(Updates with the full Arc founding validator cohort, launch-partner integrations and mainnet product suite details, per Circle's own release.)
Circle raised its full-year revenue forecast on expected proceeds from a $242mn sale of tokens from its new stablecoin-focused blockchain, even as second-quarter revenue came up short.
Circle's second-quarter revenue and reserve income came in at $701mn, below the $717.5mn consensus estimate, while earnings per share of 18 cents beat expectations of 16 cents. CEO Jeremy Allaire pointed to the company's new blockchain, Arc, as the bigger story: "the birth of a new operating system layer for economic activity in the world," he called it, predicting such networks could become large-scale internet infrastructure within three to five years. "We look at Arc as potentially as a bigger opportunity than USDC itself," he said during an analyst call, referring to the company's dollar-pegged stablecoin.
Following the results, the company also announced Arc's founding validator cohort: BlackRock, the Depository Trust & Clearing Corporation (DTCC), Galaxy, Global Payments, Intercontinental Exchange (ICE), Mastercard, MoneyGram, SBI Group, Standard Chartered, Sumitomo Corporation and Visa, many of which are also included in another stablecoin consortium, Open Standard.
As for USDC, its circulation rose 19% over the year to $73.3bn, but remained below the company's target of roughly 40% compound annual growth through the cycle and fell from $77bn in the previous quarter. Usage expanded more quickly, with onchain transaction volume rising 151% to $14.8tn. Costs also increased, as adjusted operating expenses rose 23%, more than three times the pace of revenue growth, reducing the adjusted EBITDA margin by 329 basis points to 50%.
The company's conviction in Arc's success shaped its financial forecasts. CFO Jeremy Fox-Geen raised guidance for other revenue excluding reserves from the $150mn to $170mn range set in May to between $310mn and $330mn, bolstered by revenue from the presale of the Arc token. Fox-Geen said that the expected revenue from the token sale to cover 75% of the milestones due this year.
Without the revenue from the token, the forecast for the rest of the business fell to between $130mn and $150mn, below the range set in the previous quarter. Margin guidance moved the same way, rising to 41.7%-43.7% from 38%-40%, though Fox-Geen said that excluding Arc it sits near the previous midpoint of around 39%. That gap matters against the backdrop of USDC's own quarter: circulation fell from $77bn to $73.3bn even as it grew 19% over the year, evidence that the core stablecoin business is losing momentum at exactly the moment Circle is asking investors to underwrite its next one.
According to Allaire, Arc's testnet has processed more than 500mn transactions across close to 3mn wallets, and more than 100 partners are on the private mainnet. BlackRock is expected to bring its BUIDL tokenized money-market fund onto the network, while DTCC plans to integrate its tokenized asset service with Arc from the second half of 2027. A separate integration layer will give exchanges and wallet providers access to USDC on Arc from day one, with Binance Wallet, Chainlink, Fireblocks, Kraken, Ledger, MetaMask, Uniswap Labs and Upbit named as partners handling custody and cross-chain movement. The public mainnet, set for 16 Sep, is also due to ship with privacy features, an agent stack for programmable finance and support for tokenized real-world assets.
Arc enters a competitive field of institutional chains chasing the same settlement business and attracting the same partners. The Canton Network, which Franklin Templeton joined as a super validator this week, already carries more than $348bn of tokenized asset value and was selected as an initial supporting network for the DTCC tokenization service. Open Standard, a stablecoin consortium that debuted 30 Jun whose partners overlap heavily with Arc's validator group, has plans to share most of its reserve income with distributors rather than retaining it like Circle.
Citi analyst Pete Christiansen asked how Circle would compete if sharing reserve income became the industry standard, arguing that its existing economic arrangement with Coinbase could limit its ability to match Open Standard's model. Allaire did not directly address the economics, instead noting that about 70% of the companies involved in consortium initiatives already build on USDC.
A partnership with perpetual futures exchange Hyperliquid was also pointed to as a possible avenue for future growth. Allaire said that Hyperliquid had agreed to make USDC its main dollar token as part of a deal Circle negotiated with Coinbase.
USDC now accounts for 40% of the collateral that traders post across major perpetual futures venues. According to Circle, Hyperliquid holds around 6% of all USDC in circulation.
Fox-Geen said about 90% of Hyperliquid's USDC was held on Coinbase's platform at the end of June against about 10% on Circle's. He declined to say how the two companies divide the income, though Circle pays out a share of its interest income to platforms holding USDC, like Coinbase.
The quarter had also brought the debut of Circle's stack for agentic payments using the open x402 protocol. Allaire said 99.3% of payments made through the protocol now settle in USDC, although declined to answer questions on when they expect the stack to meaningfully contribute to revenue. Instead, he said, the benefit would come indirectly by encouraging the usage of USDC and Arc. AI capabilities were among the items Fox-Geen listed behind a 23% increase in adjusted operating expenses to $146mn.
Allaire stated that the firm would publish a whitepaper in the second half of the year that would outline Circle's AI agent strategy. He pointed to an internal push to include AI agents within the company, "setting up infrastructure where hybrid teams of agents and humans operate working together as one."
Circle's shares swung following the release before settling near the previous close, trading at $63.50 as of 18:42UTC. The stock is down about 20% year to date.
