Profit expectations, stock price jumps: Circle, what exactly is the price of this financial?

@circle The third quarter of 2025 performance was announced on 12 November, with quarterly revenue of $740 million, a significant 66 per cent increase over the same period; net profits recorded $214 million, a three-fold increase over the same period last year. The result was significantly better than the market's previous expectations of $700 million and $31 million EBIT.

At the same time, however, the company has revised its operating cost guidelines upwards throughout the year, with projected costs rising to between $495 million and $510 million. This cost outlook raises doubts among investors about their cost management and future profit margins.

However, the stock price fell by about 12.21 per cent on the day the financial statements were issued. As of Friday, 14 November, the latest market value was approximately $19.2 billion. This paper shows you how much profit is expected, but the market is in danger behind the price of the stock.

Analysis of the Tri-Quarterly Report

Three points can be drawn from the Quarterly Report published by Circle:

The quality of the profits has improved significantly, but the profits remain highly dependent on the single engine of the US-debt spread plus USDC base expansion.
New operations such as Arc, CPN, USAYC are setting up a moat from a "single-stabilizer" to "multi-layer financial infrastructure", but in the short term it means higher costs and capital expenditures.
The dual uncertainty of regulation and competition persists, with new regulations such as GENIUS Act recasting the dollar to stabilize the currency industry, and Circe being both a beneficiary and a target of training.

(a) Income structure: it's still the story of + USDC size.

Of the $740 million in total income and reserve income, the core came from two components:

Reserve income (Reserve Income): $711 million, 60 per cent over the same period
Other income (other income): $28.52 million, an increase of $28 million over the same period, mainly from the high growth in income from subscriptions and services and transactions.

As can be seen, Circe is still a new type of financial institution, "circular + management-driven" with a high income correlation between USDC size and US debt/base rate of return. Once in the interest-rate cycle, unless the USDC volume continues to expand at a high rate, there will be pressure on reserve revenues.

(b) Unit economy: RLDC and net reserve rate of return

One indicator of management's focus is Revue Less Distribution Costas (RLDC), i.e., "platform Maori" with income less distribution costs. The three quarters are as follows:

RLDC: $292 million, year-on-year increase 55%
RLDC Profit Rate: 39% (Decrease over the same season last year 270bps)
Net Reserve Margin: 37 per cent

Simplified Understanding: Circe returns a portion of the proceeds of reserves to distribution and partners (e.g. Coinbase) for ecological incentives, exchange cooperation and embedded payments.

A rough estimate: a rough estimate of 37 per cent net reserve return, about 60 per cent of the spreads are "generated" to partners and ecology; Circe retains about 30 to 40 per cent for its own purposes as a platform.

This reflects a typical platform strategy: the exchange of spreads for network effects. In the long run, as long as USDC's share continues to rise, Circe maintains a low but stable net spread, which also supports significant profits.

Third quarter Net profit $214 million, 20 per cent, net interest rate about 29 per cent。

In particular, management disclosed that there were two important "non-recurring" or unsustainable types of gains in net profits:

Income tax gains $61.29 million：

The impact of tax incentives, R & D tax credits, and the new United States tax code are mainly derived from equity incentives.

Transferable fair value gain $48 million：

The weakening of equity prices in the three quarters resulted in a reduction in the fair value of reversible debt, resulting in an accounting gain.

IfElimination of the two above (approximately $109 million)The "recurring profits" of Circle are about Top 100 million dollars。

This suggests that the company's business itself already has considerable profitability; however, a significant proportion of the three-quarter "high-profile growth" comes from accounting projects rather than purely operating cash flows. This may be one of the reasons why the stock price did not respond to expectations even if the profits were higher than expected.

II. INFORMAL AND INVESTMENTAL DISCUSSIONS

Several core issues are summarized in this paper, which was discussed by investors with the Circle executive. For CPN (Maoist), management is very clear:We'll make a big network, then we'll charge.The short-term profit margin is not necessarily good, but it is strategically the position of the "quelling." For Arc, the management temporarily gaveDirectional IndicesBut without releasing the details of the specific value allocation, the typical "prepare, then tell the story" status is about profit, and investors want to seePerformance realization and valuation recoveryThe strategy of "continue to press for profit expansion" will be depreciated and management will stand."Retrieving network priority" The position is that accepting short-term profit margins is imperfect.

