Circle's 41% RLDC Margin Looks Big-But USDC Investors Should Focus on What Sticks

Gross margin looks strong, but operating results still tell the harder story

Circle has reported 41.7% gross margins, which can make the business look like a high-margin cash machine. The problem is that a strong gross margin does not automatically translate into strong earnings. After operating expenses are deducted, investors get a much different picture.

Circle bulls still have a credible case. The company has cited 29% stablecoin market share, $41 trillion in on-chain transaction volume, and 52x year-over-year growth in diversified income streams. If usage keeps scaling, that infrastructure could become more profitable over time as fixed costs are spread across a larger base.

The bear case starts with the broader income statement. Circle reported Q1 net income from continuing operations of $55 million, down 15%, and its operating margin was 0.00% as of September 30, 2025 versus -9.82% a year earlier. That does not prove the model is fragile, but it does show that Circle still has work to do in turning gross profitability into cleaner, more repeatable earnings.

The real 2026 test is durability, not just margin breadth

The key question is whether Circle can build cash generation that holds up across rate cycles and becomes less dependent on reserve income. That means growing platform, ecosystem, and other diversified revenue streams fast enough to matter.

If that transition succeeds, the current margin profile could look less like a one-number story and more like a defensible business. If it does not, the stock may remain a debate about timing rather than conviction.