Circle Internet Group: Buy As USDC Market Share Heats Up

Summary Circle Internet Group offers a compelling buying opportunity after a sharp post-IPO correction, with valuation now more attractive amid sector pessimism. USDC circulation surged 108% y/y to $73.7 billion in Q3, outpacing stablecoin market growth and driving robust revenue expansion. Q3 revenue grew 66% y/y to $739.8 million, significantly beating expectations, while adjusted EBITDA margins remain above 70%. Top-tier partners like Coinbase and Klarna fuel USDC adoption, positioning CRCL for continued market share gains despite lower interest rates. With the overall stock market continuing to trend near all-time highs, it's becoming more important for investors to deploy single-stock selection in order to pick up shares of more reasonably valued stocks that are more buffered in the case of market downside. Surprisingly, the crypto sector has been a major laggard in 2025, with Bitcoin prices colliding, and the weakness has spread to all blockchain-related stocks, even those that aren't directly exposed to price weakness, like Circle ( CRCL ). Circle, the issuer behind USDC, briefly touched the high $200s immediately after its IPO last year but has since returned close to where it was trading immediately after its IPO. In my view, the stock's sharp correction over the past few months presents a great buying opportunity. Data by YCharts I last wrote a buy article on Circle in September, when the stock was trading near $120. While I acknowledge that my buy call was poorly timed, I think Circle has become even more attractive from a valuation perspective after its share price declines, especially as USDC circulation and Circle's own revenue growth continue on an upward glidepath. I think Circle is subject to excessive pessimism over the specter of interest rate declines and the recent crypto market cap pullback. As a reminder for investors who are newer to this stock, here is my full bull case for Circle: USDC continues to gain in circulation. As more and more stablecoin use cases and applications are built out, Circle continues to benefit from a surge of interest in owning and holding USDC, especially as an interest-bearing alternative to holding cash. Currently, circulation is growing by more than 2x y/y. Yes, it's true that Circle's primary means of revenue is from interest rate spreads, just like a bank (the difference between what it earns on short-term U.S. treasury bills and the interest rate it pays out to customers). That said, growing circulation should also help to blunt the impact of lower rates. Top-tier partners are helping Circle gain market share. Circle's USDC is the second-largest U.S. dollar-backed stablecoin, behind USDT. That said, USDC's share is gaining, and this momentum is fed especially by the company's growing base of top-tier partners like Coinbase and Klarna. Coinbase, in particular, just released stock trading, which is another use for funds held in USDC on the platform. Highly efficient business with healthy profitability. The company is achieving 70%+ adjusted EBITDA margins (against its revenue, less distribution costs or interest paid to partners), despite its relatively early scale and huge growth rates. Stay long here: in my view, Circle has plenty of catalysts to spark a rebound. Q3 Download Let's now go through Circle's latest quarterly results in greater detail. The Q3 earnings summary is shown below: Circle Q3 results (Circle Q3 shareholder letter) Circle's total, unadjusted revenue grew 66% y/y to $739.8 million, well ahead of Wall Street's expectations of $699.6 million (+57% y/y). The wide beat spread is just one indication of how quickly USDC is gaining adoption and share. Meanwhile, revenue after distribution costs (the interest that Circle pays out to wallet partners like Coinbase, who in turn offer USDC yield for their clients) grew 55% y/y to $292 million. The chart below, meanwhile, showcases the recent trends of USDC circulation. Overall circulation grew at a stunning 108% y/y pace to $73.7 billion. This not only added ~$12 billion in net-new circulation since Q2 (after roughly flat performance in that quarter) but also accelerated broadly versus 38% y/y growth in Q3. It's clear here that Circle and USDC are gaining prominence and trust after Circle's IPO (positioning it in contrast to Tether/USDT, whose sponsoring parent company isn't U.S.-based and is less regulated). Also, partner distribution networks are key to Circle's success, as the share of USDC held on Coinbase grew to 24%, up from 21% in Q2. USDC circulation (Circle Q3 shareholder letter) And as can be seen in the chart below, USDC's circulation growth of 108% y/y in Q3 roughly doubled the 59% y/y growth in overall stablecoin issuance. Meanwhile, USDC's share of stablecoin transactions grew to 40%, up from 36% in Q2 and just 30% in the year-ago quarter. Circle market share (Circle Q3 shareholder letter) Yes, it's true that interest rates are trending down; the company's reserve return rates (what it earns on its U.S. treasury holdings) fell to 4.15%, roughly ~20% below 5.11% in the year-ago quarter. But with USDC circulation more than doubling y/y, the broader base of interest-earning assets more than offsets interest rate softness. Per CEO Jeremy Allaire's remarks on Circle's recent share growth on the Q3 earnings call : USDC in circulation grew 108% year-over-year to $73.7 billion. This is tremendous growth. And we're very proud that our growth also represents continued market share expansion. Moreover, the amount of onchain transactions using USDC grew 580% year-over-year to $9.6 trillion in Q3, underscoring the inherent and increasing velocity and efficiency of using USDC as a medium of exchange. This increasing velocity of money is a crucial feature of the Internet financial system [...] And adoption has been expanding across a range of use cases, industries and types of firms. Overall, the stablecoin market has continued to grow strongly, and Circle continues to gain share. On a year-over-year basis, stablecoins in circulation grew 59%. Because we grew faster than the overall market, Circle's share grew to 29% in the third quarter. Based on Visa's published analysis, stablecoin transaction volumes have grown approximately 130% year-over-year with USDC share expanding to 40% in Q3. And as you can see, the dollar stablecoin space remains a market with 2 leading issuers and a number of much smaller players as we continue to sustain our strong position despite increasing competition. Circle's profit expansion and efficiencies are also healthy. Adjusted EBITDA soared 78% y/y to $166 million, reflecting a 57% margin that improved 7 points versus 35% in the year-ago quarter. The company managed to keep OPEX (at $131 million) growing at just 35% y/y, nearly half the 55% y/y growth in revenue after all distribution costs were paid. Circle adjusted EBITDA (Circle Q3 shareholder letter) Valuation and Key Takeaways At current share prices near $85, Circle trades at a market cap of $19.97 billion. Netting off the $2.32 billion of cash, investments, and digital assets not held on behalf of customers on the company's latest balance sheet against $149.1 million of convertible debt gives us an enterprise value of $17.79 billion. For next year, FY26, Wall Street is expecting Circle to generate $3.30 billion in total revenue, representing 21% y/y growth. That, of course, represents a sharp deceleration from 66% growth this quarter. Of course, reserve return rates in Q3 were at 4.15%. The Fed cut rates by a quarter point at the end of Q3 (on September 17) and again in October. Consensus is currently calling for two more cuts this year, which would effectively bring reserve return rates down to the low 3s for the year. Of course, partners like Coinbase will also adjust their APY accordingly, and Circle should be able to preserve its RLDC (revenue less distribution cost) margins roughly consistently. Again, interest rate declines will be more than offset by the company's CAGR expectations of 40%+ circulation growth, which it well exceeded in Q3. Assuming RLDC margins of 39% hold in FY26, net revenue less distribution on consensus' $3.3 billion revenue expectations will be ~$1.29 billion. A flat adjusted EBITDA profile of 57% against this revenue profile, meanwhile, indicates ~$735 million in adjusted EBITDA, positioning Circle's valuation at 24.2x EV/FY26 adjusted EBITDA. For a company currently growing USDC circulation at more than 2x y/y, with >20% expected revenue growth next year and much faster adjusted EBITDA expansion trends, these are quite reasonable multiples to pay. Stay long here and buckle in for a rebound.