Circle: AI agents need currency with APIs.

```

Circle’s narrative for Q1 is shifting: it is still a stablecoin issuer highly dependent on USDC reserve income, but both management and sell-side research are now emphasizing a bigger story—whether USDC can become a programmable settlement currency that AI agents can access and use via API.

The latest financial report is not universally strong. Circle’s Q1 total revenue and reserve income were $694 million, up 20% year-on-year, but below Citibank and market expectations; RLDC (revenue less distribution costs) was $287 million, which actually exceeded expectations. Adjusted EBITDA was $151 million, with an adjusted EBITDA margin of 53%. The company maintains its full-year guidance.

Signals from business activity are more positive. USDC’s circulating supply at quarter-end was $77 billion, up 28% year-on-year and roughly flat quarter-on-quarter; on-chain transaction volume rose 263% year-on-year to $21.5 trillion. Management says use cases for USDC in corporate payments, cross-border payments, capital markets collateral and AI agent payments are expanding.

The market is focusing on two new main themes. First, the ARC Token presale raised $222 million, corresponding to a $3 billion fully diluted network valuation, but the related revenue and incentives are not yet included in the guidance. Second is Circle Agent Stack. Citibank’s Peter Christiansen wrote in a May 11 report that, Circle is moving from stablecoin issuance toward “agent economy” infrastructure, where AI agents can use USDC for programmable transactions, and Circle’s full-stack pathway could make it the default settlement rail for agent commerce.

Financial Report Quality: Missed Revenue, RLDC More Critical

Circle’s Q1 total revenue and reserve income was $694 million, below Citibank and market expectations, mainly due to lower reserve yield. The quarterly reserve return rate was 3.5%, down 66 basis points year-on-year, reflecting SOFR’s decline, and below Citibank’s expectation of 3.59%.

But RLDC performed better. Q1 RLDC was $287 million, 3% above both Citibank and market expectations. RLDC margin was 41.4%, up 1.5 percentage points year-on-year, and 1.3 points quarter-on-quarter.

CFO Jeremy Fox Geen said RLDC margin improvement came from growth in other income, increased USDC held within the Circle platform, and moderate decrease in some high-incentive channels. He also mentioned, Coinbase’s proportion of USDC circulation increased in the quarter, especially in the last month, creating some mixed effects for margin.

Adjusted operating expenses were $136 million, up 32% year-on-year, reflecting continued investment in products, distribution, and operational infrastructure. Adjusted EBITDA was $151 million, up 24% year-on-year. However, Citibank’s report noted the company changed its definition of adjusted EBITDA this quarter to include equity incentive compensation expenses. Calculated by the previous method, adjusted EBITDA was about $141 million, slightly below Citi’s expectation but still above market consensus.

This means Q1 cannot be simply interpreted as a sudden major improvement in profitability. More accurately, there were flaws in revenue, but RLDC quality was good and profitability exceeded market expectations.

USDC: Transaction Volume Surges, Platform Stickiness Improves

USDC’s circulating supply at quarter-end was $77 billion, up 28% year-on-year and basically flat quarter-on-quarter. Jeremy Fox Geen said in the context where the digital asset market has fallen about 45% since its October 2025 peak, USDC’s circulation remained resilient, showing that non-crypto trading usages and real-world scenarios are growing.

USDC held within Circle’s platform infrastructure was $13.7 billion, up 3.5 times year-on-year, accounting for 18% of total circulation. Management considers this as proof of increased platform stickiness and infrastructure adoption.

Trading activity grew even faster. Circle said USDC on-chain transaction volume rose 263% year-on-year to $21.5 trillion. Jeremy Allaire said third-party data sources including Solana show USDC quarterly transaction volume approached $30 trillion, making up about 80% of all on-chain transaction volume.

Management also referenced Visa's commercial transaction volume, saying USDC continues to gain stablecoin market share, now accounting for 63% of all stablecoin transactions. Circle also said USDC mint and redemption volume approached $150 billion in Q1.

