Bitcoin Holdings and Strategy - The company held approximately 641,167 bitcoins as of October 30, 2025, with an aggregate market value of $68.28 billion based on a market price of $106,490 per bitcoin[186]. - The total bitcoin holdings increased from 447,470 bitcoins at December 31, 2024, to 640,031 bitcoins by September 30, 2025, reflecting a growth of 43%[179]. - The company reported unrealized gains on digital assets of $3.89 billion for the three months ended September 30, 2025, and $12.03 billion for the nine months ended September 30, 2025[182]. - The company purchased bitcoin using $4.37 billion from common stock sales, $1.99 billion from convertible notes, and $710 million from initial public offerings in the first quarter of 2025[179]. - The average purchase price per bitcoin increased from $62,503 at December 31, 2024, to $73,983 at September 30, 2025[184]. - The company’s strategy involves capital raising through debt and equity to fund bitcoin acquisitions, with no specific target for total bitcoin holdings[171]. - The company’s bitcoin strategy includes potential periodic sales for corporate purposes and tax benefits, alongside exploring income-generating strategies using bitcoin holdings[172]. - The company acquired 42,705 bitcoin during the three months ended September 30, 2025, increasing total holdings to 640,031 bitcoin, compared to 25,889 bitcoin in the same period of 2024[204]. - For the nine months ended September 30, 2025, the company acquired 192,561 bitcoin, increasing total holdings to 640,031 bitcoin, compared to 63,070 bitcoin in the same period of 2024[207]. - The market price of bitcoin increased from $63,463 as of September 30, 2024, to $114,378 as of September 30, 2025, contributing to the increase in BTC $ Gain[207]. - As of September 30, 2025, the company had deferred tax liabilities of approximately $7.43 billion related to unrealized gains on bitcoin holdings[223]. - The company held approximately 640,031 bitcoins with a carrying value of $73.21 billion as of September 30, 2025[282]. Financial Performance - Total revenues for the three months ended September 30, 2025, increased by 10.9% to $128.7 million compared to $116.1 million in the same period of 2024[213]. - Subscription services revenues rose by 65.4% to $46.0 million for the three months ended September 30, 2025, compared to $27.8 million in the same period of 2024[213]. - Product support revenues decreased by 16.2% to $51.1 million for the three months ended September 30, 2025, compared to $61.0 million in the same period of 2024[213]. - Gross profit for the three months ended September 30, 2025, was $90.7 million, an increase of 11.0% from $81.7 million in the same period of 2024[213]. - The company recorded a provision for income taxes of $3.35 billion on a pretax income of $11.93 billion for the nine months ended September 30, 2025, resulting in an effective tax rate of 28.0%[222]. - The company achieved BTC Gain of 31,058 and 115,956 for the three and nine months ended September 30, 2025, respectively, compared to 11,535 and 33,657 in the prior year[207]. - BTC $ Gain was approximately $3.552 billion and $13.263 billion for the three and nine months ended September 30, 2025, respectively, compared to approximately $732.0 million and $2.136 billion in the prior year[207]. - The company reported a $9.1 billion increase in net income for the nine months ended September 30, 2025, despite a $13.4 million increase in changes in operating assets and liabilities[255]. Capital Raising and Expenses - The company sold 5,712,041 shares of Class A common stock in the three months ended September 30, 2025, generating net proceeds of $2,199,360 thousand[194]. - The total net proceeds from all equity offerings for the nine months ended September 30, 2025, amounted to $17,633,587 thousand[194]. - The company has issued a total of $1,984,852 thousand in net proceeds from its 2030B Convertible Notes during the nine months ended September 30, 2025[199]. - Approximately $5.1 billion was raised from capital markets activity during the three months ended September 30, 2025, with $2.3 billion from STRK ATM and Common Stock ATMs, increasing Assumed Diluted Shares Outstanding by 5.8 million to approximately 320.0 million[205]. - The company announced a capital plan to raise $84 billion in the medium-to-long term, including $42 billion of equity capital and $42 billion of fixed-income instruments[242]. - The company has long-term debt obligations totaling $8.24 billion, with semi-annual coupon interest payments of $17.3 million due for outstanding convertible notes[251]. - Net cash used in operating activities for the nine months ended September 30, 2025, was $(45,612) thousand, a 27.7% increase from $(35,708) thousand in the same period of 2024[254]. - Net cash used in investing activities increased by 384.1% to $(19,417,576) thousand for the nine months ended September 30, 2025, compared to $(4,010,904) thousand in 2024[254]. - Net cash provided by financing activities rose by 381.4% to $19,476,842 thousand for the nine months ended September 30, 2025, compared to $4,046,067 thousand in the prior year[254]. - Net cash provided by financing activities increased by $15.4 billion for the nine months ended September 30, 2025, primarily due to a $10.6 billion increase in net proceeds from the sale of class A common stock[258]. Market and Risk Factors - The company is exposed to market risks including fluctuations in bitcoin prices, foreign currency, and interest rates, which could materially affect actual