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].

Bitcoin Holdings and Strategy - As of September 30, 2023, MicroStrategy held approximately 158,245 bitcoins, with a market value of $425.2 million based on a price of $27,030.47 per bitcoin[121]. - The total original cost basis of bitcoins held by MicroStrategy was approximately $4.68 billion, with cumulative digital asset impairment losses of $2.23 billion[123]. - In Q3 2023, MicroStrategy purchased bitcoin using $147.3 million from the proceeds of its class A common stock sales and excess cash[125]. - The average purchase price per bitcoin in Q3 2023 was approximately $27,348, with a total of 5,912 bitcoins acquired[123]. - MicroStrategy's bitcoin acquisition strategy aims to accumulate bitcoin as long-term holdings, without a specific target for total bitcoin holdings[119]. - The company believes bitcoin serves as a store of value and a hedge against inflation, enhancing brand awareness through its related activities[120]. - The market value of bitcoins held at the end of Q3 2023, using the ending market price, was approximately $4.28 billion[126]. - The company held approximately 158,400 bitcoins as of October 31, 2023, with an aggregate purchase price of $4.686 billion, averaging $29,586 per bitcoin, while the market price was $34,555.58[133]. - The company held approximately 158,245 bitcoins as of September 30, 2023, with a carrying value of $2.451 billion, reflecting cumulative impairments of $2.230 billion[218]. Financial Performance - Total revenues for Q3 2023 were $129.462 million, a slight increase from $125.360 million in Q3 2022, while total revenues for the nine months ended September 30, 2023, were $371.777 million, compared to $366.710 million in the same period of 2022[146]. - The gross profit for Q3 2023 was $102.801 million, compared to $99.975 million in Q3 2022, indicating a stable gross margin despite rising operating expenses[146]. - Operating expenses for Q3 2023 totaled $128.048 million, significantly higher than $93.917 million in Q3 2022, driven by increased digital asset impairment losses[146]. - Digital asset impairment losses for Q3 2023 were $33.6 million, accounting for 26.2% of operating expenses, compared to $0.7 million (0.8%) in Q3 2022[132]. - Digital asset impairment losses for the nine months ended September 30, 2023, were $76.613 million, a significant decrease from $1.088 billion in the same period of 2022[146]. - The company reported a non-GAAP loss from operations of $(8,441,000) for the three months ended September 30, 2023, compared to a non-GAAP income of $22,957,000 in 2022[210]. - Non-GAAP net loss for Q3 2023 was $127.666 million, compared to a loss of $10.831 million in Q3 2022, while the nine-month period showed a net income of $354.301 million compared to a loss of $1.177 billion in the same period last year[211]. - Non-GAAP diluted loss per share for Q3 2023 was $(8.98), compared to $(0.96) in Q3 2022, with a nine-month figure of $24.59 compared to $(104.19) in the prior year[211]. Revenue Breakdown - Total product licenses and subscription services revenues increased by 16.3% to $45,019,000 for the three months ended September 30, 2023, compared to $38,700,000 in the same period of 2022[153]. - Domestic product licenses revenues decreased by 33.4% to $10,338,000 for the three months ended September 30, 2023, compared to $15,526,000 in the same period of 2022[154]. - International product licenses revenues increased by 102.8% to $13,707,000 for the three months ended September 30, 2023, compared to $6,760,000 in the same period of 2022[156]. - Subscription services revenues increased by 27.8% to $20,974,000 for the three months ended September 30, 2023, compared to $16,414,000 in the same period of 2022[153]. - Product support revenues increased by 1.3% to $66,860,000 for the three months ended September 30, 2023, compared to $66,010,000 in the same period of 2022[159]. - Total consulting revenues decreased by 14.7% to $16,676,000 for the three months ended September 30, 2023, compared to $19,545,000 in the same period of 2022[160]. - Education revenues decreased by $0.9 million for the nine months ended September 30, 2023, compared to the same period in the prior year[161]. - The number of product licenses transactions with recognized revenue of more than $1.0 million increased from 3 to 4 for the three months ended September 30, 2023, compared to the same period in 2022[154]. - The company expects subscription services revenues to continue to grow in future periods as it promotes its cloud offering to new and existing customers[158]. - Product licenses revenues may experience declines in future periods as the company continues to promote its cloud offering[154]. Expenses and Cost Management - Research and development expenses decreased by 2.7% to $29,660,000 for the three months ended September 30, 2023, compared to $30,498,000 in the same period of 2022[167]. - General