vor 5 Monaten
Summary I'm upgrading Circle Internet Group (CRCL) to a Strong Buy rating, driven by the firm's rapid revenue growth, defensibility, and AI tailwinds. CRCL's stablecoin business model leverages network effects, programmable money, and reserve income, positioning it for long-term market leadership. Q4 results showed USDC circulation up 72% YoY, $11.9T in transaction volume, and 77% YoY revenue growth, supporting forward profitability. Despite a 36x Adj. EBITDA multiple, CRCL's high growth, operating leverage, and moat justify the premium, even with interest rate and execution risks remaining. One word that I’ve been thinking a lot about recently is defensibility . While the dictionary has a number of definitions for this word, in the context of investing, I define it as whether or not a company has some form of economic advantage that will allow it to continue earning profits on a go forward basis. Over the last few years, AI has shown itself to be a huge disruptive force in markets, which has thrown assumptions that investors have previously made into question. To this point, a research firm called Citrini just put out a thought piece highlighting how AI has the potential to disrupt most (or all) white-collar knowledge work, driving widespread unemployment and economic devastation. As agentic coding models from companies like Anthropic have gotten better and better, the friction in writing and producing production-ready code has gone to near zero, which has drastic consequences for the tech world. This provides a template for how AI models could impact law, consulting, marketing, and more. The thought piece also highlighted how firms with significant economic moats - like credit card companies - could face disruption from agentic commerce tools. As many prominent companies sell off, I’ve been looking for more defensible places to invest my capital. One particular business model that I see as particularly future-proof is the stablecoin business. Circle Internet Group ( CRCL ), the most prominent public stablecoin business, earns money from tokenizing USD deposits that it earns interest on. In return, the firm provides a sort of 'bridge' for government-backed currencies into the decentralized financial ecosystem. As Circle continues to ride the wave of adoption - while developing its own tools for frictionless global payments and agentic commerce - I believe the stock is well positioned to deliver above-average returns in the years ahead. Today, I’ll reiterate my thesis, highlight the stock’s most recent earnings report, and make the case that shares of CRCL are a highly defensible, incredibly attractive investment through the end of the decade. Sound good? Let’s dive in. The Thesis In case you haven’t read my previous coverage on Circle, I’ve largely said two things: that the company’s business model is dead simple (and thus, highly interesting), and that the stock looked aggressively priced. As such, I have historically rated the stock a Hold: Seeking Alpha Now - however - as AI and crypto adoption advance, I believe CRCL is ready to benefit from a perfect storm of business drivers that could increase revenue substantially in the coming years. First off, in case you’re unfamiliar with CRCL, the business essentially accepts USD and EUR deposits from users and tokenizes them for use in decentralized finance applications. Said differently, the company issues the USDC and EURC stablecoins, which are popular among crypto users for being widely available, easily transferable, and a stable source of value in the relatively volatile crypto ecosystem. The company then takes its deposits and buys government bonds, earning interest in the process. These Treasury reserves are Circle’s primary source of revenue. As a result, CRCL will likely see its revenue wax and wane on the back of two things: overall outstanding supply of stablecoins, and the interest rate that the company earns on the government debt that it buys. Obviously, on the interest rate side, there’s not much for the company to do. As central banks adjust interest rates, CRCL is largely at the whims of the wider monetary markets. Thus, when rates go up, the company earns more, and when rates go down, the company earns less. In that way, CRCL is a relatively good countercyclical play, as most companies tend to perform better when rates are going down. On the other hand, the company has a lot more control when it comes to the adoption of its stablecoin network, and that’s where I’ll be focusing the majority of my analysis. In my most recent research, I highlighted the fact that the company’s efforts, including CPN, Circle Gateway, ARC, CCTP, and the company’s considerable financial tooling should drive strong future adoption, leading to considerable revenue growth. As one of only two key players in the stablecoin market, Circle already has significant size, brand, and tech advantages, and as the company leverages public markets to drive further integrations and partnerships, I believe CRCL could become the number one stablecoin player in the ecosystem. On a use case basis, stablecoins are inherently valuable for a couple of reasons. First off, crypto payment rails are simple, cheap, fast, and effective. This makes them a great way to transfer money at low cost, making them ideal tools for disrupting the foreign exchange markets, which are historically complex and Byzantine. Additionally, stablecoins are programmable money, which means that users can program dollars, euros, and eventually other stablecoins to move and execute business logic via smart contracts as opposed to manual workflows. This enables everything from agentic commerce to enterprise integration. If stablecoins become popular and the company’s new ARC network gains enough traction, the company could significantly disrupt legacy payments infrastructure across international FX, credit and debit cards, and more, with cheaper, faster, more straightforward transfers that provide certainty for everyone involved. Q4 Results Recently, the company reported its Q4 earnings, which showed significant acceleration on all of the company’s primary business fronts. At a high level, Q4 2025 ended with more than $75 billion dollars of USDC in circulation, a 72% increase year over year: IR At the same time, USDC facilitated $11.9 trillion dollars in on-chain transaction volume in Q4 alone, up 247% YoY. At a base level, this