Corporate Payments: CPN Becomes Entry Point for Non-Speculative Demand

Circle is pushing USDC into corporate and financial institution payment flows. Jeremy Allaire mentioned in the call: Meta is using USDC to pay creators, DoorDash uses USDC to pay drivers, Polymarket uses USDC for deposits and settlements.

For financial institutions, Airbor Bank uses USDC for 24-hour banking services. Circle also mentioned expanding relations with top exchanges in Korea. In capital markets, the company is participating in DTCC’s tokenized securities trading test and sees early demand for USDC as collateral in regulated derivatives exchanges.

Corporate treasury management is also a key focus. Circle recently partnered with Kyriba, which serves thousands of companies and several Fortune 100 firms, aiming to embed USDC payment flows into corporate treasury solutions. Ramp is using USDC for both international and domestic cases.

Circle Payments Network, CPN for short, continued to expand in Q1. At quarter-end, CPN’s annualized total payment volume based on the past 30 days was $8.3 billion, up 17% quarter-on-quarter. As of May 7, it was close to $10 billion, up nearly 75% from the last disclosure. CPN now connects over 136 financial institutions, up 36% quarter-on-quarter.

Management said CPN’s current growth mainly comes from B2B cross-border payment flow. The company launched CPN Managed Payments to help banks, financial institutions, and payment services providers deal with licensing, USDC liquidity, stablecoin custody accounts infrastructure, and blockchain compliance—removing onboarding obstacles.

ARC: New Variable Not Yet Included in Guidance

ARC is the most watched new variable for investors this call. Circle said ARC testnet is performing well, users are increasingly trading at scale, developer community continues to grow, and the mainnet is about to launch.

Circle announced ARC Token presale raised $222 million, implying a $3 billion fully diluted network valuation. The presale was led by a16z crypto, with participants including Apollo Funds, ARK Invest, BlackRock, Janus Henderson Investors, Bullish, Intercontinental Exchange, Marshall Wace, SBI Group, Standard Chartered Ventures, General Catalyst, Haun Ventures, IDG Capital, and others.

Management said ARC Token will be used for network launch and expansion, supporting governance, staking, security, and other protocol functions. Jeremy Allaire said Circle will retain 25% of ARC Token. The white paper shows 60% of tokens for ecosystem grants, airdrops, and other incentive plans.

Jeremy Fox Geen said the current 2026 full-year guidance does not include ARC Token presale, ARC incentive plans, or any ARC-related revenue flows. After ARC Token is created and delivered, the company will recognize related value as other income. Circle plans to update the guidance perspective in the next earnings call.

This means ARC could increase revenue sources, but also bring incentive costs and changes to margin structure. Management has not quantified these impacts yet.

Agent Stack: AI Agents Need Programmable Settlement Layer

Circle Agent Stack is the core of this narrative shift. It’s not about packaging stablecoins as AI, but about answering a specific question: if AI agents need autonomous service invocation, payment and settlement, what currency and infrastructure will they use?

Circle’s answer is USDC and a full service stack. The company announced key components of Circle Agent Stack during the call, including Agent Wallets, Agent Nano Payments, Agent Marketplace and Circle Platform CLI.

Agent Wallets allow AI agents to build on-chain wallets, transact, access USDC, and operate within preset policies and security safeguards. Agent Nano Payments supports microtransactions as small as one millionth of a cent in USDC, for high-frequency machine-to-machine payments. These features support the x402 standard, and Circle said it’s involved in its design.

Circle said that currently, in x402 agent payments, 99.8% are settled in USDC. The first version of Agent Marketplace is live, offering over 500 service endpoints for agents to discover, pay, and call.

This is also the most valued part in Citibank’s research. The report says Agent Stack strengthens Circle’s path from stablecoin issuance toward agent economy infrastructure. If AI agents really need to use funds via API, Circle hopes USDC is not just a wallet frontend, but the underlying settlement rail.

