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]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-42509 MICROSTRATEGY INCORPORATED (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of ...

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]

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].

Bitcoin Holdings and Acquisitions - Strategy holds 471,107 BTC, with a carrying value of $23.909 billion as of December 31, 2024[1][10] - In Q4 2024, the company acquired 218,887 bitcoins for $20.5 billion, marking the largest quarterly increase in bitcoin holdings[3] - The company purchased $15.09 billion in Bitcoin during the fourth quarter of 2024, utilizing proceeds from its stock offerings[45] - As of December 31, 2024, MicroStrategy held 447,470 bitcoins, with a market value of approximately $26,339,829,000 using the lowest market price during the quarter[47] - The total number of bitcoins held by MicroStrategy increased from 132,500 at the end of December 31, 2022, to 447,470 by December 31, 2024[47] Financial Performance - Total revenues for Q4 2024 were $120.7 million, a 3.0% decrease year-over-year, while subscription services revenues increased by 48.4% to $31.9 million[10] - The company reported a net loss of $1.17 billion for the twelve months ended December 31, 2024, compared to a net income of $429.1 million for the same period in 2023[36] - Basic loss per share for the twelve months ended December 31, 2024, was $(6.06), compared to earnings of $3.14 per share in 2023[36] - The company reported a total product licenses revenue of $48,567 thousand for the year ended December 31, 2024, down 35.5% from $75,351 thousand in 2023[62] - The income tax benefit for the year ended December 31, 2024, was $767,685 thousand, compared to $553,646 thousand in 2023, reflecting improved tax efficiency[62] Operating Expenses and Losses - Operating expenses surged to $1.103 billion, a 693.2% increase year-over-year, primarily due to impairment losses on digital assets of $1.006 billion[9] - The company's total operating expenses for the twelve months ended December 31, 2024, were $2.19 billion, compared to $501.4 million in 2023[36] - Digital asset impairment losses for the twelve months ended December 31, 2024, were $1.79 billion, significantly higher than $115.9 million in 2023[36] - Total expenses for the year ended December 31, 2024, were $2,316,434 thousand, compared to $611,308 thousand in 2023, indicating a significant increase in costs[62] - The loss from operations for the Software Business in 2024 was $55,407 thousand, compared to a gain of $3,558 thousand in 2023[62] Stock and Equity - The company issued 42,308,443 shares of class A common stock for net proceeds of approximately $15.1 billion during Q4 2024[10] - Strategy completed a 10-for-1 stock split on August 7, 2024, retroactively adjusting prior period share information[4] - The company has not paid any dividends on its class A common stock historically and does not intend to do so in the future[30] - The company reported a total stockholders' equity of $18.23 billion in 2024, up from $2.16 billion in 2023, reflecting an increase of approximately 743%[39] Cash Flow and Assets - Cash and cash equivalents decreased to $38.1 million as of December 31, 2024, down from $46.8 million a year earlier[17] - Net cash used in operating activities was $(53.03) million in 2024, a decline from $12.71 million provided in 2023[41] - Net cash used in investing activities escalated to $(22.09) billion in 2024 compared to $(1.91) billion in 2023[41] - Total assets increased significantly to $25.84 billion in 2024 from $4.76 billion in 2023, representing a growth of approximately 442%[39] - Digital assets surged to $23.91 billion in 2024, up from $3.63 billion in 2023, marking an increase of about 558%[39] Market Conditions and Risks - The company revised its annual BTC Yield target to a minimum of 15% for 2025, down from 74.3% achieved in FY 2024[6][7] - Strategy aims for an annual BTC $ Gain target of $10 billion for 2025, with a BTC Gain of 140,538 for FY 2024[6][7] - The company’s ability to achieve positive BTC Yield, BTC Gain, or BTC $ Gain may depend on various factors, including the price of bitcoin and the availability of financing[31] - Forward-looking statements indicate potential risks including fluctuations in bitcoin prices and changes in market conditions that could materially affect future results[33] Market Prices - The average purchase price per Bitcoin increased to $62,503 in 2024, compared to $31,168 in 2023[43] - The market price per bitcoin at the end of the quarter on December 31, 2024, was $58,863.90[47] - The highest market price per bitcoin during the quarter ended December 31, 2024, was $108,388.88, resulting in a market value of $48,500,772,000[47] - The market value of bitcoins held at the end of the quarter using the ending market price was $41,789,317,000 as of December 31, 2024[47]

