Bitcoin Holdings and Strategy - As of February 13, 2026, the company held approximately 717,131 bitcoins, acquired at an aggregate purchase price of $54.5 billion, with an average purchase price of approximately $76,027 per bitcoin [29]. - The market price of one bitcoin on February 13, 2026, was reported at $68,734, indicating a potential unrealized loss on the company's bitcoin holdings [29]. - The bitcoin acquisition strategy involves using proceeds from capital raising transactions, including offerings of Class A common stock and preferred securities, to acquire bitcoin [23]. - The company actively manages its bitcoin holdings and capital structure to maintain long-term durability, liquidity, and flexibility [35]. - The company evaluates its bitcoin strategy continuously based on market conditions, capital structure, and anticipated cash resource needs [25]. - The company aims to generate value from its bitcoin holdings through innovative financial strategies, including the issuance of digital credit instruments [26]. - The company’s capital management strategy focuses on achieving accretive acquisitions of bitcoin while managing cost of capital and financial obligations [37]. - The company’s bitcoin strategy relies heavily on obtaining equity and debt financing, with all bitcoin purchases made using proceeds from such financings [123]. - The company expects to incur additional indebtedness and fixed charges as part of its bitcoin strategy, which may create liquidity risks if bitcoin prices decline [112]. - A significant decrease in the fair market value of bitcoin holdings could adversely affect the company's ability to satisfy financial obligations [112]. - The company has adopted ASU 2023-08 effective January 1, 2025, requiring bitcoin holdings to be measured at fair value, resulting in a cumulative-effect net increase to retained earnings of $12.75 billion [128]. - The company incurred $4.06 billion of cumulative impairment on its bitcoin holdings through December 31, 2024, reflecting the volatility of bitcoin prices [145]. - The concentration of bitcoin holdings limits risk mitigation and enhances the risks inherent in the company's bitcoin strategy [166]. Financial Performance and Risks - For the fiscal year ended December 31, 2025, the unrealized loss on digital assets was $5.40 billion, partially offset by a deferred tax benefit of $1.55 billion [110]. - The company experienced significant fluctuations in operating results, with quarter-to-quarter comparisons not indicative of future performance due to volatility in bitcoin prices [108]. - The cost basis of the bitcoin holdings was less than its fair market value as of December 31, 2025, but has since exceeded its fair market value, impacting deferred tax liabilities [111]. - The company’s enterprise analytics software business did not generate positive cash flow from operations for the fiscal year ended December 31, 2025 [112]. - The company is subject to potential tax liabilities that could materially affect its financial results, particularly if bitcoin is sold at prices above its cost basis [114]. - The price of bitcoin has historically been highly volatile, influencing the company's financial results and market price of listed securities, with significant declines impacting user and investor confidence [130]. - The company has experienced significant price fluctuations in bitcoin, which could adversely affect its business and financial condition [144]. - Future regulatory changes could impose significant costs or limit the company's ability to hold and transact in bitcoin [159]. Regulatory Environment - The laws and regulations applicable to bitcoin are evolving, with various U.S. federal and state agencies examining digital asset operations [70]. - The SEC approved the first U.S. spot bitcoin ETPs in January 2024, expanding access through regulated investment vehicles [59]. - The SEC approved the listing and trading of spot bitcoin ETPs, which began trading on January 11, 2024, with a trading volume of $4.6 billion on the first day [149]. - The company faces enhanced regulatory scrutiny due to its bitcoin strategy, especially with the increasing focus on anti-money laundering and compliance regulations [155]. - Future regulatory developments, such as the SEC's enforcement actions and new legislation like the GENIUS Act, could impose additional burdens on the company and affect bitcoin's price [135]. - Regulatory changes reclassifying bitcoin as a security could classify the company as an "investment company," imposing additional regulatory controls [181]. - The company does not comply with regulations applicable to investment companies, allowing broad discretion over its investment and cash management policies [183]. Market Conditions and Competition - The emergence of stablecoins and government-backed digital currencies could negatively impact bitcoin's price and market position [67]. - The emergence of alternative digital assets, including stablecoins and CBDCs, could negatively impact the price of bitcoin and the company's financial condition [168][169]. - The market for bitcoin is highly uncertain, influenced by factors such as institutional demand and the availability of alternative investment vehicles [139]. - The broader digital assets industry has faced high-profile bankruptcies and regulatory actions, negatively impacting the adoption rate and use of bitcoin [126]. - The company faces risks from potential changes in consumer preferences and competition from other digital assets that may offer better characteristics [131]. - The company acknowledges that significant legal, commercial, regulatory, and technical uncertainties surrounding digital assets could adversely affect bitcoin's price and the ability to transact [133]. Operational and Strategic Initiatives - The company established a USD Reserve of $2.25 billion as of February 13, 2026, to support dividend payments on preferred stock and interest on outstanding indebtedness [25]. - The company structured and issued five classes of Preferred Stock in 2025, providing differentiated economic exposure to its Class A common stock and bitcoin holdings [24]. - The company completed a 10-for-1 stock split of its class A and class B common stock on August 7, 2024, retroactively adjusting all applicable share and per share information [105]. - The company has established strategic partnerships with various third-party vendors, enhancing its sales and service coverage across regions and industries [87]. - The company’s AI-powered business intelligence platform, Strategy One, supports medium to large enterprise deployments and delivers real-time insights [80]. - The company’s generative AI capabilities automate and accelerate the deployment of AI-enabled applications, making advanced analytics accessible to non-technical users [79]. - The company’s marketing programs target technology and line-of-business executives across large global enterprises and mid-size organizations [89]. - The company’s competitive differentiators include a cloud-native architecture optimized for major hyperscalers, enhancing customer choice and ease of integration [81]. Employee and Compliance Matters - As of December 31, 2025, the company had a total of 1,539 employees, with 448 based in the United States and 1,091 internationally [98]. - The company is subject to various privacy and data protection laws, including the GDPR, which imposes significant compliance requirements and potential penalties [95]. - Changes in privacy laws and regulations could impose additional compliance costs and operational challenges, adversely affecting business performance [215][218]. - The company relies on skilled personnel for success, and losing key employees could materially affect business and financial condition [214]. Cybersecurity and Technology Risks - The company may face risks related to the custody of bitcoin, including loss of private keys and potential cyberattacks [178]. - Cybersecurity incidents related to AI integration could adversely affect the company's business and results of operations [195]. - The company has experienced software errors and security vulnerabilities in the past, which could lead to lost revenue and damage to its reputation, impacting future business performance [201]. - The integration of AI into enterprise analytics products may incur substantial costs and could result in reputational harm if AI tools produce inaccurate analyses [194]. - The company faces various risks in doing business with government entities, including procurement challenges and budgetary constraints, which could adversely impact demand for its offerings [209][210].
MicroStrategy Inc Series A Pfd(STRD) - 2025 Q4 - Annual Report