network growth is what will ultimately drive long-tail financial results, so the growth here is incredibly encouraging. In terms of financials, Circle produced $770 million dollars in total revenue and reserve income, an increase of 77% YoY, alongside $167 million dollars in adjusted EBITDA, an increase of 412% YoY. More broadly, the stablecoin market continues to grow, with USDC and USDT dominating the total stablecoin supply and circulation: IR With only 28% of the overall circulating supply, but nearly 50% of the transaction volume, it’s clear that USDC is being not just held, but used at a higher rate by market participants. In my mind, this should drive stronger forward adoption of the company’s products, especially as USDC transforms from a reserve asset, to a programmable money machine that can execute commands and automated workflows, or act on behalf of AI agents. Acting as a stable store of value is one thing, but building out use cases and layers should drive long-term entrenchment and profitability for investors. Business model defensibility here comes in two forms: traditional economic theory, and potential economic reality. On the traditional side, CRCL benefits from incredibly strong network effects, being widely used for DeFi applications and sharing a duopoly market with Tether. Other attempts at building stablecoin networks have not gained much traction, which tells me that this will likely evolve into a few-take-most economic outcome. Thus, CRCL is directly leveraged to the growth of stablecoins in circulation and transaction volumes moving forward. In terms of where the economy might go, however, I also believe that CRCL is well protected from potential threats posed by AI. While it looks like AI will meaningfully disrupt white-collar knowledge work across finance, tech, law, and consulting (not to mention the millions of other white-collar office jobs that exist), I believe that the improvement of AI agents could also be a disrupting force on traditional payment networks. Citrini do an excellent job of laying out this eventuality in their recent report: Once agents controlled the transaction, they went looking for bigger paperclips. There was only so much price-matching and aggregating to do. The biggest way to repeatedly save the user money (especially when agents started transacting among themselves) was to eliminate fees. In machine-to-machine commerce, the 2-3% card interchange rate became an obvious target. Agents went looking for faster and cheaper options than cards. Most settled on using stablecoins via Solana or Ethereum L2s, where settlement was near-instant and the transaction cost was measured in fractions of a penny. Citrini Research In this case, we can see CRCL, and stablecoins more broadly, as a potential beneficiary of AI disruption as agentic tools focus more on price, speed, and certainty versus consumer experience and brand. In that way, stablecoins’ speed and cost advantages could finally win business over entrenched card networks like Visa ( V ). Taken together, Circle is growing rapidly into an expanding market opportunity, and with strong network effects and product advantages that should shield it from the current wave of AI disruption. Most importantly, the most recent Q4 report has significant implications for the company’s stock price. Valuation Right now, CRCL has a market cap of roughly $24 billion dollars. For a company with negative TTM operating margins and total revenue of only $2.41 billion dollars, a 10x sales multiple may look quite expensive. Admittedly, the Seeking Alpha Quant rating has not been finalized yet, but with premiums of anywhere from 76 to 150% above traditional tech sector sales multiples, it’s clear that the stock is expensive looking : Seeking Alpha That said, if you look at the company’s fixed cost base and operating model, and depending on the interest rate environment, the business is anywhere from roughly breakeven to incredibly profitable: Gross Profits (Seeking Alpha) As the network continues to grow in the 70%+ range, with management anticipating 30%+ bumpy YoY growth, I believe that CRCL will rapidly become profitable, thus driving down the company’s expensive-looking valuation. Right now, even if you annualize adjusted EBITDA to $670 million dollars, CRCL is trading at only 36x. For a business growing revenues this quickly, with this high of a competitive moat and with so much operating leverage, I believe that this price is more than worth paying. The market agrees, with shares of CRCL up 67% over the last eight days: TradingView I believe the rally has not gotten ahead of itself, and shares could continue their dramatic ascent in the quarters and years ahead. Thus, my upgrade to a Strong Buy rating. Risk While most of my article focused on defensibility and protection for the company’s future profitability from competitors and disruptive threats like AI, there are three key risks worth thinking about when it comes to CRCL. First off, valuation. As I mentioned, I believe paying 36x annualized adjusted EBITDA for a company growing this quickly and with such inherent leverage is a reasonable price to pay. The market may end up disagreeing with this, especially in the event of a downturn. In this case, I see significant room for material cyclical multiple compression that could dent investor returns. Second, CRCL is reliant on reserve income for the majority of its revenues, which means that if interest rates head lower, CRCL may not be able to outgrow one of the two pieces in its revenue formula. Finally, number three, if the business faces any execution challenges, then that could open things up for competitors and allow a third market player to come in and take share. Poor product rollouts, technical glitches, or strategic management missteps could threaten the overall thesis. Of course, CRCL has been well run up to this point, but it’s always a risk worth noting. Summary Overall, while there are some salient risks with an investment in CRCL and the stock remains hyper-volatile post-IPO, shares in the company, at only 36x adjusted unit profits appear reasonably priced, especially as revenue, profit, and underlying metric growth are all coming in at 50%+ year over year. With AI acting as a potential tailwind, I view shares of CRCL as an excellent way to take advantage of future market disruptions. Thus, my upgrade to a Strong Buy rating. Cheers~