Bitcoin Holdings and Strategy - As of September 30, 2024, the company held approximately 252,220 bitcoins, with a carrying value of $6,850,879,000[137]. - The total original cost basis of bitcoin holdings was $9,903,699,000, with impairment losses amounting to $3,052,820,000[137]. - The average purchase price per bitcoin held as of September 30, 2024, was $39,266[137]. - In Q3 2024, the company purchased bitcoin using $1.105 billion from the sale of class A common stock and $458.2 million from the issuance of convertible notes[140]. - The company’s bitcoin strategy includes funding acquisitions primarily through equity and fixed-income instruments, with no specific target for total bitcoin holdings[134][135]. - The market value of bitcoin held at the end of Q3 2024, using the highest market price, was approximately $17,006,630,000[143]. - The company held approximately 252,220 bitcoins, acquired at an average price of $39,266 per bitcoin, totaling $9.904 billion[147]. - As of September 30, 2024, the company held approximately 252,220 bitcoins, all unencumbered[197]. - The company may incur significant digital asset impairment losses in the future, with at least $18.9 million incurred during the fourth quarter of 2024 on bitcoin holdings[180]. - The company incurred an impairment loss of $783.8 million on its bitcoin holdings for the nine months ended September 30, 2024[229]. Financial Performance - Total revenues for Q3 2024 were $116.1 million, a decrease of 10.3% from $129.5 million in Q3 2023[154]. - Subscription services revenues increased by 32.5% to $27.8 million in Q3 2024, up from $21.0 million in Q3 2023[162]. - Product licenses revenues decreased by 53.9% to $11.1 million in Q3 2024, down from $24.0 million in Q3 2023[162]. - Digital asset impairment losses for Q3 2024 were $412.1 million, representing 80.1% of operating expenses, compared to $33.6 million (26.2%) in Q3 2023[146]. - The gross profit for Q3 2024 was $81.7 million, down from $102.8 million in Q3 2023[154]. - Total operating expenses for Q3 2024 were $514.3 million, significantly higher than $128.0 million in Q3 2023, primarily due to increased digital asset impairment losses[154]. - Non-GAAP loss from operations for the three months ended September 30, 2024, was $413,205, compared to a loss of $8,441 for the same period in 2023[217]. - Non-GAAP net loss for the three months ended September 30, 2024, was $307,796, compared to a loss of $127,666 for the same period in 2023[220]. - Non-GAAP diluted loss per share for the three months ended September 30, 2024, was $1.56, compared to a loss of $0.90 for the same period in 2023[220]. Expenses and Costs - Share-based compensation expense increased to $19.4 million in Q3 2024 from $16.8 million in Q3 2023, primarily due to additional awards granted[157]. - Cost of revenues increased by 28.8% to $34,349,000 for the three months ended September 30, 2024, compared to $26,661,000 in the same period of 2023[168]. - Research and development expenses rose by 12.3% to $33,301,000 for the three months ended September 30, 2024, from $29,660,000 in the prior year[176]. - General and administrative expenses increased by 14.7% to $33,505,000 for the three months ended September 30, 2024, compared to $29,223,000 in the same period of 2023[178]. - Sales and marketing expenses decreased by 0.5% to $35,414,000 for the three months ended September 30, 2024, from $35,606,000 in the prior year[174]. - General and administrative expenses rose by 21.3% to $104.300 million, up from $85.959 million in the same period last year[225]. Cash Flow and Financing Activities - Net cash used in operating activities for the nine months ended September 30, 2024, was $(35.7) million, a 409.8% decrease compared to $11.5 million in the same period of 2023[199]. - Net cash used in investing activities increased by $3.320 billion for the nine months ended September 30, 2024, primarily due to a $3.320 billion increase in bitcoin purchases[201]. - Net cash provided by financing activities increased by $3.370 billion for the nine months ended September 30, 2024, mainly due to a $3.160 billion increase in long-term debt proceeds[202]. - The company anticipates that existing cash and cash equivalents will be sufficient to meet working capital requirements for at least the next 12 months[195]. - The company has long-term cash requirements primarily related to obligations for long-term debt, operating leases, and various purchase agreements[195]. - The company incurred $4.272 billion in principal due upon maturity of long-term debt instruments[198]. - The company paid $23.9 million and $15.3 million in interest to holders of the 2028 Secured Notes during the nine months ended September 30, 2024, and 2023, respectively[205]. - For the nine months ended September 30, 2024, the company did not repurchase or prepay any outstanding debt, but has $891.3 million available for sale under the August 2024 Sales Agreement[208]. Stock and Equity Offerings - The company completed a 10-for-1 stock split on August 7, 2024, retroactively adjusting share information[131]. - The company plans to sell class A common stock with an aggregate offering price of up to $2.0 billion and $21 billion under new at-the-market equity offering programs filed on August 1, 2024, and October 30, 2024, respectively[192]. - Total shares sold under at-the-market equity offering programs for the nine months ended September 30, 2024, were 10,000,069, generating total net proceeds of $1,242,293[214]. - The company terminated the November 2023 Sales