and administrative expenses increased by 7.1% to $29,223,000 for the three months ended September 30, 2023, compared to $27,283,000 in the same period of 2022[170]. - Sales and marketing expenses increased by 0.6% to $35,606,000 for the three months ended September 30, 2023, compared to $35,409,000 in the same period of 2022[167]. - Share-based compensation expense for Q3 2023 was $16.806 million, relatively stable compared to $16.899 million in Q3 2022, with a projected additional expense of $146.1 million over the next 2.5 years[148]. - The company expects share-based compensation expense to continue as a significant recurring expense over the coming years[209]. Cash Flow and Financing - Net cash provided by operating activities decreased by 46.2% to $11,528,000 for the nine months ended September 30, 2023, compared to $21,409,000 in 2022[191]. - Net cash used in investing activities increased by 196.0% to $(690,550,000) for the nine months ended September 30, 2023, primarily due to a $456.5 million increase in bitcoin purchases[193]. - Net cash provided by financing activities increased by 207.2% to $676,025,000 for the nine months ended September 30, 2023, driven by $819.7 million in net proceeds from the sale of class A common stock[194]. - The company purchased $688.0 million of bitcoin during the nine months ended September 30, 2023, compared to $231.5 million in the same period of 2022[193]. - The company issued and sold 1,348,855 shares of class A common stock under the 2022 Sales Agreement for net proceeds of approximately $339.0 million during the nine months ended September 30, 2023[204]. - The company has initiated an at-the-market equity offering under the August 2023 Sales Agreement, with $602.1 million remaining available for issuance[183]. Tax and Deferred Revenue - The effective tax rate for the nine months ended September 30, 2023, was 632.2%, compared to an effective tax rate of (10.1)% for the same period in 2022, primarily due to the release of a valuation allowance on deferred tax assets[176]. - As of September 30, 2023, the total deferred revenue and advance payments amounted to $186.8 million, a decrease of $43.4 million from December 31, 2022, but an increase of $12.1 million from September 30, 2022[180]. - The remaining performance obligation as of September 30, 2023, was $282.3 million, with approximately $217.7 million expected to be recognized over the next 12 months[181]. Foreign Currency and Risk Management - International revenues accounted for 44.5% of total revenues for the three months ended September 30, 2023, compared to 38.8% for the same period in 2022[219]. - For the nine months ended September 30, 2023, international revenues represented 42.7% of total revenue, up from 40.5% in the prior year[219]. - A 10% adverse change in foreign currency exchange rates would have decreased reported cash and cash equivalents by 4.2% as of September 30, 2023[222]. - If average exchange rates had changed unfavorably by 10%, revenues for the nine months ended September 30, 2023 would have decreased by 3.6%[222]. - The company attempts to minimize foreign currency risk by converting excess foreign currency to U.S. dollar-denominated cash and investment accounts[221]. - Revenues and expenses from foreign subsidiaries are translated at average monthly exchange rates, which may impact operating results due to currency fluctuations[220]. Strategic Initiatives - The company is transitioning to a cloud-native model, enhancing go-to-market strategies to acquire new customers and drive revenue growth[136]. - The company aims to leverage AI capabilities within its MicroStrategy ONE platform to enhance data-driven decision-making and maintain a competitive edge in the analytics market[140]. - MicroStrategy is exploring opportunities to integrate features leveraging the Lightning Network into its software offerings[120].

Bitcoin Holdings and Strategy - As of June 30, 2023, the company held approximately 152,333 bitcoins, with a market value of $4.6 billion based on a bitcoin price of $30,361.51[120] - The company has accumulated a total of $4.5 billion in original cost basis for its bitcoin holdings, with impairment losses amounting to $2.2 billion[122] - The average purchase price per bitcoin in the second quarter of 2023 was approximately $28,136, with 12,333 bitcoins acquired during this period[124] - The company's bitcoin acquisition strategy is supported by stable cash flows from its enterprise analytics software business, which allows for long-term bitcoin holdings[117] - The company plans to continue monitoring market conditions to determine additional financings for bitcoin purchases, with no specific target for total bitcoin holdings[118] - The market value of bitcoins held at the end of the second quarter of 2023 was calculated at $4.6 billion using the ending market price[125] - As of July 31, 2023, the company held approximately 152,800 bitcoins, acquired