Circle's Profit Surge Highlights Growth Amid Persistent Valuation Risks

What happened

Circle Internet Group reported a surge in quarterly profit in late 2025, driven by robust demand for its USDC stablecoin. This growth defied a broader crash in bitcoin and other digital assets, underscoring USDC's resilience as a regulated payment instrument. According to the DeepValue report, USDC circulation reached $73.7 billion in Q3 2025, fueling revenue of $740 million and adjusted EBITDA of $166 million. However, over 96% of revenue stems from interest-sensitive reserves, and the stock trades at elevated multiples of approximately 62x EV/EBITDA, pricing in unsustainable growth. While the profit surge confirms operational momentum, it does not alleviate core concerns about valuation compression from potential Fed easing, competitive threats, and regulatory normalization.

Implication

The profit surge validates USDC's adoption and Circle's ability to monetize reserves, but this performance is heavily dependent on high interest rates vulnerable to Fed cuts. Circle's valuation remains stretched at ~62x EV/EBITDA, embedding optimistic assumptions without adequately pricing in normalization from monetary easing or competition. Emerging threats from bank-issued stablecoins like JPM Coin and fintech offerings could compress margins by increasing distribution costs or eroding market share. Regulatory progress, such as the conditional OCC trust charter, provides durability but may lower barriers for new entrants under the GENIUS Act. Therefore, while the news reinforces growth potential, it underscores the need for disciplined entry points or risk management, aligning with the DeepValue report's POTENTIAL SELL rating.

Thesis delta

The profit surge confirms the bull-case growth assumptions but does not shift the core thesis of asymmetric downside risk. Valuation remains elevated relative to fundamental exposures from Fed easing, competitive pressures, and expense growth. Investors should monitor for signs of non-reserve revenue scaling or margin deterioration, as these factors could alter the risk-reward balance.