results[281]. - Bitcoin has traded between $60,000 and $120,000 in the 12 months preceding September 30, 2025, indicating high volatility[282]. - A 10% adverse change in foreign currency exchange rates would have decreased reported cash and cash equivalents by 4.4% as of September 30, 2025[286]. - If average exchange rates had changed unfavorably by 10%, revenues for the nine months ended September 30, 2025 would have decreased by 3.8%[286]. - The company does not believe its interest rate risk exposure via STRC Stock is material as of October 30, 2025[288]. Dividends and Shareholder Returns - Total dividends paid for the three months ended September 30, 2025, amounted to $139.8 million, with no dividends paid during the same period in 2024[249]. - The board of directors increased the monthly regular dividend rate on STRC Stock from 10.00% to 10.25%, effective October 1, 2025, with a cash dividend of $0.854166667 per share payable on October 31, 2025[252]. - The regular dividend rate on STRC Stock was increased from 10.25% to 10.50% per annum effective November 1, 2025[287]. - An increase of 0.50% in the regular dividend rate on STRC Stock would result in an additional monthly dividend accrual of approximately $1.2 million[288]. Employee and Operational Metrics - The total employee headcount as of September 30, 2025, was 1,546, an increase from 1,534 as of December 31, 2024[229]. - The transition from on-premise perpetual licenses to cloud subscriptions is expected to continue impacting revenue recognition and cash flows, with product license revenues declining[211]. - Deferred revenue and advance payments represent amounts received before services are transferred, with revenue recognized in the period control is transferred to the customer[211]. - Total deferred revenue and advance payments decreased by $38.9 million as of September 30, 2025, compared to December 31, 2024, primarily due to decreased deferred product support revenue[225].

Financial Performance - Strategy reported a net income of $2.8 billion and diluted EPS of $8.42 for Q3 2025, marking significant positive earnings for the second consecutive quarter[4]. - Operating income for Q3 2025 was $3.9 billion, compared to an operating loss of $432.6 million in Q3 2024[12]. - Strategy's full-year guidance includes operating income of $34 billion and net income of $24 billion, based on a projected bitcoin price of $150,000 by year-end[18]. - Total revenues for the three months ended September 30, 2025, were $128.7 million, a 10.3% increase compared to $116.1 million for the same period in 2024[51]. - Net income for the three months ended September 30, 2025, was $2.8 million, compared to a net loss of $340.2 million for the same period in 2024[51]. - The company reported a gross profit of $90.7 million for the three months ended September 30, 2025, representing a gross margin of 70.5%[51]. - Basic earnings per share for the three months ended September 30, 2025, were $9.30, compared to a loss of $1.72 per share for the same period in 2024[51]. Bitcoin Holdings and Strategy - The company increased its bitcoin holdings to 640,808 bitcoins, with a total cost of $47.44 billion, averaging $74,032 per bitcoin[6]. - Year-to-date, Strategy achieved a BTC Yield of 26% and a BTC $ Gain of $12.9 billion, reaffirming a full-year target of $20 billion BTC $ Gain[4][6]. - Strategy Inc. is the world's first and largest Bitcoin Treasury Company, adopting Bitcoin as its primary treasury reserve asset[31]. - The company uses Bitcoin Per Share (BPS) as a key performance indicator, representing the ratio of Bitcoin holdings to Assumed Diluted Shares Outstanding, expressed in Satoshis[33]. - BTC Yield measures the percentage change in BPS over a period, helping assess the company's strategy of acquiring Bitcoin in an accretive manner[34]. - The market value of Bitcoin holdings is calculated by multiplying the current market price of Bitcoin by the total number of Bitcoins held, referred to as Bitcoin NAV[48]. - The company acknowledges the volatility and risks associated with Bitcoin markets, which may affect the actual fair market value of its holdings[62]. Capital and Liquidity - The company has raised $20 billion year-to-date through its capital markets platform, positioning itself as a dominant credit issuer globally[3]. - As of September 30, 2025, cash and cash equivalents stood at $54.3 million, up from $38.1 million at the end of 2024[12]. - The company experienced a net cash used in operating activities of $45.6 million for the nine months ended September 30, 2025, compared to $35.7 million for the same period in 2024[55]. - Total liabilities increased to $15.5 billion as of September 30, 2025, from $7.6 billion as of December 31, 2024[53]. Dividend Policy - The STRC dividend rate was increased to 10.50% for November 2025, reflecting a structured approach to dividend adjustments[3][14]. - The company plans to adjust dividends for its STRC Stock based on future operating income and net income projections[50]. Digital Assets and Market Value - Digital assets held by the company increased significantly to $73.2 billion as of September 30, 2025, compared to $23.9 billion as of December 31, 2024[53]. - The cumulative effect upon adoption of ASU 2023-08 resulted in a carrying value increase to $41,790,421,000 immediately following the adoption[57]. - In Q1 2025, the company purchased Bitcoin using $4.37 billion from class A common stock offerings and other sources, totaling $7.66 billion in digital asset purchases[58]. - By March 31, 