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 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 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 MICROSTRATEGY INCORPORATED (Exact Name of Registrant as Specified in Its Charter) | Delaware | 1850 Towers Crescent Plaza, Tysons Corner, ...