Circle Internet Stock Angles Higher as Earnings Beat Overcomes the Crypto Slump — Barrons.com

By Joe Light and Kit NortonCircle Internet Group stock shook off losses Wednesday as investors digested the fintech's better-than-expected earnings report.Shares fell as low as $59.12 Wednesday before angling 0.1% higher to $63.30. The stock is off about 60% in the past year.Before the market open, Circle reported second-quarter earnings of 18 cents a share, up from a loss of $4.48 a year ago and coming in above Wall Street expectation of 16 cents. Total revenue grew 7% to $701.32 million, missing the analyst consensus call for $713 million, according to FactSet.Circle's main line of business is the USDC stablecoin, a type of crypto pegged to the dollar and backed by safe assets such as Treasury bills. Stablecoins have traditionally been used to buy more volatile cryptos such as Bitcoin and to make cross-border remittances.Bitcoin's price has been slashed in half since its October peak. And as trade volume has fallen, the amount of USDC in circulation has essentially stayed flat.The "headline beat fails to tell the full story," wrote Mizuho analyst Dan Dolev, citing the decline in USDC's market capitalization as one of many factors.In an interview, CFO Jeremy Fox-Geen told Barron's that more uses for USDC outside of trading are filling the crypto trading hole."In historic times through prior market cycles, you kind of saw stablecoin balances draw down significantly," Fox-Geen said. "The fact that hasn't happened is testament to the other forces at play, which is the underlying growth from a much smaller start of utility in other vectors."One use for USDC, for example, is the trading of tokenized traditional assets like stocks and bonds that firms are dabbling in.In conjunction with the earnings report, Circle announced that BlackRock, Intercontinental Exchange, Mastercard, and Visa would be among its initial partners on its new "Arc" blockchain — a network that will allow users to do a host of transactions, from making instant payments to trading tokenized assets to lending and borrowing money.Circle also says Arc and other blockchains will be heavily used by AI agents."We see Circle moving toward a transaction revenue model as it builds the leading rails for global stablecoin operability and payments," wrote William Blair analyst Andrew Jeffrey.Circle raised its full-year outlook for "other revenue," or subscription s and services. The range is now from $310 million to $330 million, up from $150 million to $170 million. The new guidance includes revenue from its Arc token presale.Besides the crypto slump, Circle has other hurdles to jump over.Other tech and payments companies, including Visa, Mastercard, Stripe, and Coinbase are part of a new consortium launching a stablecoin called Open USD. And a handful of banks are experimenting with tokenized deposits and their own tokens.In the interview, Fox-Geen said that the competition validates Circle's business model and that USDC is protected by already having a large network."We have a market position that we're working very, very hard to defend, and we have a market position that we think creates real benefit for people working on USDC as opposed to making other choices," Fox-Geen said.Write to Joe Light at [email protected] content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.