Valuation: $243 Target Price Bets on Long-Term Scenarios

Citibank gives Circle a target price of $243, corresponding to the May 8 closing price of $113.67, implying a 113.8% expected stock price return, rated “Buy/High Risk”.

But this target is not based on next quarter’s profits, but on a long-term scenario for 2031. Key assumptions include USDC circulation compounding at 40% for five years, reserve return at 2.80%, distribution costs dropping, and sustained operating leverage.

In Citibank’s model, by 2031, Circle’s net reserve income will be about $5.6 billion, making up 74% of total revenue. This shows that even as Agent Stack and CPN deliver new narratives, reserve income remains the pillar of the valuation model.

CPN is included in the model too, but assumptions are not aggressive: annual payment processing volume of $300 billion, 0.15% of customer-directed cross-border transfers, a take rate of 0.50%, implying $1.5 billion in income, 20% of total 2031 revenue.

Cost-side assumptions are equally key. Citibank assumes operating expenses grow at 25% CAGR; under this, adjusted EBITDA/RLDC margin reaches about 81%. If free cash flow conversion rate is 80%, 2031 free cash flow is $5.3 billion. The valuation also uses a 2.0% terminal growth rate, 9.0% WACC, and adds $1.6 billion in net cash from the IPO.

Risks: Interest Rates Remain Foundation of Model

Circle is talking about payment networks, programmable currency and AI agent settlement, but the business model remains highly exposed to interest rates.

Citibank estimates that a 25 basis point drop in SOFR would result in mid-single digit revenue declines and mid-double digit EBITDA declines. A long-term low or zero-interest-rate environment would significantly impact Circle’s business model.

Regulation is the second variable. Jeremy Allaire said Circle hopes stablecoin incentives match real-world utility—real transactions, real payment volume, real activity—not just idle yield. Circle President Heath Tarbert commented on the Clarity Act, saying it will aid blockchain, digital assets, and traditional financial institutions to participate in digital asset activities, and mentioned Title IV scenarios involving banks, broker-dealers and custodians using stablecoins.

Management also mentioned GENIUS Act and Clarity Act, saying regulatory clarity will boost adoption of stablecoin tech by corporates and financial institutions. But Citibank’s report also cautions that future regulation may require stablecoin issuers to retain safety reserves, impacting the business model.

The stablecoin industry itself has tail risk. If a stablecoin issuer fails operationally or suffers a network attack and loses its peg, a broader stablecoin run could be triggered. These risks are hard to include in the quarterly model but would directly affect the valuation framework.

Next Observations: ARC Income, CPN Scaling and AI Payments

Circle maintains its 2026 full-year guidance. The company also keeps several forecasts: target for USDC circulation to compound at 40% yearly for multiple years, other income between $150-170 million, RLDC margin at 38-40%, adjusted operating expenses at $570-585 million.

But the current guidance does not include ARC Token presale, ARC incentives or any ARC-related income. The next earnings call will be a crucial window, as investors focus on how ARC Token revenue is recognized, how incentives affect costs and margins, and whether the ARC network can drive growth flywheel for USDC, CPN and other digital assets.

The conclusion from this financial report is not complex: Q1 numbers have flaws, but core indicators didn’t stall; USDC activity and share within the platform continues to improve; Agent Stack gives Circle an “AI era settlement infrastructure” valuation narrative. The problem is, for the story to materialize, three hard conditions must be met: USDC keeps growing, interest rate environment doesn’t worsen significantly, and regulation doesn’t rewrite the cost structure.

Risk Warning and DisclaimerThe market has risks; invest with caution. This article does not constitute personal investment advice and does not take into account individual users’ special investment objectives, financial situations or needs. Users should consider whether any opinion, viewpoint or conclusion herein fits their specific circumstances. Investments made based on this are at their own risk. ```