SS #124 - Circle Q2 Revenue Misses Estimates

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Good morning.

Circle's earnings miss reads as a headline distraction from the real story, where a validator cohort stacked with BlackRock, Visa, and Standard Chartered signals the company is betting its next growth chapter on becoming settlement infrastructure for TradFi incumbents rather than on USDC circulation alone, a pivot the market seems to be pricing in even as reserve income growth decelerates against a shrinking stablecoin supply.

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In Today's Edition:

• Headline: Circle Q2 Revenue Misses Estimates

• Quick Bites: Mastercard Expands Stablecoin Push

• Yield of the Week: NEMO USDC Prime's 40.37% APY

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HEADLINE

State of play: Circle's revenue miss landed alongside a stronger net income beat and a sharply raised guidance range, suggesting the market's near term read on USDC growth understates the company's shifting revenue mix ahead of Arc's mainnet launch.

• Circle reported $701M in Q2 revenue, missing Wall Street's $713M estimate despite 7% year over year growth.

• Net income from continuing operations hit $48M, a $530M year over year swing, while shares rose 5.7% premarket.

• Reserve income grew 5% on a 25% jump in average USDC circulation, even as total stablecoin supply contracted industry wide.

• Management raised other revenue guidance to $310M to $330M from $150M to $170M, driven partly by Arc token presale revenue.

• Arc's founding validator cohort includes BlackRock, DTCC, Mastercard, Visa, and Standard Chartered ahead of its September 16 mainnet launch.

What’s Next: Arc's public mainnet launches September 16, with over 100 ecosystem and institutional builders already onboarded ahead of the debut.

Why it Matters: Circle's earnings miss obscures a more consequential shift, where the company is diversifying revenue toward Arc infrastructure just as USDC's core reserve income growth decelerates against a shrinking stablecoin market.

Our Take: The premarket share rally despite the miss suggests investors are pricing Circle less as a reserve income business and more as infrastructure optionality on Arc, a bet that could unravel quickly if validator commitments from names like BlackRock and Visa don't translate into real onchain volume by launch.

QUICK BITES

• Circle Q2 revenue falls short of Wall Street estimates.

• Japanese stablecoin firm JPYC raises $38M in extended Series B.

• Mastercard expands stablecoin push with Crypto Credential pilot.

• Mastercard, Borderless test shared identity checks for stablecoin transfers.

• Western Union brings stablecoin remittances to Visa network with Stablecard.

• Visa expands stablecoin capabilities on Visa Direct with zerohash collaboration.

YIELD OF THE WEEK

NEMO USDC Prime: 40.37% APY

• The vault accepts USDC deposits and runs a market-neutral multi-strategy approach combining quantitative rate-arbitrage and options strategies across Derive, Hyperliquid, Aave, and Morpho, with ~$5.14M in TVL capped at $15M.

• Capital is deployed across Derive (~$3.01M), Hyperliquid (~$395k), Aave V3 (~$360k), and Morpho (~$501k), with leveraged wstETH positions used to generate USDC borrowing capacity for yield strategies.

• Yield is generated from rate-arbitrage and options strategies with no directional crypto exposure, delivering a 30-day APY of 40.37%, net of a 2% platform fee and 20% performance fee, with standard withdrawals processed within 31 days.

Sentora PRIME Looping: 15.37% APY

• The vault accepts PYUSD deposits and deploys capital into a single leveraged looping strategy, borrowing PYUSD against Figure's PRIME collateral at 5x to 10x leverage on Morpho, with ~$2.08M in TVL.

• Capital is deployed through Morpho with ~$7.29M in PRIME collateral against ~$5.97M in borrowed PYUSD, delivering amplified yield from the spread between collateral returns and borrowing costs.

• Yield is generated from the leveraged PRIME/PYUSD spread on Morpho, delivering a 30-day APY of 15.37% with 0% platform and performance fees, and a 4-day withdrawal period, while also earning 5x rewards.

Axis Origin USDx: 18.00% APY

• The vault accepts USDT or USDC deposits in a pre-deposit phase to seed USDx supply and distribution across DeFi, with ~$67.25M in TVL split between a wallet balance (~$33.66M) and Axis deployment (~$33.67M).

• Capital is deployed into Axis's USDx ecosystem, with deposits converted to USDx and allocated across wallet reserves and Axis protocol supply in roughly equal proportions.

• Yield is generated from Axis's USDx-denominated strategies targeting 18.00% APY with 0% platform and performance fees, and a 7-day withdrawal period.

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