at an aggregate purchase price of $4.534 billion, with an average purchase price of $29,672 per bitcoin[132] - The company held approximately 152,333 bitcoins as of June 30, 2023, with 137,069 being unencumbered[182] - The company expects to meet its working capital requirements and contractual obligations for at least the next 12 months without needing to sell bitcoins[180] Financial Performance - Total revenues for Q2 2023 were $120.4 million, slightly down from $122.1 million in Q2 2022, while total revenues for the first half of 2023 were $242.3 million, compared to $241.4 million in the same period of 2022[140] - The gross profit for Q2 2023 was $93.3 million, compared to $96.9 million in Q2 2022, indicating a decline in profitability[140] - Total operating expenses for Q2 2023 were $120 million, significantly lower than $1.015 billion in Q2 2022, primarily due to reduced digital asset impairment losses[140] - Non-GAAP loss from operations for the six months ended June 30, 2023, was $13.97 million, a decrease from a loss of $1.06 billion in the same period of 2022[200] - Non-GAAP net income for Q2 2023 was $36,929,000, compared to a loss of $1,048,734,000 in Q2 2022[201] - Non-GAAP diluted earnings per share for Q2 2023 was $2.35, while it was a loss of $92.81 in Q2 2022[201] Revenue Breakdown - Total product licenses and subscription services revenues increased by 3.7% to $35,400,000 for the three months ended June 30, 2023, and by 12.8% to $71,622,000 for the six months ended June 30, 2023[145] - Domestic product licenses revenues decreased by 31.3% to $10,416,000 for the three months ended June 30, 2023, and by 23.8% to $19,066,000 for the six months ended June 30, 2023[145] - International product licenses revenues increased by 2.9% to $5,106,000 for the three months ended June 30, 2023, and by 19.2% to $13,868,000 for the six months ended June 30, 2023[145] - Subscription services revenues increased by 41.8% to $19,878,000 for the three months ended June 30, 2023, and by 44.0% to $38,688,000 for the six months ended June 30, 2023[145] - Product licenses revenues decreased by 22.9% year-over-year to $16,180,000 in Q2 2023, compared to $20,129,000 in Q2 2022[203] - Total revenues for the first half of 2023 were $39,750,000 for subscription services, reflecting a 44.0% increase from $26,862,000 in the same period of 2022[204] Expenses and Cost Management - Research and development expenses decreased by 7.7% to $29,354,000 for the three months ended June 30, 2023, compared to $31,790,000 in the same period of 2022[162] - Sales and marketing expenses increased by 2.2% to $36,862,000 for the three months ended June 30, 2023, compared to $37,660,000 in the same period of 2022[160] - General and administrative expenses increased by 1.2% to $28,830,000 for the three months ended June 30, 2023, compared to $28,502,000 in the same period of 2022[164] - Cost of subscription services revenues increased by $1.7 million for the three months ended June 30, 2023, primarily due to a $1.2 million increase in cloud hosting infrastructure costs[155] Cash Flow and Financing Activities - Net cash provided by operating activities decreased by 17.2% to $18.9 million for the six months ended June 30, 2023, compared to $22.9 million in the same period of 2022[184] - Net cash used in investing activities increased by 132.3% to $527.4 million for the six months ended June 30, 2023, primarily due to a $300.8 million increase in bitcoin purchases[186] - Net cash provided by financing activities increased by 140.7% to $525.9 million for the six months ended June 30, 2023, driven by $672.4 million in net proceeds from the sale of class A common stock[187] - The company issued and sold 1,079,170 shares of class A common stock under the 2023 Sales Agreement for net proceeds of approximately $333.5 million during the six months ended June 30, 2023[196] Market Risks and Currency Fluctuations - The company recognizes that fluctuations in bitcoin prices and revenue shortfalls in its software business may significantly impact its operating results[140] - The company is exposed to market risks related to fluctuations in bitcoin prices and foreign currency exchange rates[208] - A 10% adverse change in foreign currency exchange rates would have decreased reported cash and cash equivalents by 4.6% as of June 30, 2023[213] - Revenues for the six months ended June 30, 2023, would have decreased by 3.7% if average exchange rates had changed unfavorably by 10%[213] - The company attempts to minimize foreign currency risk by converting excess foreign currency to U.S. dollar-denominated cash and investment accounts[212]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q 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 000-24435 (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, 2023 MICROSTRATEGY INCORPORATED (Exact name of registrant as specified in its charter) 1850 Towers Crescent Plaza, Tysons Corne ...