Agreement and filed a new prospectus for an at-the-market equity offering program with an aggregate offering price of up to $2.0 billion on August 1, 2024[210]. - As of October 30, 2024, the company filed a prospectus for a new at-the-market equity offering program with an aggregate offering price of up to $21 billion[211]. Employee and Operational Metrics - As of September 30, 2024, total employee headcount was 1,637, a decrease from 1,934 as of December 31, 2023[156]. - The company aims to leverage its software development capabilities to innovate in Bitcoin applications and enterprise analytics[133]. - The company has engaged in advocacy and educational activities to promote Bitcoin as a digital capital asset[136]. International and Currency Impact - International revenues accounted for 44.0% of total revenues for the nine months ended September 30, 2024, compared to 42.7% in the same period of 2023[230]. - A 10% adverse change in foreign currency exchange rates would have decreased reported cash and cash equivalents by 4.5% as of September 30, 2024[233].

Bitcoin Holdings and Market Value - MicroStrategy holds approximately 252,220 BTC with a carrying value of $6.851 billion and a market value of $16.007 billion as of September 30, 2024[7]. - The total market value of bitcoin held by MicroStrategy is expected to reach approximately $6.851 billion by September 30, 2024, based on the current number of bitcoins held[42]. - The average market price per bitcoin at the end of the third quarter of 2024 is projected to be $39,266[42]. - As of September 30, 2023, MicroStrategy's total digital asset purchases reached approximately $1.214 billion, increasing the total carrying value of digital assets to $2.451 billion[35]. - The total number of bitcoins held by MicroStrategy increased to 158,245 by September 30, 2023, with an average purchase price per bitcoin of $29,582[35]. Financial Performance - Total revenues for Q3 2024 were $116.1 million, representing a 10.3% decrease year-over-year, while subscription services revenues increased by 32.5% to $27.8 million[13]. - Total revenues for Q3 2024 were $116.071 million, a decrease of 10.3% compared to $129.462 million in Q3 2023[29]. - Subscription services revenue increased by 32.5% year-over-year, reaching $27.800 million in Q3 2024, compared to $20.974 million in Q3 2023[29]. - For the nine months ended September 30, 2024, total revenues were $342,759 thousand, a decrease of 7.8% from $371,777 thousand in the same period of 2023[59]. - The gross profit for the nine months ended September 30, 2024, was $247,460 thousand, compared to $290,054 thousand for the same period in 2023[59]. Losses and Expenses - The company reported a net loss of $340.2 million, or $1.72 per share on a diluted basis, compared to a net loss of $143.4 million, or $1.01 per share, in Q3 2023[13]. - Net loss for Q3 2024 was $340.174 million, compared to a net loss of $143.441 million in Q3 2023[29]. - The company reported a basic loss per share of $1.72 for Q3 2024, compared to a loss of $1.01 per share in Q3 2023[29]. - Operating expenses surged to $514.3 million, a 301.6% increase year-over-year, primarily due to impairment losses on digital assets totaling $412.1 million[13]. - Total operating expenses for the three months ended September 30, 2024, were $514,304 thousand, compared to $128,048 thousand for the same period in 2023[59]. - MicroStrategy reported a non-GAAP loss from operations of $413.2 million for the third quarter of 2024, compared to a loss of $8.4 million in the same quarter of 2023[47]. - Non-GAAP net loss for the three months ended September 30, 2024, was $307,796 thousand, compared to a non-GAAP net loss of $127,666 thousand for the same period in 2023[49]. Strategic Goals and Financing - MicroStrategy announced a strategic goal to raise $42 billion over the next three years, consisting of $21 billion in equity and $21 billion in fixed income securities[2]. - A new At-the-Market Equity Offering Program was announced, allowing the company to issue shares with an aggregate offering price of up to $21 billion[7]. - The company generated $4.046 billion in net cash from financing activities during the nine months ended September 30, 2024[33]. - Long-term debt increased to $4.212 billion as of September 30, 2024, compared to $2.182 billion at the end of 2023[31]. Digital Asset Impairment - Digital asset impairment losses for Q3 2024 were $412.084 million, significantly higher than $33.559 million in Q3 2023[29]. - Digital asset impairment losses for the third quarter of 2023 amounted to $39.2 million, contributing to a total impairment of $2.229 billion as of September 30, 2023[35]. - MicroStrategy has introduced a Corporate & Other category in 2024, which includes impairment charges and costs associated with its digital asset holdings[59]. Stock and Equity Changes - The company completed a 10-for-1 stock split on August 7, 2024, with all prior share information adjusted accordingly[4]. - Total stockholders' equity increased to $3.774 billion as of September 30, 2024, from $2.165 billion at the end of 2023[31]. - Deferred revenue as of September 30, 2024, totaled $190,746 thousand, down from $236,686 thousand as of December 31, 2023[57].

