01—Abstract
Summary
Summary of the 10-Q filed May 11, 2026. Cited figures are marked; the original filing is the authoritative source.
Circle Internet Group, Inc. reported first-quarter 2026 total revenue and reserve income of $694.1 milliona, up 20.0% from $578.6 million a year earlier, driven by reserve income of $652.5 million (up 17.0%) and other revenue of $41.6 million (up 101.5%).
Distribution, transaction and other costs rose 17.0% to $406.8 millionb, and operating expenses rose 75.6% to $242.4 million, led by compensation expenses of $138.1 million (up 82.7%). Operating income from continuing operations fell to $45.0 million from $92.9 million, and net income from continuing operations declined 14.7% to $55.2 million, with diluted EPS of $0.21. Management reports Adjusted EBITDA of $151.4 million, up from $122.4 million, though the company changed its definition beginning in the first quarter of 2026 to exclude payroll tax on stock-based compensation, which was $10.6 million for the quarter.
USDC in circulation at quarter end was $77.0 billionc, up 28% year over year, and USDC onchain transaction volume grew 263% to $21.5 trillion. The reserve return rate fell to 3.5% from 4.2%, and the filing attributes part of the reserve income decline to interest rate actions by the U.S. Federal Reserve. Cash and cash equivalents segregated for the benefit of stablecoin holders rose to $76.9 billion, against deposits from stablecoin holders of $76.8 billion.
Stockholders' equity rose to $3.43 billiond, and the convertible notes were fully converted into Class A common stock during the quarter. Subsequent to quarter end, on May 8, 2026, the company sold 740 million ARC Tokens to institutional investors led by a16z crypto at $0.30 per token, for estimated gross proceeds of approximately $222.0 million, implying a fully diluted network valuation of $3.0 billion.
The filing also discloses repayment rights for presale purchasers if token delivery or the Arc network's transition to proof-of-stake does not occur by May 8, 2028, and expanded risk factors relating to Arc and the ARC Token. A dispute with a former financial advisor over fees remains pending, and the company says its outcome cannot be reasonably quantified or estimated.
02—Key points
Key Highlights
- Total revenue and reserve income rose 20.0% to $694.1 million; reserve income was $652.5 million, or 94.0% of total revenue.
- Net income from continuing operations declined 14.7% to $55.2 million, while operating income fell to $45.0 million from $92.9 million as operating expenses rose 75.6% to $242.4 million.
- Compensation expenses increased 82.7% to $138.1 million, including a $39.1 million increase in stock-based compensation expense.
- Adjusted EBITDA increased to $151.4 million from $122.4 million, under a definition amended in Q1 2026 to exclude stock-based compensation payroll taxes.
- USDC in circulation grew 28% to $77.0 billion, and USDC onchain transaction volume grew 263% to $21.5 trillion in the quarter.
- The reserve return rate declined to 3.5% from 4.2%, and the filing attributes part of the reserve income change to Federal Reserve interest rate actions.
- Subsequent to quarter end, the company agreed to sell 740 million ARC Tokens at $0.30 each for estimated gross proceeds of approximately $222.0 million, implying a $3.0 billion fully diluted network valuation.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed May 11, 2026Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $41.63M$578.57M | −92.8% |
| Operating Expenses | $242.35M$137.99M | +75.6% |
| Operating Income | $45.00M$92.94M | −51.6% |
| Net Income | $55.25M$64.79M | −14.7% |
| EPS (Basic) | $0.23— | — |
| EPS (Diluted) | $0.21— | — |
| Shares Outstanding (Basic) | 244.04M57.97M | +321.0% |
| Shares Outstanding (Diluted) | 266.69M75.65M | +252.5% |
05—Questions
Frequently Asked Questions
What drove the change in Circle's profitability this quarter?
Revenue grew 20.0% to $694.1 million, but operating expenses rose 75.6% to $242.4 million, mainly from compensation expenses of $138.1 million, up 82.7%, and general and administrative expenses of $57.3 million, up 86.6%. Operating income fell to $45.0 million from $92.9 million, and the company also recorded a $7.7 million charge tied to the re-issuance of treasury stock to Circle Foundation. Income tax expense fell to $1.4 million from $25.0 million, partly offsetting the operating decline.
How much did the reserve return rate affect reserve income?
The reserve return rate was 3.5% compared with 4.2% a year earlier. The filing states that reserve income rose by $94.6 million, reflecting a roughly 39.1% increase in average daily USDC in circulation, but this was offset by about $106.3 million from a 66 basis point decline in average yields tied to Federal Reserve interest rate actions.
What is the status of the ARC Token and what cash did the company receive?
On May 8, 2026, Circle agreed to sell 740 million ARC Tokens to institutional investors led by a16z crypto at $0.30 per token, for estimated gross proceeds of about $222.0 million. An entity affiliated with IDG Capital, a holder of more than 5% of the company's capital stock, separately agreed to buy 83.3 million tokens for $25.0 million. The filing states that the Arc network is expected to launch on mainnet this year, and that the token launch remains subject to contingencies. Purchasers hold repayment rights in specified circumstances, including if the network has not transitioned to proof-of-stake by May 8, 2028.
How strong is the company's liquidity position?
As of March 31, 2026, the company had total liquidity sources of $2.3 billion, consisting of $1.5 billion in cash and cash equivalents and $792.7 million in cash segregated for corporate-held stablecoins. Management believes these sources and operating cash flows will be sufficient for at least 12 months. Net cash provided by operating activities was $21.1 million, compared with $56.6 million a year earlier. The company's convertible notes, which had a carrying value of $36.8 million at year end, were fully converted into Class A common stock in the quarter.
Are there material legal or regulatory uncertainties disclosed?
Yes. The company is in a dispute with a financial advisor who asserts that the termination of two engagement letters is ineffective and seeks fees and interest tied to transactions including the IPO and the follow-on offering; the company strenuously disputes these claims and says the outcome cannot be reasonably quantified or estimated. The filing also notes that current tax rules for stablecoins require significant judgment, and that future guidance could materially affect results, though the impact is not estimable. The updated risk factors address securities-law characterization of the ARC Token and its presale, including potential rescission claims if the presale is found to be a non-exempt offering.
06—Continue