Circle's Q1 Revenue Increases by 20% but Misses Expectations, Net Profit Slips by 15%

Stablecoin issuer Circle has delivered a quarterly report card that shows growth alongside pressures. The company's total revenue and reserves income for the first quarter grew 20% year-on-year to $694 million, below market expectations of $720.8 million; net profit from ongoing operations decreased by 15% year-on-year to $55 million.

The core contradiction in the report is the continued expansion of the stablecoin scale, but a decline in the profitability of reserve assets. At the end of the quarter, the circulation of USDC increased by 28% year-on-year to $77 billion, with an average circulation increase of 39% year-on-year, but the reserve return rate dropped to 3.5%, a decline of 66 basis points year-on-year, and also below the expected 3.56%.

Most of the company's profits come from the interest on US government securities that support the USDC reserves, and an increase in USDC circulation will expand the reserve pool, but a decrease in the reserve yield will weaken the return on each dollar of reserves. First quarter reserve revenue grew by 17% year-on-year to $653 million, driven primarily by the increase in average USDC circulation, but the decline in the reserve return rate offset some of the increase.