The following are specific messages of discussion:

1. CPN: Rapid growth vs When do you make money?

Investors are concerned that:

The CPN channel appears to be strong: 29 are online, 55 are in the pipeline, 500 are Pipeline, and the annual TPV has reached $3.4 billion.
Core chase:

These institutionsHow long does it take to really turn into a good deal?？
Circle. How and when to convert from CPN♪ I can't ♪ What's the charge pattern?
With more institutional access,Will compliance and wind control cost blow up the cost?？

Management response:

The priority is growth and quality, not short-term profit.：
The network is set up to enable participants (banks, PSPs, cross-border companies, neobanks, etc.) to use a stable currency infrastructure and to earn the benefits of efficiency and capital occupancy.
The current stage is more...Let the members make their own money in traffic.(Customs billing)
> Quantity：
Not just a few endpoints.Meaningful financial flows" Institutions, strong distribution to enterprises/retails, and meeting SLA, local mobile participants.
Cost end:
Recognition:Network Review + Ongoing KYC/ Wind Control Monitoring It will cost more.
But it'll work. Technology+AI AutomationTo reduce the expansion of the "plus head" is theoretically consistent with the "high leverage" platform model.

Arc & Original Dinar: Need vs Real Use?

Investors are concerned that:

Arc @arc A 100+ top financial institutions have been tested (Apollo, BlackRock, HSBC, Visa, etc.).
Key questions:

Why must there be? Arc Original Currency？
This token is... Gas? Governance?
What's going on?No hair.♪ I can't ♪ What does that mean for the economics of Circle shareholders?

Management response:

Strategic positioning: Arc YesStable Currency Finance + RWA Enterprise Economy OS”。
Original tokens consider three dimensions:
Incentives for network participants(operating nodes, application developers, institutions promoting adoption);
Governance(Decisions on upgrades, operator expansion, network rules);
As a...Network utility carrier(Specific uses not specified).
Unequivocal denial:
At this stage, it doesn't seem like a simple gas coin,The transaction costs themselves are still denominated in stable currencies like USDC.。
But for now,No economic model disclosed.And there's no commitment to issue it, just to say, "In a positive assessment, it'll be disclosed again depending on progress."

3. Q4 Guides & Profit Rates: Good results, why "conservative calibre"?

Investors are concerned that:

Reality:

Q3 RLDC profit margin 39.5%, ring ratio rising;
The growth in other income was also remarkable;

But according to the year-round guidelines,Q4 RLDC, the profit margin looks like it's going down.And with the year-round adjustment, Opex was revised upwards to $495-510 million.
The investors asked:

Isn't Q4 going to add a large number of distributions/incentives?
Is there an invisible cost/pressure?
Why don't you get more profit in a good year?

Management response:

The calibre is very consistent:
For now.Early age of index curve of the Internet financial system" Short-term figures are highly volatile.
Guidance"Conservative.", not all hope values will be taken into account, but only those with higher certainty.
I'd rather "slightly conservative than super-expected" than overdirect the market.
Reasons for the increase:
To the Platform ' s capacity and global partnersIncreased input；
IPO after related to equity incentivesWage taxThe impact is expected to be clear throughout the year, taking into account (about 5 million per quarter).

4. USDC moat: Network effect vs. "Stability currency is a commodity"?

Investors are concerned that:"Is Stablecoin itself a substitute? There will be a lot of dollar-chained coins, USDC. " ... "

The management response (Jeremy said so hard):

"Anyone can issue a coin.
The big corporate alliance, the super-appliance, also issued a stable currency.Many are almost zero.。
How many moats does USDC have? Network effects：
Acceptance / Coverage：
B2B. Platforms and big companies often.No commercial agreement with Circle, no active access to USDC.Because it's a mandatory interoperability standard.
Liquidity network：
First, secondary markets are highly liquid, with USDC in banks, vouchers, exchanges and wallets, and counterparties prefer to use this asset for financing/settlement.
Regulation and infrastructure moat：
More than 55 licence plates/ registers;
Deep access to system-critical banks.
To build these infrastructure...Long-term work. It's not "rich."
Market structure judgement:
They think it's a stable coin."Winner take most"not a complete decentralization of competition.

