JPMorgan Chase released a research report on Circle Internet Corp. (CRCL.US) this week, noting that its Q2 2025 earnings largely met expectations with strong performance from on-platform USDC, with core growth driven by on-platform USDC and other revenue streams. The report maintains an "Underweight" rating but raises the December 2026 target price from $80 to $89 based on robust growth in on-platform USDC.

The bank believes Q2 performance was solid and generally in line with expectations, while Circle's on-platform USDC data was particularly impressive. The third quarter has started strong, and the $1.5 billion follow-on offering will benefit from market sentiment for fundraising.

On August 12, Circle Internet Corp. announced its Q2 2025 earnings, marking its first earnings report since going public and drawing significant market attention. The data showed Q2 revenue of $251 million, exceeding JPMorgan's forecast of $232 million, primarily due to reduced distribution costs. Adjusted EBITDA reached $126 million, surpassing market consensus of $121 million. GAAP earnings were -$4.48 per share.

The performance essentially met expectations (excluding some unexpected gross profit growth), with GAAP losses primarily driven by IPO-related stock compensation and other expenses related to convertible bond fair value measurements. Overall, JPMorgan considers this a solid quarter that executed the strategy announced at IPO while launching new business initiatives.

The bank particularly noted strong growth in high-margin business areas, including: 1) USDC on Circle's platform (averaging $4.5 billion in Q2 2025); 2) Other revenue ($24 million in Q2 2025).

JPMorgan mentioned that despite the quarter's solid performance, flat USDC market share and still-elevated valuations led the bank to maintain its current rating. However, based on the momentum of on-platform USDC growth, the bank raised its December 2026 target price to $89.

**USDC Achieves Growth in Circle's High-Margin Segments**

JPMorgan noted several positive surprises on the revenue front. Based on an average USDC balance of $61 billion and a 4.14% reserve rate, Circle reported total reserve income of $634 million, exceeding JPMorgan's expectation of $630 million. The actual RLDC profit margin was 38.2%, higher than JPMorgan's expected 35.9%, with this improvement stemming from increased proportion of on-platform USDC balances, which actually reached $4.5 billion versus the expected $3.6 billion.

Given that on-platform USDC represented approximately 10% of total USDC balances at the end of Q2, the bank now raises its 2027 forecast for Circle's on-platform USDC proportion from the previous ~9.5% to 14%.

Similarly, other revenue (including blockchain rewards, CCTP cross-chain transfers, redemption fees, USYC-related income, etc.) also exceeded expectations at $24 million, compared to the bank's forecast of $17 million. Management simultaneously set fiscal 2025 other revenue guidance at $75-85 million, compared to the bank's previous expectation of $70 million. Therefore, driven by growth in blockchain partnership fees and redemption fees, the bank raises its fiscal 2025 other revenue expectation to $86 million.

**Arc Blockchain Launch Completes Circle's Technology Ecosystem**

The bank believes the most significant news in this earnings report was Circle's announcement of Arc—a new Layer-1 blockchain specifically designed for "stablecoin finance," expected to launch in the second half of 2025. Management described Arc as a programmable infrastructure solution for payments, foreign exchange, and capital markets, with USDC serving as its native token to address gas fee issues.

The bank believes this blockchain launch completes Circle's technology ecosystem, thereby strengthening its positioning as a "network-type enterprise." While existing products like CCTP already play a role in promoting cross-chain liquidity, and Circle's Gateway helps facilitate cross-chain liquidity, the bank believes Arc provides a comprehensive solution for liquidity, consensus, and finality through a shared ledger validated by the stable native currency USDC.

Additionally, Arc introduces new optional privacy control features for users, allowing them to determine how their transactions appear on public blockchains. It's worth noting that USDC is currently available on 24 blockchains, one-third of which were added in 2025, and Circle observed $16.5 billion in CCTP (Cross-Chain Transfer Protocol) transaction volume in Q2 2025.

**Competitive Payment Sector Creating "Frenemy" Relationships**

Furthermore, Circle launched the Circle Payment Network (CPN) in Q2 2025, with approximately 100 interested companies currently in the partnership process. Additionally, CPN has gone live in Hong Kong, Brazil, Nigeria, and Mexico, potentially consolidating stablecoin applications in emerging markets and dollarization scenarios.

While JPMorgan views CPN as one of many factors driving Circle's on-platform USDC development, with Circle maintaining an "open and inclusive mindset," the bank found that its products directly compete with some of Coinbase's enablement initiatives. Coinbase is entering consumer-to-business (C2B) payment services through Coinbase Commerce and will soon expand into business-to-business (B2B) payments through Coinbase Business, which somewhat resembles the B2B network currently targeted by CPN.

Circle's management praised Coinbase for building payment products around USDC but also acknowledged that the on-chain payment sector will have numerous networks and distribution channels. For the bank, this situation indicates extremely fierce competition in the payment sector, but Circle is achieving differentiated competition through its neutral third-party issuer positioning, especially compared to its most direct competitors (such as Coinbase).