million | up 24% |
| Adjusted EBITDA | $151 million | increased 24% |
Revenue minus distribution costs resulted in a 41% margin, offering little flexibility for concurrent impacts from balances, yields, and partner payouts.
The rate segment showed minimal respite last week. The Federal Reserve maintained its target range at 3.50% to 3.75%. Three-month Treasury yields dropped by 14 basis points by July 30.
Chief Financial Officer Jeremy Fox-Geen encouraged investors to focus past a single cycle. “Rates have cycles, and we are building a company that’s going to be living through many rate cycles,” he told Reuters in May. Reuters
| Estimated yield sensitivity at $71.8 billion USDC | Yearly gross impact | Quarterly impact |
|---|---|---|
| Yield decreases by 10 basis points | -$71.8 million | -$18.0 million |
| Yield decreases by 25 basis points | -$179.5 million | -$44.9 million |
| Yield decreases by 50 basis points | -$359.0 million | -$89.8 million |
Results may vary significantly from those shown in the table. Circle cites customer actions, reserve amounts and distribution expenses as factors that affect rate sensitivity.
The disparity among analysts is notable. TD Cowen began its coverage with a Buy rating and set an $82 price target. In contrast, Morgan Stanley’s target suggests shares could fall 39% from where they closed on Friday.
| Analyst comparison | Rating | Target | Relative to Friday’s $62.61 finish |
|---|---|---|---|
| Morgan Stanley | Underweight | $38 | -39% |
| TD Cowen | Buy | $82 | +31% |
Morgan Stanley lowered its 2027 USDC projection by nearly one-third and dropped its 2028 forecast by 44%. By contrast, TD Cowen forecasts USDC will grow at an annual rate of about 31% until 2030.
Circle stock rose just 0.4% over the week, dropping 2.5% on Friday to end the session at $62.61. That finish leaves the shares 67% under their 52-week peak of $189.92.
Circle ended Friday lower, even after securing a regulatory victory. The company received a limited-purpose trust charter from New York for its trust unit. CEO Jeremy Allaire described the move as a “longstanding objective” achieved, citing regulatory clarity. Circle
The webcast set for Wednesday begins at 8 a.m. ET. Investors are expected to focus on figures including average USDC, reserve return, distribution costs, and RLDC margin. The company last indicated expectations of a 38%–40% full-year margin and 40% USDC growth through the cycle.
Risks: USDC balances may recover ahead of impacting average reserves. Interest rates might remain elevated, as fee income could accelerate more quickly. On the other hand, increased redemptions, declining yields, or higher partner expenses could compress margins.
The immediate challenge is specific. Circle needs to demonstrate that July’s reduced balance was a short-term issue, or has been balanced out in another area. Merely reporting strong headline earnings may not answer that concern.
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