Bernstein says Circle's Q2 counters bearish concerns over competition, reserve income

Research and brokerage firm Bernstein reiterated its Outperform rating and $140 price target on Circle after the stablecoin issuer reported second-quarter earnings on Wednesday, arguing the results form a "counter thesis to the bears."

Circle's Q2 2026 revenue came in at $701 million, up 7% year over year, but about 2% below consensus estimates. Adjusted EBITDA of $143 million and basic earnings per share of $0.19 both topped expectations, while reserve income accounted for roughly 95% of revenue.

In a note to clients on Thursday, Bernstein analysts led by Gautam Chhugani addressed two central concerns weighing on the stock: growing competition in stablecoins and the sustainability of Circle's reserve income in the current rate environment.

The analysts argued the concerns underestimate USDC's long-term potential and Circle's advantages in distribution, liquidity, and regulatory position, adding that investors may also be overlooking future revenue from transaction fees, partnerships, and the Arc blockchain.

Partnerships and Arc underpin Bernstein's outlook

Bernstein pointed to new partnerships and infrastructure initiatives during the quarter, including Circle's national trust bank approval, growing Circle Payments Network, and the Sept. 16 launch of the Arc public mainnet, which will debut with founding validators including BlackRock, DTCC, Galaxy, Global Payments, ICE, Mastercard, MoneyGram, SBI Group, Standard Chartered, Sumitomo Corporation, and Visa.

Bernstein also noted that management raised its 2026 guidance for other revenue and revenue-less-distribution-cost margins, reflecting expected recognition of $180 million in Arc token presale revenue.

The analysts added that they do not believe prospective revenue from Arc staking, gas fees, and partnership activity is reflected in current forward estimates.

Circle closed the second quarter with $73.3 billion of USDC in circulation, down 5% from the previous quarter but up 19% year over year. The analysts said Circle's push beyond crypto trading into payments, tokenized real-world assets, and broader financial infrastructure could help drive the next phase of USDC adoption. 

Circle closed up 0.05% at $63.28 on Wednesday, with Bernstein's 12-month price target implying 121% upside potential.

Gautam Chhugani holds long positions in various cryptocurrencies. Bernstein or its affiliates have had investment banking and other business relationships with Circle over the past 12 months.