2025, the market value of Bitcoin held increased to approximately $43,546,079,000, with 528,185 Bitcoins held[61]. - In Q2 2025, Bitcoin purchases amounted to $6.77 billion, funded by $5.19 billion from class A common stock offerings and other sources[58]. - The market value of Bitcoin held at the end of Q2 2025 was approximately $64,362,798,000, with 597,325 Bitcoins held[61]. - In Q3 2025, the company purchased Bitcoin for $4.95 billion, utilizing $2.07 billion from class A common stock offerings and other sources[59]. - As of September 30, 2025, the company held 640,031 Bitcoins with a market value of approximately $73,205,725,000[61]. - The unrealized gain on digital assets reached $14,047,514,000 by March 31, 2025, reflecting significant market fluctuations[57]. Risks and Market Considerations - The company has historically not paid dividends on its Class A common stock, and ownership of its securities does not represent an ownership interest in the Bitcoin held[44]. - The company's ability to maintain BPS or achieve positive BTC Yield, BTC Gain, or BTC $ Gain may depend on various factors, including Bitcoin price fluctuations[45]. - The trading price of the company's Class A common stock can deviate significantly from the market value of its Bitcoin holdings[37]. - The company may experience increases in Assumed Diluted Shares Outstanding without corresponding increases in Bitcoin holdings, affecting BPS and other KPIs negatively[43]. - The company encourages investors to regularly review information provided on its strategy dashboard for insights into market prices and key performance metrics[29].

Bitcoin Holdings and Strategy - As of June 30, 2025, the company held approximately 597,325 bitcoins, with an aggregate purchase price of $42.40 billion and an average purchase price of approximately $70,982 per bitcoin [188]. - The company purchased bitcoin using $5.19 billion from sales under its at-the-market offering program for class A common stock in the second quarter of 2025 [187]. - The company’s bitcoin strategy includes issuing debt or equity securities to fund bitcoin purchases, with no specific target for the amount of bitcoin to hold [179]. - The company’s treasury reserve assets consist of cash assets exceeding working capital requirements and bitcoin as the primary reserve asset [181]. - The company held approximately 597,325 bitcoins, valued at $73.42 billion based on market price, indicating significant liquidity potential [240]. - The company does not anticipate needing to sell bitcoin to meet short-term liquidity needs but may do so as part of treasury management operations [263]. - The company incurred additional costs related to bitcoin advocacy and custodial fees as part of its ongoing bitcoin strategy [266]. Financial Performance - Total revenues for Q2 2025 were $114.5 million, a slight increase of 2.3% compared to $111.4 million in Q2 2024 [197]. - Subscription services revenues increased by 69.5% to $40.8 million in Q2 2025 from $24.1 million in Q2 2024, driven by conversions to cloud-based subscriptions [206]. - Product licenses revenues decreased by 22.7% to $7.2 million in Q2 2025 from $9.3 million in Q2 2024, attributed to a decline in deal volume and size [205]. - Product support revenues fell by 15.6% to $52.1 million in Q2 2025 from $61.7 million in Q2 2024, reflecting a decrease in both domestic and international markets [207]. - Gross profit for the first half of 2025 was $155.8 million, down from $165.7 million in the same period of 2024 [197]. - Operating expenses for the first half of 2025 totaled $7.95 million, significantly reduced from $569.7 million in the first half of 2024 due to changes in accounting for digital assets [197]. - Non-GAAP income from operations for Q2 2025 was $14,047,732, compared to a loss of $179,653 in Q2 2024, reflecting a significant recovery [285]. - Non-GAAP net income attributable to common stockholders for Q2 2025 was $9,946,587, up from a loss of $136,058 in Q2 2024 [287]. Cash Flow and Financing Activities - Net cash used in operating activities increased by 809.4% to $(37,302) thousand for the six months ended June 30, 2025, compared to $5,258 thousand in the same period of 2024 [265]. - Net cash used in investing activities rose by 493.6% to $(14,457,699) thousand, primarily due to a $12.00 billion increase in bitcoin purchases [267]. - Net cash provided by financing activities increased by 491.6% to $14,504,460 thousand, driven by a $9.51 billion increase in net proceeds from the sale of class A common stock [268]. - The company issued 7,300,000 shares of STRK Stock on February 5, 2025, raising approximately $563.2 million in net proceeds for general corporate purposes, including bitcoin acquisition [246]. - The company issued 28,011,111 shares of STRC Stock on July 29, 2025, raising approximately $2.47 billion in net proceeds for general corporate purposes [250]. - Total net proceeds from at-the-market equity offerings reached $5,858,518 thousand for the three months ended June 30, 2025 [282]. Tax and Liabilities - The provision for income taxes for the six months ended June 30, 2025, was $2.26 billion on a pretax income of $8.06 billion, resulting in an effective tax rate of 28.0% [228]. - The company had deferred tax liabilities of approximately $6.31 billion related to unrealized gains on bitcoin holdings as of June 30, 2025 [229]. Market and Economic Risks - The company anticipates continued significant exposure to market price changes in bitcoin, foreign currency fluctuations, and interest