Earnings report exceeds expectations: Why did the "stablecoin giant" Circle’s stock price fall?

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Although Circle's Q3 financial report was strong, investors are more concerned about its future profitability outlook—multiple pressures including rising costs, an impending interest rate downcycle, and the potential for insiders to sell shares.

According to WallstreetCN, on November 12, stablecoin issuer Circle released a robust Q3 earnings report, with both revenue and earnings per share beating Wall Street analysts' expectations.

However, this positive news did not lift market sentiment; the company’s stock price plunged more than 12% that day. This drop brings the stock’s decline from its all-time high on June 23 this year to over 70%.

(Circle shares plunged more than 12% on Wednesday)

The key factor driving the market selloff was an update to the company’s full-year expense guidance in the earnings report. Circle raised its 2025 operating expense forecast to between $495 million and $510 million, increasing investor concerns about its cost control and future profitability.

In addition, the Fed’s anticipated rate cut cycle is expected to squeeze Circle’s core income source, and the company's insider share lockup period may end early, adding further downward pressure on the stock price.

Earnings beat expectations, but cost outlook drags

Financial data shows Circle’s performance in Q3 was outstanding.

The report shows the company achieved revenues of $739.8 million in the quarter, a 66% year-over-year increase, beating the analyst consensus estimate of $706.7 million. Earnings per share reached $0.64, far exceeding Wall Street's forecast of $0.20.

The strong growth was mainly due to the expansion of its core product, the US dollar stablecoin USDC. As of the end of September, USDC’s circulation reached $73.7 billion, more than twice the level of the same period last year.

However, in the earnings report, a forecast regarding future costs became a "stumbling block" for the market.

Circle raised its 2025 operating expense estimate from the previous range of $475 million–$490 million to $495 million–$510 million.

Although the company also raised the midpoint expectation for non-reserve income such as subscriptions and services from $80 million to $95 million, the projected increase in costs is clearly larger, directly impacting investors’ assessment of future profit margins.

Part of the increased expenditure may go to the company's planned launch of the Arc blockchain network, which has already attracted partners such as BlackRock, HSBC, and Visa.

Rate cut cycle and lockup expiry raise concerns

Circle’s main business model is earning interest on its USDC reserves, which are mainly invested in money market funds.

However, as the Fed cut interest rates consecutively in September and October this year and is expected to lower rates further in December and into 2026, the market worries that Circle's interest earnings will decrease. Data shows the return rate on the company’s reserves fell by 96 basis points to 4.15% this quarter.

Despite concerns, Circle CFO Jeremy Fox-Geen refuted the notion that lower rates would hurt the company in a media interview. He said:

Falling interest rates bring stronger economic activity, greater risk taking, and increased investment. In the short term, that’s good for our business.

Another direct factor for the stock price decline is the so-called "lockup period" potentially ending early.

According to regulatory filings, the share lockup period for company executives and insiders could end as early as "the second trading day after the company announces its quarterly earnings for the period ending September 30, 2025," that is, this Friday.

Normally, the post-IPO lockup period is 180 days and should have ended in early December. This means large amounts of insider-held shares may soon hit the market, creating potential selling pressure.

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