Circle Shares Plunge 8% as Revenue Surges 66% Despite Earnings Miss

Circle's shares plummeted by more than 8% after the company's first quarterly earnings announcement as a public entity. The stock decline came despite a significant increase in revenue, which grew 66% from the previous year. The circulation of Circle's flagship USDC coin more than doubled, contributing to the revenue surge. According to the Q3 earnings report, Circle's reserve rate of return is now 4.2%, a decline that spooked investors. Operating expenses jumped 70% since last year and are expected to continue rising. The company's FY25 guide implies lower 4Q other revenue and higher adjusted operating expenses, said Dan Dolev, a senior analyst at Mizuho, in a note. Circle's revenue reached $1.05 billion in Q3, a substantial increase from the $630 million reported in the same period last year. The company's net income was $134 million, a significant improvement from the $80 million reported in Q3 2022. However, the decline in reserve rate of return and rising operating expenses have raised concerns among investors. The market impact of Circle's earnings announcement was significant, with the company's stock price declining by over 8%. This decline is a stark contrast to the company's initial public offering (IPO) in June, where its stock rallied by 250% in its first two days, the biggest two-day pop since 1980. The company's stock price has since stabilized, but the decline in Q3 earnings has raised concerns about the company's future prospects. Circle is the world's second-largest issuer of stablecoins, with its USDC coin being a widely used digital currency. The company's stablecoin business model relies heavily on its reserves, which provide the vast majority of the company's income. The decline in reserve rate of return has raised concerns about the sustainability of Circle's business model. The future outlook for Circle appears uncertain, with the company's FY25 guide implying lower 4Q other revenue and higher adjusted operating expenses. The company's ability to maintain its revenue growth and manage its operating expenses will be crucial in determining its future prospects. As the company continues to navigate the rapidly evolving cryptocurrency market, investors will be closely watching its performance to determine whether it can sustain its growth trajectory.