rate risk [288]. - A 10% adverse change in foreign currency exchange rates would have decreased reported cash and cash equivalents by 5.2% as of June 30, 2025 [293]. - If average exchange rates had changed unfavorably by 10%, revenues for the six months ended June 30, 2025 would have decreased by 3.8% [293]. - The company is exposed to interest rate risk through its STRC Stock, which has a variable dividend rate initially set at 9.00% per annum [294]. - An increase of 0.50% in the regular dividend rate on STRC Stock would result in an additional monthly dividend accrual of approximately $1.2 million [295]. Employee and Operational Changes - The company had a total of 1,512 employees as of June 30, 2025, a decrease from 1,839 employees a year earlier [200]. - Share-based compensation expense decreased by $4.9 million in Q2 2025 compared to Q2 2024, primarily due to forfeitures and vesting of stock awards [201]. - Research and development expenses decreased by $6.2 million (20.6%) and $11.0 million (18.5%) for the three and six months ended June 30, 2025, respectively, compared to the same periods in the prior year [219][220]. - Sales and marketing expenses decreased by $6.5 million (9.6%) for the six months ended June 30, 2025, compared to the same period in the prior year [218]. - General and administrative expenses increased by $6.3 million (8.8%) for the six months ended June 30, 2025, compared to the same period in the prior year [221].

Exhibit 99.1 Contact: Strategy Shirish Jajodia Corporate Treasurer ir@strategy.com Strategy Announces Second Quarter 2025 Financial Results; Record Net Income of $10.0 Billion and EPS of $32.60 Earnings Highlights Bitcoin Highlights FY2025 Earnings Guidance TYSONS CORNER, Va., July 31, 2025 - MicroStrategy ®Incorporated d/b/a Strategy™ (Nasdaq: MSTR/STRK/STRF/STRD/STRC) ("Strategy" or the "Company"), the largest corporate holder of bitcoin and the world's first Bitcoin Treasury Company, today announces fina ...

Group 1 - Strategy increased its Bitcoin holdings by acquiring 4,980 BTC, totaling approximately $531.9 million [1] - The funding for this acquisition came from the sale of its Class A common stock (MSTR), convertible preferred stock (STRK), and perpetual preferred stock (STRF) through an ATM (at-the-market) offering [1]

Core Insights - Seeking Alpha welcomes Aaron Brown as a new contributing analyst, emphasizing the platform's commitment to diverse investment ideas and community engagement [1] - Aaron Brown is a corporate attorney specializing in M&A transactions, with a keen interest in the intersection of law and financial markets, and a passion for long-term investing and new technologies [2] Company and Industry Summary - The article highlights the importance of thoughtful analysis in investment decisions, reflecting the broader community's engagement with emerging legal and financial topics [2] - The contributions from analysts like Aaron Brown are aimed at providing insights that can help investors navigate complex market dynamics [2]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Unaudited Q1 2025 statements reflect a significant net loss, primarily from a $5.91 billion unrealized loss on digital assets, with total assets surging to $43.9 billion [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in thousands of USD) | Account | March 31, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $60,298 | $38,117 | +58.2% | | Digital assets | $43,546,079 | $23,909,373 | +82.1% | | **Total assets** | **$43,919,760** | **$25,843,685** | **+69.9%** | | Long-term debt, net | $8,140,156 | $7,191,158 | +13.2% | | Total liabilities | $10,394,027 | $7,613,701 | +36.5% | | Total mezzanine equity | $1,304,497 | $0 | N/A | | Retained earnings (deficit) | $6,351,847 | ($2,166,876) | N/A | | **Total stockholders' equity** | **$32,221,236** | **$18,229,984** | **+76.8%** | - The significant increase in **Digital Assets** is due to both additional purchases and the adoption of **ASU 2023-08**, which requires measurement at fair value. The company also issued **$1.3 billion** in new perpetual preferred stock, classified as **Mezzanine Equity**[8](index=8&type=chunk)[24](index=24&type=chunk) [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Consolidated Statements of Operations Highlights (in thousands of USD, except per share data) | Account | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total revenues | $111,066 | $115,246 | -3.6% | | Gross profit | $77,095 | $85,231 | -9.5% | | Unrealized loss on digital assets | ($5,906,005) | $0 | N/A | | Digital asset impairment losses | $0 | ($191,633) | N/A | | Loss from operations | ($5,921,412) | ($203,702) | +2807.4% | | Net loss | ($4,217,370) | ($53,118) | +7838.6% | | Net loss attributable to common stockholders | ($4,228,018) | ($53,118) | +7858.8% | | Basic loss per common share | ($16.49) | ($0.31) | +5219.4% | - The massive **net loss** in Q1 2025 was primarily driven by a **$5.91 billion unrealized loss** on digital assets, a new line item resulting from the adoption of accounting standard **ASU 2023-08** This replaced the previous digital asset impairment model[10](index=10&type=chunk)[24](index=24&type=chunk) - **Total revenues slightly decreased**, with a **61.6% increase in Subscription services revenue** ($37.1 million vs $23.0 million) being offset by a **43.8% decline in Product licenses revenue** ($7.3 million vs $12.9 million) and a **16.2% decline in Product support revenue** ($52.5 million vs $62.7 million), reflecting the ongoing shift to cloud-based