Bitcoin Holdings and Acquisitions - As of June 30, 2024, the company held approximately 226,331 bitcoins, with a market value of $3.134 billion based on a bitcoin price of $61,926.69[138] - The company has accumulated a total of approximately $8.328 billion in digital assets, with an average purchase price of $36,798 per bitcoin as of June 30, 2024[145] - The total bitcoin holdings increased from 132,500 bitcoins at the end of 2022 to 226,331 bitcoins by June 30, 2024[140] - As of August 5, 2024, the company held approximately 226,500 bitcoins acquired at an aggregate purchase price of $8.340 billion, with a market price of $53,469.63 per bitcoin[149] - The company plans to continue acquiring bitcoin using cash flows from operations and proceeds from equity and debt financings, with no specific target for total bitcoin holdings[137] - The company emphasizes the importance of digital asset management and has strategies in place for potential sales of bitcoin for corporate purposes[137] - As of June 30, 2024, the company held approximately 226,331 bitcoins, with 175,721 being unencumbered[199] Financial Performance - Total revenues for the three months ended June 30, 2024, were $111,442, a decrease of 7.9% compared to $120,400 in the same period of 2023[156] - Gross profit for the three months ended June 30, 2024, was $80,507, down from $93,279 in the same period of 2023, reflecting a decrease of 13.7%[156] - Loss from operations for the three months ended June 30, 2024, was $(200,274), compared to a loss of $(26,708) in the same period of 2023[156] - Non-GAAP loss from operations for Q2 2024 was $179,653, compared to a loss of $11,214 in Q2 2023, reflecting a significant increase in operational losses[216] - Non-GAAP net loss for Q2 2024 was $136,058, a decrease from a net income of $36,929 in Q2 2023, indicating a substantial decline in profitability[217] - Non-GAAP diluted loss per share for Q2 2024 was $7.62, compared to earnings of $2.35 per share in Q2 2023, highlighting a drastic drop in earnings performance[217] Revenue Breakdown - Subscription services revenues increased by 21.1% to $24,080 for the three months ended June 30, 2024, compared to $19,878 in the same period of 2023[162] - Product licenses revenues decreased by 40.2% to $9,286 for the three months ended June 30, 2024, compared to $15,522 in the same period of 2023[162] - Product support revenues decreased by 6.6% to $61,740 for the three months ended June 30, 2024, compared to $66,081 in the same period of 2023[164] - Total consulting revenues fell by 13.2% to $15,604,000 for the three months ended June 30, 2024, down from $17,980,000 in the prior year[165] - Subscription services revenues for Q2 2024 increased by 21.1% year-over-year, reaching $24,205, up from $19,878 in Q2 2023[218] - Product licenses revenues for Q2 2024 decreased by 40.2% year-over-year, totaling $9,306, down from $15,522 in Q2 2023[218] - International revenues accounted for 42.8% of total revenues for the three months ended June 30, 2024, compared to 40.7% in the same period last year[223] Expenses and Impairments - Digital asset impairment losses for the three months ended June 30, 2024, were $180.1 million, representing 64.1% of operating expenses, compared to $24.1 million or 20.1% in the same period of 2023[148] - Total operating expenses for the three months ended June 30, 2024, were $280,781, significantly higher than $119,987 in the same period of 2023, primarily due to digital asset impairment losses[156] - Share-based compensation expense increased to $20,621 for the three months ended June 30, 2024, compared to $15,494 in the same period of 2023, reflecting a rise of 33.7%[158] - General and administrative expenses increased by 25.3% to $36,129,000 for the three months ended June 30, 2024, compared to $28,830,000 in the same period of 2023[178] - The company incurred an impairment loss of $371.7 million on its bitcoin holdings during the six months ended June 30, 2024[222] Cash Flow and Financing Activities - The company reported a net cash provided by operating activities of $5.258 million for the six months ended June 30, 2024, a decrease of 72.2% compared to $18.925 million in the same period of 2023[201] - Net cash used in investing activities increased by 361.8% to $(2.435 billion) for the six months ended June 30, 2024, primarily due to a $1.907 billion increase in bitcoin purchases[203] - Net cash provided by financing activities increased by 366.2% to $2.452 billion for the six months ended June 30, 2024, driven by a $2.162 billion increase in long-term debt proceeds[204] - The company filed a prospectus for a new at-the-market