Bitcoin Acquisition and Holdings - In 2022, MicroStrategy purchased approximately 8,813 bitcoins for an aggregate price of approximately $287.9 million, averaging $32,670 per bitcoin, and sold about 704 bitcoins for $11.8 million at an average sale price of $16,786 per bitcoin [29]. - As of December 31, 2022, MicroStrategy held $1.840 billion in digital assets, consisting of approximately 132,500 bitcoins, with cumulative impairment losses of $2.153 billion due to trading price fluctuations [30]. - As of February 15, 2023, MicroStrategy's bitcoin holdings were acquired at a total cost of $3.993 billion, averaging $30,137 per bitcoin, while the market price was $24,163.86 [31]. - MicroStrategy's bitcoin acquisition strategy involves using liquid assets exceeding working capital requirements and may include issuing debt or equity securities to fund additional bitcoin purchases [22]. - The company has not set a specific target for the amount of bitcoin to hold and will continue to monitor market conditions for potential additional financings [27]. - MicroStrategy's treasury reserve policy includes cash assets and bitcoin as primary treasury reserve assets, with bitcoin serving as a long-term holding strategy [28]. - The company believes bitcoin serves as a store of value and a hedge against inflation due to its limited supply and decentralized nature [47]. - The company anticipates increasing its bitcoin holdings in the future, which may lead to greater volatility in earnings compared to prior periods [134]. - The concentration of bitcoin holdings enhances risks, particularly as the price of bitcoin has recently experienced significant declines [149]. - The company has entered into a bitcoin-collateralized loan and may consider issuing additional debt or financial instruments collateralized by bitcoin holdings [144]. - The company's bitcoin holdings are expected to represent a larger proportion of total assets in the future, increasing exposure to market volatility [134]. - The company’s bitcoin acquisition strategy exposes it to risks associated with the volatility of bitcoin and potential impairment losses [116]. - The company is subject to counterparty risks related to custodians of its bitcoin holdings, which could adversely affect financial condition [117]. - A significant decrease in the market value of bitcoin holdings could adversely affect the company's ability to service its indebtedness, as the majority of its assets are concentrated in bitcoin [161]. Financial Performance and Risks - The company generated a net loss for the fiscal year ended December 31, 2022, primarily due to digital asset impairment losses [106]. - The company reported a net loss of $1.470 billion for the year ended December 31, 2022, compared to a net loss of $535.5 million for the year ended December 31, 2021 [133]. - Digital asset impairment losses of $1.286 billion for the year ended December 31, 2022 represented 76.9% of the company's operating expenses, compared to 69.0% in the previous year [133]. - The company’s financial results may experience variability due to the potential impairment of bitcoin holdings, which could materially affect reported earnings [132]. - The price of bitcoin is subject to significant fluctuations influenced by various factors, including regulatory changes and market sentiment [131]. - The company may face increased tax liabilities due to changes in tax laws and regulations, particularly under the Inflation Reduction Act of 2022 [110]. - The company’s operating results may fluctuate significantly due to various factors, including bitcoin price volatility and changes in customer demand [102]. - The company faces risks related to non-performance by counterparties in its bitcoin acquisition strategy, which could result in significant losses [163]. Regulatory and Compliance - The company is committed to ongoing collaboration with regulatory bodies to ensure compliance with evolving digital asset regulations [51]. - Regulatory scrutiny is heightened due to the company's bitcoin acquisition strategy and potential compliance requirements [142]. - The company is subject to various global data protection laws, including GDPR, which can impose fines of up to €20 million or 4% of global annual revenue for non-compliance [86]. - Regulatory changes reclassifying bitcoin as a security could classify the company as an "investment company" under the Investment Company Act of 1940, potentially adversely affecting the market price of bitcoin and the company's Class A common stock [159]. - The company’s digital asset strategy is subject to evolving regulatory frameworks that could impact the price and transferability of bitcoin [135]. - Compliance with changing privacy regulations may require substantial resources and could materially affect the company's business operations [218]. Business Operations and Strategy - The company emphasizes the importance of its enterprise analytics software in empowering organizations to leverage data for actionable insights [54]. - MicroStrategy's cloud service received FedRAMP authorization on November 29, 2022, certifying compliance with U.S. federal cloud security standards [63]. - The MicroStrategy platform offers over 200 connectors to popular data sources, enhancing flexibility and agility for organizations [59]. - The company has established strategic alliances with third-party vendors to enhance customer success in enterprise intelligence initiatives [76]. - The company relies on its enterprise analytics software business for revenue, which is subject to evolving market demands and regulatory restrictions on data usage [166]. - The company faces risks related to government contracting, including budget constraints and potential contract terminations [198]. - The company is exposed to risks from geopolitical tensions, natural disasters, and pandemics, which could disrupt operations [190]. Employee and Organizational Structure - As of December 31, 2022, MicroStrategy had a total of 2,152 employees, with 719 based in the United States and 1,433 internationally [96]. - The company expanded equity compensation programs worldwide in 2022 to enhance employee engagement and retention [98]. - The company’s ability to attract and retain skilled personnel is critical for future success, particularly the retention of key executives [204]. Market Competition - The analytics market is highly competitive, with MicroStrategy competing against major players like IBM, Microsoft, and Oracle [81]. - The company faces risks related to software errors and security vulnerabilities that could adversely affect revenue and reputation [184]. - The company’s marketing strategy focuses on increasing brand awareness through digital media, events, and partnerships, particularly highlighting its bitcoin acquisition strategy [78].