offerings[10](index=10&type=chunk)[208](index=208&type=chunk)[210](index=210&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Highlights (in thousands of USD) | Category | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($2,389) | $28,587 | ($30,976) | | Net cash used in investing activities | ($7,670,400) | ($1,640,854) | ($6,029,546) | | Net cash provided by financing activities | $7,694,305 | $1,648,400 | $6,045,905 | - Investing activities were dominated by **$7.66 billion in digital asset purchases** These purchases were funded by **$7.69 billion in net cash from financing activities**, which included proceeds from new convertible notes (**$2.0 billion**), preferred stock offerings (**$1.34 billion**), and common stock offerings (**$4.41 billion**)[18](index=18&type=chunk) [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail ASU 2023-08 adoption, fair value accounting for digital assets, a $12.75 billion retained earnings adjustment, and capital raises - Effective January 1, 2025, the company adopted **ASU 2023-08**, requiring bitcoin holdings to be measured at **fair value** with changes recognized in net income This resulted in a cumulative-effect adjustment increasing the opening balance of retained earnings by **$12.75 billion**[24](index=24&type=chunk)[25](index=25&type=chunk) Digital Asset Holdings | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Approximate number of bitcoins held | 528,185 | 447,470 | | Digital asset carrying value (in thousands of USD) | $43,546,079 | $23,909,373 | - In Q1 2025, the company issued **$2.0 billion** of 0% Convertible Senior Notes due 2030 (2030B Notes) Additionally, all **$1.05 billion** of the 0% Convertible Senior Notes due 2027 were redeemed or converted into **7,373,528 shares** of class A common stock[49](index=49&type=chunk)[51](index=51&type=chunk)[64](index=64&type=chunk) - The company issued two new series of perpetual preferred stock in Q1 2025: 8.00% Series A Perpetual Strike Preferred Stock (STRK) and 10.00% Series A Perpetual Strife Preferred Stock (STRF), raising combined net proceeds of approximately **$1.27 billion**[112](index=112&type=chunk)[113](index=113&type=chunk)[127](index=127&type=chunk) - Subsequent to quarter end, through May 2, 2025, the company purchased an additional **27,265 bitcoins** for **$2.45 billion** and raised approximately **$2.46 billion** from its at-the-market equity offerings[171](index=171&type=chunk)[172](index=172&type=chunk)[175](index=175&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses its dual strategy of bitcoin accumulation and enterprise software, reporting a $4.22 billion net loss in Q1 2025 due to fair value accounting, and relying on financing for future obligations - The company's primary business strategy is to use proceeds from equity and debt financings, as well as cash from operations, to strategically **accumulate Bitcoin as its primary treasury reserve asset**[179](index=179&type=chunk)[181](index=181&type=chunk) Bitcoin Holdings Roll-Forward | Date | Approximate Bitcoins Held | Average Purchase Price Per Bitcoin (USD) | | :--- | :--- | :--- | | Dec 31, 2024 | 447,470 | $62,503 | | Mar 31, 2025 | 528,185 | $67,457 | | May 2, 2025 | 555,450 | $68,550 | - Management states that cash and cash equivalents from operations are **not expected to be sufficient** to satisfy obligations over the next twelve months They anticipate **relying on equity or debt financing** to meet these obligations[250](index=250&type=chunk) - The adoption of **ASU 2023-08** is expected to **increase the volatility of financial results** due to the requirement to recognize fair value changes of bitcoin in net income each period[224](index=224&type=chunk)[332](index=332&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks include bitcoin price volatility, which significantly impacts earnings, and foreign currency fluctuations due to substantial international revenues - The company's primary market risk is the **price volatility of bitcoin** As of March 31, 2025, it held approximately **528,185 bitcoins** with a carrying value of **$43.5 billion**[278](index=278&type=chunk)[279](index=279&type=chunk) - The company is exposed to **foreign currency risk**, as international revenues accounted for **42.9% of total revenues** for the three months ended March 31, 2025[280](index=280&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of the end of the period covered by the report[284](index=284&type=chunk) - There were **no changes in internal control over financial reporting** during the quarter that materially affected, or are reasonably likely to materially affect, these controls[285](index=285&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, but management does not expect a material adverse effect on its financial position or results - The company states that it does not expect the resolution of its various legal proceedings to have a **material adverse effect** on its financial condition or results[287](index=287&type=chunk) [Item 1A. Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) Key risks include bitcoin price volatility, potential CAMT liabilities, custody risks, regulatory uncertainty, competition from ETPs, substantial indebtedness, and reliance on capital markets - A primary risk is the **high volatility of bitcoin** The adoption of **ASU 2023-08**, requiring fair value accounting, is expected to **significantly increase the volatility of reported earnings**[317](index=317&type=chunk)[332](index=332&type=chunk) - The company may become subject to the **15% Corporate Alternative Minimum Tax (CAMT)** starting in 2026 due to unrealized gains on its bitcoin holdings, which could result in a **material cash tax obligation**[298](index=298&type=chunk)[301](index=301&type=chunk) - The company's enterprise analytics software business is **not expected to generate sufficient cash flow** to satisfy its financial obligations (including debt service and preferred stock dividends) over the next twelve months, creating a **reliance on capital markets**[296](index=296&type=chunk) - The recent approval and trading of **spot bitcoin ETPs** may **adversely affect the market price of the company's stock**, as investors may view ETPs as a more direct or preferable way to gain exposure to bitcoin[333](index=333&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk) - As of March 31, 2025, the company had **$8.22 billion in outstanding indebtedness**, which could **limit its ability to raise additional capital** and places it at a competitive disadvantage compared to less leveraged companies[471](index=471&type=chunk)[473](index=473&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=79&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) In Q1 2025, 7,373,528 shares of class A common stock were issued to settle $1.05 billion in 2027 Convertible Notes, exempt from registration - In Q1 2025, **7,373,528 shares** of class A common stock were issued upon the conversion of **$1.05 billion** of the 2027 Convertible Notes The issuance was **exempt from registration under Section 3(a)(9) of the Securities Act**[483](index=483&type=chunk) [Item 5. Other Information](index=80&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025 - **No directors or officers adopted or terminated a Rule 10b5-1 trading plan** during the quarter ended March 31, 2025[485](index=485&type=chunk) [Item 6. Exhibits](index=80&type=section&id=Item%206.%20Exhibits) This section indexes all exhibits filed with the Form 10-Q, including corporate governance, debt indentures, preferred stock designations, and sales agreements

Financial Performance - Total revenues for Q1 2025 were $111.1 million, a 3.6% decrease year-over-year compared to Q1 2024[16] - The Company reported total revenues of $111,066,000 for the three months ended March 31, 2025, compared to $115,246,000 for the same period in 2024, reflecting a decrease of approximately 3.4%[35] - The gross profit for the three months ended March 31, 2025, was $77,095,000, down from $85,231,000 in the prior year, indicating a decline of about 9.5%[35] - The Company incurred a net loss of $4,217,370,000 for the three months ended March 31, 2025, compared to a net loss of $53,118,000 for the same period in 2024, representing a significant increase in losses[35] - Basic loss per common share for the three months ended March 31, 2025, was $(16.49), compared to $(0.31) for the same period in 2024, indicating a substantial increase in loss per share[35] - The non-GAAP loss from operations for the three months ended March 31, 2025, was $(5,909,593), compared to $(185,911) for the same period in 2024, indicating a significant increase in losses[51] - The net loss attributable to common stockholders for the three months ended March 31, 2025, was $(4,228,018), compared to $(53,118) in 2024, reflecting an increase in losses of approximately 7,873%[53] - The diluted loss per common share for the three months ended March 31, 2025, was $(16.49), compared to $(0.31) in 2024, marking a substantial increase in loss per share[53] Digital Assets and Bitcoin Strategy - The Company achieved a "BTC Yield" of 13.7% year-to-date, surpassing the full year 2025 target of 15%[6] - "BTC $ Gain" for Q1 2025 was $4.1 billion, contributing to a year-to-date total of $5.8 billion, meeting 58% of the annual target[7] - Bitcoin holdings totaled 553,555 BTC with a total cost of $37.90 billion, averaging $68,459 per bitcoin as of April 28, 2025[6] - The Company recorded an unrealized loss of $5.9 billion on digital assets in Q1 2025 due to the adoption of fair value accounting[9] - The Company is increasing its 2025 "BTC Yield" target from 15% to 25% and "BTC $ Gain" target from $10 billion to $15 billion[6] - The Company purchased $7.66 billion in Bitcoin during Q1 2025, utilizing proceeds from various financing activities[44] - The market value of Bitcoin holdings increased to approximately $40.44 billion as of March 31, 2025, compared to $26.34 billion at the end of 2024[47] - The average purchase price per Bitcoin held increased to $67,457 as of March 31, 2025, from $58,863.90 at the end of 2024[47] Operating Expenses and Financial Position - Operating expenses for Q1 2025 were approximately $6.0 billion, a 1,976.1% increase year-over-year, primarily due to unrealized losses[16] - The Company’s total operating expenses for the three months ended March 31, 2025, were $5,998,507,000, compared to $288,933,000 in the prior year, showing a dramatic rise in expenses[35] - Total assets increased to $43.92 billion as of March 31, 2025, compared to $25.84 billion on December 31, 2024, representing a growth of 70%[37] - Digital assets held by the company reached $43.55 billion, up from $23.91 billion at the end of 2024, marking an increase of 82%[37] - Total liabilities rose to $10.39 billion as of March 31, 2025, compared to $7.61 billion at the end of 2024, reflecting a 37% increase[37] - Stockholders' equity increased to $32.22 billion as of March 31, 2025, up from $18.23 billion at the end of 2024, indicating a growth of 77%[37] Cash Flow and Investments - Cash and cash