Goldman Sachs analyst delivers shock message on Circle after blowout quarter
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Circle Internet Group (CRCL) just delivered a quarter that blockchain-focused companies can only dream of. A clean earnings beat, stronger-than-expected revenue, and margins moving in the right direction are just some of the noteworthy items coming out of earnings.But Goldman Sachs’ “first take” in the aftermath of the earnings comes with an important caveat. The key point, according to Goldman, is that buried inside the company’s 2026 outlook is a cost story that no one can ignore — one that's higher than it first appears. Goldman Sachs summed it up in a Feb. 25 note.The tension is thanks to the last clause. This is because Circle’s 2026 outlook includes a cost detail that will change how investors model the year ahead.Circle earnings beat: USDC growth powers a blowout quarterCircle’s business still runs primarily on one engine: USD Coin (USDC), a regulated stablecoin pegged 1:1 to the U.S. dollar.As USDC circulation rose 72% from a year earlier to $75.3 billion, Circle’s reserve-driven model did what it was supposed to. It spun scale into income.Related: Samsung shocks Apple in smartphone warReserve revenue hit $733 million as USDC expanded, Reuters reported, helping increase total revenue and reserve income by 77% to $770 million for the period.Circle's own release echoes the same. USDC circulation at $75.3 billion, on-chain USDC transaction volume of $11.9 trillion (up 247% year over year), and adjusted EBITDA of $167 million reinforce the narrative. Goldman highlights the profitability angle even more directly. The analyst note points to “a 54% adj. EBITDA margin,” which is well above consensus expectations.You also need to think about the regulatory tailwind. Favorable stablecoin rules, such as the GENIUS Act framework, have contributed to the rise in USDC adoption. A quiet shift is forming around Circle after earnings.Nagle/Bloomberg via Getty Images Circle’s 2026 guide looks fine until you normalize costsCircle’s report points to more of what we saw in the last quarterly results.It guided a 2026 setup, which is offering a smooth transition. Other revenue: $150 million to $170 millionRLDC margin: 38% to 40%Adjusted operating expenses: $570 million to $585 millionRelated: Galaxy S26 brings 'agentic AI' to phones, and it’s bigger than SamsungWhat is Goldman’s take? Essentially, the revenue and margin guide is the good news, and, in places, it comes ahead of market expectations.But the catch remains expenses.Goldman said Circle “restated its definition” of adjusted operating expenses to eliminate recurring items. That includes the cost of payroll taxes related to stock-based pay, legal fees, and the cost of sending clients information about acquisitions.If you take into account the headline cost guidance with prior-year periods, it does not provide the full "run-rate" load.Goldman put it bluntly: “The comparison is not apples to apples.”Why does that matter to investors?If you boil it down, Circle analysts perceive the stock as a scaled financial infrastructure play. The simple reason is that Circle is currently valued as a scaled financial infrastructure play, largely based on an operating leverage thesis.
More Tech Stocks:Morgan Stanley sets jaw-dropping Micron price target after eventNvidia’s China chip problem isn’t what most investors thinkQuantum Computing makes $110 million move nobody saw comingIf costs maintain their upward ascent as Circle expands, the market will switch from "margin expansion" mode to "cost creep" mode.Goldman is not alone in focusing on operational details, with Circle CEO Jeremy Allaire saying that while higher rates can boost revenue, rate cuts are “welcome” because of an improvement in the economic environment and USDC adoption. That’s a timely reminder that Circle’s model is tied to both scale and the broader rate environment.What Goldman says to watch next for CircleGoldman maintains a neutral rating on Circle, arguing it needs “further clarity” on several questions. Some of the questions are "Will USDC be able to keep growing after 2026?" and "What is causing the company's expenses to look like they are going up?" Here’s the clean way to frame Circle’s future: If USDC keeps scaling and RLDC margins hold, the beat is the start of a trend, one that investors can ride well into the future.If normalized costs rise faster than investors expect, the stock’s “clean beat” narrative is not sustainable.The bottom line is that Circle just gave investors a quarter they love; it’s growing, making money, and the stock is up.But it's important to remember Goldman's warning. Circle's 2026 outlook could have an underlying cost issue that is harder to see than a headline EPS beat.Related: Veteran analyst sends shocking message on Nvidia after earnings