equity offering program with an aggregate offering price of up to $2.0 billion[193] - The company reported total net proceeds of $137.152 million from shares sold under at-the-market equity offering programs for the six months ended June 30, 2024[213] Future Expectations and Strategic Initiatives - The company expects subscription services revenues to continue to grow in future periods as it promotes its cloud offerings to new and existing customers[163] - The company expects to recognize approximately $242.4 million of the remaining performance obligation over the next 12 months as of June 30, 2024[190] - The company does not anticipate needing to sell bitcoins within the next twelve months to meet working capital and interest payment obligations[199] - The company expects to continue facing significant recurring expenses related to share-based compensation and interest expense from long-term debt[215]

Bitcoin Holdings and Strategy - As of March 31, 2024, the company held approximately 214,278 bitcoins, with a market value of $15.82 billion based on a bitcoin price of $73,835.57[139] - The company has accumulated a total of approximately $7.54 billion in bitcoin, with an average purchase price of $35,180 per bitcoin[143] - The company’s bitcoin acquisition strategy involves using liquid assets exceeding working capital requirements and proceeds from capital raising transactions to purchase bitcoin[133] - The company plans to continue accumulating bitcoin without setting a specific target, monitoring market conditions for potential additional purchases[133] - The company’s bitcoin holdings are viewed as long-term investments, with potential strategies to generate income streams from these assets[133] - As of December 31, 2023, the company reported a carrying value of $3.63 billion for its bitcoin holdings, with a total of 189,150 bitcoins[136] - The company held approximately 214,278 bitcoins as of March 31, 2024, with a carrying value of $5.074 billion, reflecting cumulative impairments of $2.461 billion[210] Financial Performance - Total revenues for the three months ended March 31, 2024, were $115,246,000, a decrease of 5.5% compared to $121,915,000 for the same period in 2023[150] - Product licenses revenues decreased by 25.7% to $12,938,000 in Q1 2024 from $17,412,000 in Q1 2023, primarily due to a decrease in deal volume[156] - Subscription services revenues increased by 22.1% to $22,966,000 in Q1 2024 from $18,810,000 in Q1 2023, driven by conversions to cloud-based subscriptions[157] - Product support revenues decreased by 4.3% to $62,685,000 in Q1 2024 from $65,481,000 in Q1 2023, attributed to customers converting to subscription services[158] - Non-GAAP loss from operations for Q1 2024 was $185.911 million, compared to a loss of $2.752 million in Q1 2023, reflecting a significant increase in operational losses[205] - Non-GAAP net loss for Q1 2024 was $142.008 million, a stark contrast to a net income of $445.038 million in Q1 2023, indicating a substantial decline in profitability[206] - Non-GAAP diluted loss per share for Q1 2024 was $8.26, compared to diluted earnings per share of $30.59 in Q1 2023, indicating a significant decline in per-share performance[206] Operating Expenses and Losses - Total operating expenses surged to $288,933,000 in Q1 2024, compared to $114,281,000 in Q1 2023, largely due to digital asset impairment losses of $191,633,000[150] - Loss from operations for Q1 2024 was $(203,702,000), significantly higher than $(20,307,000) in Q1 2023[150] - Digital asset impairment losses for the three months ended March 31, 2024, were $191.6 million, representing 66.3% of operating expenses, compared to $18.9 million or 16.5% of operating expenses in the same period of 2023[142] - Digital asset impairment losses surged to $191.633 million for the three months ended March 31, 2024, compared to $18.911 million in the same period of the prior year, representing a 913.3% increase[169] Cash Flow and Investments - Net cash provided by operating activities decreased by 23.6% to $28.6 million for the three months ended March 31, 2024, compared to $37.4 million in the same period of 2023[189] - Net cash used in investing activities increased by 812.7% to $1.64 billion for the three months ended March 31, 2024, primarily due to a $1.46 billion increase in bitcoin purchases[191] - Net cash provided by financing activities increased by 778.6% to $1.65 billion for the three months ended March 31, 2024, driven by a $1.376 billion increase in long-term debt proceeds[192] - The company purchased $1.639 billion of bitcoin during the three months ended March 31, 2024, compared to $179.3 million in the same period of 2023[191] Workforce and Expenses - Employee headcount decreased to 1,851 as of March 31, 2024, down from 2,123 a year earlier, reflecting a reduction in workforce[151] - Share-based compensation expense increased to $17,791,000 in Q1 2024 from $17,555,000 in Q1 2023, primarily due to additional awards granted[152] - Sales and marketing expenses decreased by $2.7 million, or 7.4%, to $33.451 million for the three months ended March 31, 2024, primarily due to a decrease in employee salaries and variable compensation[166] - Research and development expenses decreased by $2.2 million, or 6.9%, to $29.183 million for the three months ended March 31, 2024, mainly due to a decrease in employee salaries[167] - General and administrative expenses increased by $6.8 million, or 24.2%, to $34.666 million for the three months ended March 31, 2024, primarily due to increased payroll taxes and share-based compensation[168] Future Outlook and Obligations - The company expects subscription services revenues to continue to grow as it promotes its cloud offerings to new and existing customers[157] - The company expects long-term cash requirements for obligations related to long-term debt totaling $3.612 billion, with additional coupon interest payments of $2.4 million, $2.5 million, $2.6 million, and $15.3 million due semi-annually for various convertible notes and secured notes[183][184] - The company does not expect cash generated from its enterprise analytics software business to meet its long-term obligations as of March 31, 2024[183] - The company may seek to satisfy its long-term obligations through refinancing, generating cash from other sources, or selling bitcoins[183] International Revenue and Currency Impact - International revenues accounted for 44.1% of total revenues in Q1 2024, up from 42.8% in Q1 2023, highlighting the growing importance of international markets[211] - A 10% adverse change in foreign currency exchange rates would have decreased reported cash and cash equivalents by 3.7% as of March 31, 2024[214]

Bitcoin Acquisition and Strategy - In 2023, MicroStrategy purchased approximately 56,650 bitcoins at an aggregate purchase price of approximately $1.902 billion, averaging $33,580 per bitcoin[29]. - As of December 31, 2023, MicroStrategy held $3.626 billion in digital assets, consisting of approximately 189,150 bitcoins, with cumulative impairment losses of $2.269 billion due to bitcoin price fluctuations[30]. - As of February 14, 2024, MicroStrategy's bitcoin holdings were approximately 190,000 bitcoins, acquired at an aggregate purchase price of $5.933 billion, averaging $31,224 per bitcoin[31]. - The company did not sell any bitcoin during 2023, maintaining a long-term holding strategy[29]. - MicroStrategy's Treasury Reserve Policy allows for the accumulation of bitcoin as a primary treasury reserve asset, subject to market conditions[24]. - The company aims to leverage the Lightning Network for developing software products and service offerings[26]. - The company believes Bitcoin serves as a hedge against inflation and an attractive store of value amid economic uncertainty[50]. - The company plans to increase its bitcoin holdings, which may lead to greater volatility in earnings compared to prior periods[140]. - The company has acquired approximately 190,000 bitcoins at an aggregate purchase price of $5.933 billion, which enhances the risks associated with its bitcoin acquisition strategy[153]. - The company adopted bitcoin as its primary treasury reserve asset in September 2020, but bitcoin markets are characterized by significant volatility and limited liquidity[158]. Market and Regulatory Environment - The SEC approved the listing and trading of spot Bitcoin exchange-traded products (ETPs) on U.S. national securities exchanges for the first time on January 10, 2024[41]. - Regulatory scrutiny of digital assets is increasing, with various U.S. agencies examining the operations of digital asset networks and exchanges[56]. - The emergence of other digital assets and central bank digital currencies (CBDCs) could negatively impact Bitcoin's market value[46]. - The legal and regulatory landscape for digital assets remains uncertain, posing risks that could impact the price of bitcoin and the company's ability to operate[125]. - The SEC filed a complaint against Binance Holdings Ltd. on June 5, 2023, alleging multiple violations, including operating as unregistered exchanges and misleading customers[135]. - On November 21, 2023, Binance agreed to pay $4.3 billion in penalties to resolve a multi-agency investigation and will cease operations in the U.S.