equivalents as of March 31, 2025, were $60.3 million, an increase of $22.2 million from December 31, 2024[16] - Net cash used in operating activities was $(2.39) million for the three months ended March 31, 2025, compared to $28.59 million provided in the same period of 2024[39] - The company reported a net cash outflow from investing activities of $(7.67) billion in Q1 2025, significantly higher than $(1.64) billion in Q1 2024[39] - Cash, cash equivalents, and restricted cash at the end of the period totaled $62.26 million, down from $83.73 million a year earlier[39] Strategic Focus and Future Outlook - The Company’s strategy includes using BTC Yield, BTC Gain, and BTC $ Gain as KPIs to assess the performance of its bitcoin acquisition strategy, although these metrics have limitations and do not reflect traditional financial performance measures[24] - The Company has not paid any dividends on its class A common stock historically and does not indicate any intention to do so in the future[30] - Forward-looking statements indicate that the Company’s ability to achieve positive BTC Yield, BTC Gain, or BTC $ Gain may depend on various factors, including market conditions and operational cash generation[31] - The Company has dedicated certain corporate personnel to its bitcoin strategy, reflecting a strategic focus on enhancing its digital asset management[58] - The Chief Operating Decision Maker (CODM) uses net income (loss) to assess the profitability of the software business, indicating a focus on controllable costs for future budgeting[59]

Core Insights - MicroStrategy has successfully acquired 6,911 bitcoins for approximately $584 million, bringing its total holdings to 506,137 bitcoins, valued at over $44 billion [1][3] - The average purchase price for this acquisition was $84,529 per bitcoin, funded primarily through the sale of Class A common stock and Series A perpetual preferred stock [3] - MicroStrategy's total bitcoin expenditure amounts to approximately $33.7 billion, with an average purchase price of $66,608 per bitcoin [3] Company Impact - Following the announcement, MicroStrategy's stock (MSTR) rose by 7.16% to $325.99, despite concerns regarding its valuation compared to its bitcoin net asset value [4] - The company plans to raise up to $21 billion through its preferred stock issuance to further support its bitcoin acquisition strategy, indicating a strong commitment to the cryptocurrency market [4] Market Reaction - Bitcoin's price surged past the psychological barrier of $88,000, reaching a high of $88,713.83, reflecting strong market interest driven by institutional involvement [3][5] - Michael Saylor, co-founder and executive chairman of MicroStrategy, expressed confidence that bitcoin could reach $1.3 million in the next 20 years, emphasizing its potential as a commodity [3] Industry Outlook - MicroStrategy's increasing bitcoin holdings enhance its influence in the cryptocurrency market, contributing to renewed confidence in bitcoin's future despite ongoing debates about its volatility and long-term value [5] - The company's strategic investments and acquisition activities are expected to attract more institutional participation in the cryptocurrency space, potentially leading to significant market changes [5]

Bitcoin Holdings and Strategy - In 2024, the company purchased approximately 258,320 bitcoins for an aggregate price of approximately $22.073 billion, averaging $85,447 per bitcoin[32]. - As of December 31, 2024, the company held $23.909 billion in digital assets, including approximately 447,470 bitcoins, with cumulative impairment losses of $4.059 billion[35]. - The company held approximately 478,740 bitcoins as of February 14, 2025, acquired at a total cost of $31.134 billion, averaging $65,033 per bitcoin[36]. - The company has not sold any bitcoins during 2023 or 2024, indicating a long-term holding strategy[32]. - The company plans to fund further bitcoin acquisitions through issuances of common stock and various fixed-income instruments[29]. - The company expects to continue accumulating bitcoin without a specific target amount, monitoring market conditions for additional financings[30]. - The most recent bitcoin halving occurred in April 2024, reducing the mining reward to 3.125 bitcoins per block[38]. - Bitcoin is viewed as an attractive asset for its potential to serve as a hedge against inflation and a store of value due to its limited supply[56]. - The company primarily purchases bitcoin using proceeds from equity and debt financings, making its strategy dependent on favorable financing conditions[120]. - The company anticipates that the proportion of its total assets represented by bitcoin holdings will increase in the future, leading to greater earnings volatility[143]. Financial Performance and Impairment - The company generated a net loss of $1.790 billion for the fiscal year ended December 31, 2024, primarily due to digital asset impairment losses[102]. - The company incurred $4.059 billion of cumulative impairment on its bitcoin holdings through December 31, 2024, reflecting the volatility of bitcoin prices[139]. - The adoption of ASU 2023-08 on January 1, 2025, will require the company to measure its bitcoin holdings at fair value, resulting in a cumulative-effect net increase to retained earnings of $12.745 billion[106]. - The adoption of ASU 2023-08 is expected to increase the volatility of the company's financial results due to fluctuations in bitcoin prices[124]. - The company's financial results and market price of its listed