Summary Circle Internet Group (CRCL) is upgraded to Buy, reflecting strong Q3 results and an attractive valuation after a share price dip. CRCL's Q3 revenue grew 12.4% QoQ, with USDC circulation rising from $61.3B to $71.3B and robust free cash flow generation. Despite Fed rate cuts pressuring yields, CRCL's trust advantage and audited reserves position it for continued growth in stablecoins. Even under bearish scenarios, secular tailwinds and expanding use cases support the investment thesis for CRCL at current levels. Circle Internet Group ( CRCL ) is the second-largest tokenizer of USD stablecoins. With Q3 results out and a dip in the stock price over the past month, I wanted to look again, and I'm glad I did. I upgrade CRCL to Buy. Summary of Previous Thesis When I wrote about Circle in September, I gave it a Hold rating, while realizing that the declining price was making it close to attractive. Screenshot from previous thesis (Q2 2025 Company Presentation) Part of that attractiveness relied on the growth of its underlying stablecoin industry. To reiterate, Circle's business is tokenizing real currency into stablecoins. Their main product is their USD coin ( OTC:USDC ). Revenue derives from short-term interest rates on the cash reserve they hold. Circle is sufficiently capital-light that this alone can make for a profitable business. I could foresee a case of $2B to $3B in yearly earnings by 2030. Sequential Changes In Yields (Q2 2025 Form 10Q) I did warn about the impact of the Fed's rate cuts, which would directly weaken the short-term yields on their cash reserves. I wrote: For many quarters now, the short-term rates that their dollar reserves earn have been in decline. The Federal Reserve also finally issued a cut this September, so this is likely to continue. Lacking another way to make revenue, this will simply reduce earnings. Even if short-term rates don't return to zero, something like 2% could bring the range down between $1B and $1.5B. That could lower the valuation over time as well. This is part of why I didn't rate the stock a Buy, instead preferring it to be more conservatively valued and under $120 before it would be worth buying. Q3 Updates and Distress in Crypto The third quarter marked another period of growth for the company. Q3 2025 Company Presentation Total USDC in circulation grew from $61.3B to $71.3B. A larger share of USDC was also attributed to their own platform. Q2 & Q3 2025 Forms 10Q This supported a 12.4% gain in revenue, quarter-over-quarter, while distribution costs only grew 10%. Cash Flow Statement (Q3 2025 Form 10Q) Free cash flow for the three quarters has come to about $253M as well. Its first year as a public company is showing that it is highly cash-generative with its simple revenue model. CRCL 6M Price History (Seeking Alpha) In spite of the good results, CRCL's share price fell below $100, the lowest it's been since the IPO earlier this year. This largely follows bearishness around Bitcoin ( BTC-USD ) and the impact this has had on several crypto-related stocks. While stablecoins, as their name implies, do not crash alongside other cryptocurrencies, they are often used by crypto traders as a place to hold money between trades. This decline also coincides with the Federal Reserve's second rate cut, which occurred on October 29. Thus, while things were looking good in Q3's results, the market has lately been worried about the broader ecosystem of crypto and how the rate cuts will weaken Circle's yield on its cash, which is substantially all of their revenue. Outlook and Valuation With these price declines, CRCL is about $78 per share, for a market cap of about $18B. I think this is good value and finally makes the stock a Buy. Let's take a look at why. USDC Market Cap (coinmarketcap.com) First, the market cap of USDC (effectively, the total cash pile) did decline with the broader crypto market in November but recovered and reached new highs as the month ended. Even the low point of November was comparable to where it was at the end of Q3. USDC is still growing, and therefore Circle's business is growing. Q3 2025 Form 10Q The company reported $214.3M in net income for Q3. If we adjust for portions that don't reflect their earnings model (removing depreciation, digital asset gains, and their tax benefit) that gets us $174.4M in earnings, which annualizes to $697.6M. If this amount grows at a 17% CAGR by 2030, then CRCL's current market cap is just a P/E of 10 for that moment. Q3 2025 Company Presentation Some may doubt their ability to grow their base of USD. USDC is second place to Tether's USD coin ( USDT-USD ). This was also asked during Q&A in Q3 earnings call , and I thought CEO Jeremy Allaire had a good answer to that. And I think the misunderstanding is that stablecoin networks are like other Internet platform utilities, meaning they have network effects...We see major B2B firms adding USDC as the payment option without a deal with Circle, without any relationship with Circle, they're doing it because it's got the most reach and interoperability. I think this speaks largely to the fact that Circle, being a public company, has completed all the requirements in auditing and transparency. This is important because stablecoin minters need to show that they keep the reserve currency at a 1:1 ratio, as opposed to investing the cash in higher-yield assets. Otherwise, a scenario similar to a bank run could occur, leading to the failure of the coin. Tether promised to have a public audit by one of the big four auditors in March, but to date no such audit has been announced and released. Circle therefore has a trust advantage that should allow it to grow and gain entirely new business among financial institutions and vendors that want a reliable token for USD. With the next FOMC meeting days away, another rate cut is possible and seen as increasingly likely . Single meeting won't change much, and what really matters is what happens to rates over a series of FOMC meetings. If rates eventually decline to 2%, then USDC would need about twice as much market cap to support current revenues and earnings. Citi ( C ) offered a promising report on the growth of stablecoins. They made the following observation: Bank tokens, with characteristics such as trust and privacy, will remain preferred by many. We believe 2030 transaction volumes for bank tokens may exceed stablecoins. All Circle needs to do is form a similar distributor relationship with them as it has with Coinbase ( COIN ). USD Stablecoin Market Cap Estimates (Citigroup Report) Even the bear case of the report suggests more than a 3X of the stablecoin market by 2030. If Circle simply maintains its usual market share, there's the earnings growth even with 2% rates. As the biggest player with fully audited reserves, I think they can at least do this. Perhaps the risk factor that could deal the biggest blow to earnings would be a Fed that cuts rates aggressively. President Trump has been vocal about his desire for rate cuts, and with Jerome Powell's term as Chairman expiring in May, his replacement is likely to be one that Trump sees as aligning with his political goals. This means rate cuts faster than the growth of USDC's market cap could occur, hurting Circle's earnings for the foreseeable future. Conclusion I think CRCL has worked very hard to create a reliable system and is in a position to scale and expand stablecoins into use cases beyond crypto markets, into more traditional finance. They may not lead in size alone, but they lead in trust, and with the secular tailwinds, even in a more bearish case, it would take several setbacks working together for an investment in CRCL to disappoint. That is why I upgrade my rating to Buy today.
