Circle’s Hidden Revenue Engine

Summary Circle’s growth potential extends far beyond USDC reserve yield. They have a secret weapon. I project Circle’s total revenues could reach $12 billion by 2030, driven by high-margin software and fintech services integrated with stablecoins. Circle’s Q2 earnings will be pivotal, especially regarding USDC adoption, platform revenue growth, and updates on the Coinbase revenue-sharing agreement. Despite risks like rate sensitivity and USDT competition, I see over 50% upside in 3-4 years, making this dip a compelling buy opportunity. Thesis Summary Circle ( CRCL ) has come a long way since its IPO, but after some initial hype, the excitement seems to have faded somewhat. While the valuation today may seem rich, I believe investors may be overlooking some of the key growth drivers behind Circle, which go well beyond income derived from USDC. As we approach Q2, I expect some of these other growth engines will begin to become even more apparent. In my opinion, Circle could still see over 50% upside in the next 3-4 years, and investors would do well to buy this dip. Circle’s Secret Revenue Engine In my opinion, there are two areas where Circle stands to make significant revenues. Reserve Yield Reserve yield is, of course, the main source of income right now. There’s around $60 billion in circulation of USDC, and Circle earns yield through the Treasury holdings that back up this USDC. Circle generated around $1.5 billion in revenues from this last year, and this is taking into account the fact that Coinbase ( COIN ) took about 50% of this due to their revenue share agreement. However, this can easily scale to become a much larger market, as I discussed in my last article. Furthermore, there may be room to renegotiate the Coinbase revenue split after 2026, which could potentially be very bullish for Circle. Infrastructure/API Monetization But there’s a lot more juice left to squeeze in other areas, and this is what investors are overlooking right now. Circle is now offering API-based services like programmable payments and smart contract infrastructure, as well as digital on-chain treasury services. It’s still early days, but this could be a very lucrative side of the business for Circle. The idea is that as more people want to interact with stablecoins, Circle will also play an integral role in allowing parties to build software using USDC. In other words, Circle will become the backbone of any digital infrastructure that uses USDC. These revenues will be sticky and have high margins too. And there’s also room for Circle to benefit from becoming a key player in cross-border payments. The company could earn money from infrastructure fees, especially when it comes to high-volume FX platforms. Revenue Forecast If Circle executes on this roadmap, here’s how its revenues could play out by 2030. Reserve Yield Revenue There’s an argument to be made that this could grow to around $7.5 billion by 2030, which I forecasted in my last piece. Yield earnings (Author’s work) Infrastructure/API Revenue This is a bit harder to forecast, but let’s try to crunch some numbers. According to some estimates, the fintech software could be worth $1.5 trillion by 2033 . With stablecoins potentially being integrated as a common payment option, Circle could easily capture at least 1-2% in service fees from large enterprises. This would bring in at least a further $2B in revenues by 2030. Circle could also add another $1 billion through smart contract and wallet infrastructure. The smart contract market could grow to $9.2 billion by 2032 . If USDC becomes the stablecoin of choice, it’s not hard to imagine these kinds of revenues materialising. And with cross-border payments being a $200 trillion market , there’s definitely room for Circle to extract a couple of billion by 2030. The Big Picture All in all, there’s a lot of untapped potential here for Circle to benefit from a lot more than interest earnings. By 2030, I’d say we could be looking at other segments adding around $5 billion in revenues, which puts my total revenue forecast at $12 billion, making Circle a steal in my opinion. Assuming we can reach an EBITDA margin of 30% (due to higher margin software revenues), that’s $3.6 billion in earnings, and applying an EV/EBITDA multiple of 20, in line with what a mature software company could command, then the total market cap would be close to $72 billion. What to Watch in Q2 Earnings Circle’s upcoming Q2 results will be crucial in determining whether this narrative can be supported by facts. For starters, we will have to see how the adoption of USDC is going and if the total float is growing. In terms of Platform revenue, this is where we will want to see Circle talk about any potential partnerships or expansions in this segment. It’s important for Circle to start building out now in order to gain a first mover advantage. And lastly, any update on the Coinbase agreement could really change investor sentiment. Risks But risks still remain with Circle. Rate sensitivity is, of course, top of this list. Second would be competition from USDT, which is still very much competing with Circle to be the dominant USD stablecoin. And it remains to be seen just how fast other regions will adopt stablecoin regulation. Final Thoughts A lot of investors see limited upside from Circle’s current revenue model, especially since rates are coming down, but they are missing the big picture. Circle stands to make at least as much, if not more, money in the future from stablecoin-adjacent businesses like enterprise software, smart contracts, and digital payments.

Source: Seeking Alpha