Key facts
- Bernstein maintained its $140 price target and Outperform rating on Circle.
- Circle reported second-quarter revenue of $701 million and net income of $48 million, exceeding profit expectations.
- The firm believes investor concerns about competition and reserve income do not fully reflect Circle's growth strategy.
- Circle's Arc public mainnet is scheduled to launch on September 16.
- USDC circulation was $73.3 billion, a 19% increase from the previous year.
Bernstein has reaffirmed its $140 price target and Outperform rating on Circle following the stablecoin issuer's second-quarter financial results, which surpassed profit expectations despite slightly lower-than-anticipated revenue. The research firm suggested that prevailing investor concerns regarding increased competition in the stablecoin market and potential decreases in reserve income due to declining interest rates may not fully encompass Circle's comprehensive growth strategy.
Circle reported second-quarter revenue of $701 million, a 7% increase year-over-year, though this figure fell slightly short of analyst forecasts. However, the company's earnings exceeded consensus estimates, with a net income of $48 million and earnings per share of $0.18.
Bernstein highlighted the upcoming launch of Circle's Arc public mainnet on September 16 as a significant future growth catalyst. The analysts indicated that current market valuations do not appear to factor in potential future revenue streams from Arc's gas fees, staking activities, and ecosystem partnerships. The firm also noted Circle's improved 2026 guidance for revenue outside its reserve income business and enhanced expectations for revenue-less-distribution-cost margins, with management projecting approximately $180 million from Arc token presales in 2026.
During the quarter, Circle continued to expand its infrastructure business, obtaining approval to operate as a national trust bank and advancing the Circle Payments Network. The company is also preparing Arc with founding validators from major financial and technology firms. Bernstein stated that the market is underestimating Circle's long-term growth prospects, pointing to its regulatory standing, payment network, blockchain infrastructure, and distribution capabilities.
Reserve income constituted approximately 95% of Circle's total revenue for the quarter. USDC circulation stood at $73.3 billion, a 5% decrease from the prior quarter but a 19% increase compared to the same period last year. Mizuho, however, observed a sequential decline in USDC circulation and a 31% drop in on-chain transaction volumes from the previous quarter, alongside continued margin pressure in certain business segments.
Circle's stock traded lower in pre-market activity, having closed the previous session near $63 and experiencing a roughly 20% decline year-to-date. Despite these pressures, Bernstein maintained its positive outlook, emphasizing that expanding payment services, tokenized real-world assets, regulatory advancements, and the Arc launch could generate additional revenue streams beyond reserve income over time.