[135]. - Regulatory developments, including the European Union's Markets in Crypto Assets Regulation effective June 2023, may impact the digital asset market and operations of digital asset firms[128]. - The U.S. government is considering a federal framework to regulate nonbank payment providers and digital asset service providers, which could affect market dynamics[128]. - The SEC has reopened the comment period for a proposal to amend the definition of "exchange" to include digital asset trading systems, which could have a sweeping impact on the industry[128]. - The company faces enhanced regulatory scrutiny due to its bitcoin acquisition strategy and the potential for increased regulatory requirements following the FTX collapse[146][149]. Financial Performance and Risks - The company generated net income for the fiscal year ended December 31, 2023, primarily due to a $553.6 million tax benefit and a $44.7 million gain on debt extinguishment[106]. - The company had $757.6 million of deferred tax assets as of December 31, 2023, with a $1.4 million valuation allowance, largely related to the impairment on bitcoin holdings[107]. - The company may incur operating losses in future periods if revenues do not offset operating expenses or if significant impairment losses related to digital assets occur[106]. - The company has experienced fluctuations in quarterly operating results, which could adversely affect the market price of its class A common stock[102]. - The company may face greater than anticipated tax liabilities due to changes in earnings, tax laws, and the sale of bitcoin at prices above cost basis[108]. - The company’s bitcoin holdings significantly affect its financial results and the market price of its class A common stock, with potential for greater impact if holdings increase[117]. - The price of bitcoin is influenced by various factors, including market sentiment, regulatory actions, and environmental concerns, which could adversely affect the company's financial condition[124]. - The company may experience significant volatility in reported earnings due to fluctuations in bitcoin prices, which could adversely affect the market price of its class A common stock[137]. - A significant decrease in the market value of bitcoin could adversely affect the company's ability to service its indebtedness, as most assets are concentrated in bitcoin holdings[168]. - The company faces risks related to the custody of bitcoin, including potential loss or destruction of private keys and cyberattacks[163]. Operational and Market Challenges - The analytics market is highly competitive, with key competitors including IBM, Microsoft, Oracle, Salesforce, and SAP, impacting MicroStrategy's market positioning[80]. - The company may face challenges in maintaining relationships with channel partners, which are crucial for revenue growth[175]. - The shift from product licenses to cloud subscriptions may lead to lower revenue recognition in the current period, impacting operating results and cash flows[174]. - The long sales cycles can exceed nine months, increasing the risk of delays and affecting revenue recognition[180]. - The company is exposed to risks from international operations, including economic uncertainties and changes in currency rates, which may adversely affect financial condition and cash flows[207]. - Business disruptions due to geopolitical tensions, natural disasters, or pandemics could materially impact operating results and internal controls[205]. - The company’s reliance on third-party data centers and services, such as AWS and Azure, poses risks that could severely impact business operations[205]. - Cybersecurity incidents could adversely affect business operations and financial results, especially related to AI applications[188]. Employee and Corporate Governance - As of December 31, 2023, the company had a total of 1,934 employees, a decrease from 2,152 in 2022, reflecting a reduction of approximately 10.1%[96]. - The company continues to expand its equity compensation programs to attract and retain talent, reflecting a commitment to employee engagement and development[98]. - The company has not experienced any work stoppages and considers its relations with employees to be good[96]. - The company is subject to evolving data protection regulations, including GDPR, which imposes strict requirements on the handling of personal data and can result in significant fines for non-compliance[83]. - The company is subject to compliance with the new EU-U.S. Data Privacy Framework (DPF) and the UK Extension to the DPF, which may require adjustments in data transfer practices[88][90].