securities are significantly influenced by the volatility of bitcoin prices[126]. Regulatory Environment - Evolving government regulations regarding digital assets may impact the company's bitcoin strategy and market participation[60]. - The CFTC considers bitcoin a commodity, which subjects it to market manipulation and fraud oversight, while the SEC does not classify it as a security[63][64]. - The company’s bitcoin strategy subjects it to enhanced regulatory oversight, particularly in light of increased scrutiny following the FTX collapse[148][151]. - Regulatory changes could classify bitcoin as a security, potentially subjecting the company to additional regulatory controls and affecting its business strategy[169]. - The company faces significant uncertainty regarding the legal and regulatory framework governing digital assets, which may impact its ability to own or transfer bitcoin[128]. Custody and Security Risks - The company holds substantially all of its bitcoin in custody accounts at U.S.-based custodians, diversifying risk exposure across multiple custodians[52]. - Custodians are selected based on strict security protocols, including offline storage of private keys to mitigate risks associated with unauthorized access and cyberattacks[53]. - The company conducts ongoing due diligence reviews of custodians, including monitoring their financial solvency and regulatory compliance, especially in response to market events like the FTX collapse[54]. - The company believes that its bitcoin holdings are protected from custodian bankruptcy claims due to specific contractual terms and regulatory protections[55]. - The company faces counterparty risks related to custodians of its bitcoin holdings, which could affect access to its assets in case of custodian insolvency[122]. - Security breaches or cyberattacks could result in the loss of bitcoin, adversely affecting the company's financial condition[161]. - The company holds a significant amount of bitcoin with regulated custodians, but the insurance covering losses only accounts for a small fraction of the total value of bitcoin holdings[166]. - The company faces risks related to the custody of bitcoin, including potential loss or destruction of private keys and cyberattacks[165]. Employee and Operational Changes - As of December 31, 2024, the company had a total of 1,534 employees, a decrease from 1,934 in 2023 and 2,152 in 2022, reflecting a reduction of approximately 20.7% year-over-year[90]. - The company’s employee headcount in research and development decreased from 642 in 2023 to 498 in 2024, a reduction of approximately 22.4%[92]. - The company’s total headcount in consulting decreased from 399 in 2023 to 275 in 2024, a decline of approximately 30.9%[92]. Market and Economic Factors - The price of bitcoin has historically been subject to dramatic fluctuations, impacting the company's financial performance[138]. - The company is subject to macroeconomic changes, including interest rates and inflation, which could affect the price of bitcoin[130]. - The emergence of alternative digital assets and stablecoins could negatively impact the price of bitcoin, which was the largest digital asset by market capitalization as of December 31, 2024[157][158]. - The trading price of the company's class A common stock declined significantly after the approval of spot bitcoin ETPs, indicating a shift in investor preference[145]. - The market price of the company's class A common stock may fluctuate widely due to various factors, including changes in bitcoin prices and regulatory developments[213]. Legal and Compliance Risks - The company is subject to various privacy and data protection laws, including the GDPR, which can impose fines of up to €20 million or 4% of global annual revenue, whichever is higher[87]. - Compliance with evolving privacy laws and regulations could lead to substantial costs, fines, or changes in business practices, impacting overall operations[207]. - The company may incur significant legal and financial liabilities due to potential security breaches, which could adversely affect revenues and operating results[210]. Capital Structure and Financing - The company’s outstanding indebtedness was $7.274 billion as of December 31, 2024, with an annual contractual interest expense of $35.1 million[104]. - The company expects to incur additional indebtedness and fixed charges as part of its bitcoin strategy, which may impact its ability to satisfy financial obligations[104]. - The company has issued $18.970 billion of class A common stock through at-the-market equity offering programs between January 1, 2024, and February 14, 2025[219]. - The company may sell class A common stock with an aggregate offering price of up to $4.168 billion under the October 2024 Sales Agreement[220]. - The company has issued various convertible senior notes, including $800 million due in 2032 and $1.010 billion due in 2028, as part of its capital-raising efforts[219]. Technology and Innovation - The company’s cloud-native flagship, Strategy One™, is designed for large-scale analytics deployments across various industries[69]. - Strategy One incorporates Generative AI capabilities to automate and enhance analytics accessibility for non-technical users[70]. - The integration of artificial intelligence into the company's analytics offerings may incur substantial costs and could affect competitive positioning[180]. - Cybersecurity incidents could adversely impact the company's business and results, especially related to AI applications[181].