III. Arc: "Economic Operating System" in the Internet age

@arc It is an open 1st floor block chain, an economic operating system of the Internet that combines programmable currency and chain innovation with real-world economic activity. Construction specifically designed to increase economic speed and suitable for: loans and financial services; capital markets; issuance of monetized assets; global stable currency settlement.

On 28 October, the Arc Test Network was officially online and has attracted more than 100 institutions to participate in the testing, covering various sectors, including capital markets, banking, asset management, insurance, payments and technology. With this, Circle hopes to provide developers and enterprises with a programmable financial infrastructure to facilitate the scale-up of economic activity in the chain. At the same time, Circe plans to explore the issuance of Arc ' s original tokens to stimulate network participation, promote ecological applications and build long-term sustainable web economy models.

Arc was designed in close cooperation with major global financial institutions, including banks, capital market companies, asset distributors and asset management agencies from Asia, the Middle East, Europe, the United States and Latin America. This distributed network principle ensures the geographical diversity and geo-economic balance of operators and aims to create incentives for developers, end users and network participants. By exploring original currency, Arc could provide practical functions, such as incentives to coordinate network growth, stakeholder governance and participation in decision-making on technology upgrading and operator expansion. This not only enhances the sustainability of the network, but also enables the seamless integration of mainstream enterprises and digital assets and facilitates the evolution of applications from speculative to mainstream scale.

As a key infrastructure for the Circle Payment Network (CPN), Arc provides low-cost, subsecond settlement terminal and confidential functions to support the payment of transaction costs in stable currencies such as USDC. At present, the Arc Test Network has activated a number of Circle ' s products and services, including the monetized money market fund USYC, and has introduced a number of non-United States dollar stables in the testing, such as yen, reais, peso and Australian dollars. This has resulted in seamless, real-time, atomic-level currency conversion capabilities for CPN members, enhanced foreign exchange infrastructure and extended to areas such as loans, financial services and global settlements. By increasing global banking access points, Circe improves the efficiency and cost-effectiveness of liquidity networks and ensures a wider and more reliable pipeline of capital flows.

On the demand side, Circe observed strong corporate demand for stable currency and strong liquidity between local markets, which directly affected the priority of the product road map, including the construction of an abstract layer of foreign exchange, a settlement credit layer and coordination capacity. Meanwhile, Circe’s M&A strategy focuses on accelerating the distribution of core products, such as block chains, digital assets and payment networks, with three transactions completed this year and 25 patents generated from in-house research and development. Although original currency is not used for Gas costs, its potential uses include economic incentives, ecological participation and governance, and Circe is actively assessing to ensure that Arc becomes a regulatory readiness platform for global financial institutions to promote innovation and scale up of economic activity in the chain.

IV: Summary

Circle’s 25Q3 financial statements performed well, but there is still concern in detail: revenues and profits are much ahead of expectations, but growth is still clearly dependent on the single engine of USDC expansion + US debt spreads, and the quality of profits is magnified by tax and fair value changes. Under the combined effect of the partners ' concessions and long-term expansion of their inputs, short-term profitability pressures, combined with year-round operating cost increases, raise investor concerns about cost control and the stability of future cash flows. This duality of "digital excellence, emotional prudence" reflects the reality that Circe has evolved from a stable currency distributor to a key infrastructure for a chain-based dollar system, and that the profit tempo of infrastructure enterprises does not fully coincide with short-line market expectations.

At the same time, the multilayered product matrix of Arc, CPN, and USYC shows that Circle is trying to take a strategic position in the liquidation layer of the next generation. The involvement of more than 100 institutions in the Arc Test Network and the annualization of the CPN TPV has surpassed a billion dollars in scale, and these indications indicate that the chain is penetrating from speculative markets to real economic activity. Whether it is the exploration of original currency models, the laying of a global liquidity network or the construction of an abstract layer of credit and foreign exchange settlement, the strategic core of Circle points in one direction: The "sovereign position" of programmable United States dollars and chain liquidation is pre-occupied in the immediate time when regulatory frameworks and institutions adopt accelerated clarity. Fiscal data reveal short-term fluctuations, but from the point of view of network effects and infrastructure expansion, Circe is on the verge of determining its status for the next decade.