Strategy (MicroStrategy Incorporated)

Strategy continued its aggressive bitcoin acquisition strategy in Q1 2025, adding 80,715 bitcoins during the quarter at an average price of $94,922 per bitcoin, bringing its total holdings to 528,185 bitcoins as of March 31, 2025. The company further added 25,370 bitcoins between April 1 and April 28, bringing total holdings to 553,555 bitcoins with an average cost basis of $68,459 per bitcoin.

The company’s BTC Yield KPI – which measures the percentage change in the ratio between bitcoin holdings and assumed diluted shares outstanding – reached 13.7% year-to-date as of April 28, 2025, achieving over 90% of its original 15% annual target in just the first four months of the year. Based on this strong performance, Strategy has increased its 2025 BTC Yield target from 15% to 25%.

The BTC $ Gain – which represents the dollar value of the BTC Gain calculated by multiplying the BTC Gain by the market price of bitcoin – reached $5.8 billion year-to-date (based on bitcoin price of approximately $95,000 as of April 28, 2025). With 58% of its original $10 billion annual target already achieved, Strategy has increased its 2025 BTC $ Gain target to $15 billion.

A significant accounting change affected the company’s financial reporting this quarter. On January 1, 2025, Strategy adopted ASU 2023-08, which requires bitcoin holdings to be remeasured at fair value with gains and losses recognized in net income at each reporting period. This resulted in a $12.7 billion uplift in the beginning balance of retained earnings. However, due to bitcoin price fluctuations during Q1, the company recorded an unrealized fair value loss of $5.9 billion for the quarter based on the March 31 bitcoin price of $82,445.

Strategy conducted extensive capital raising activities during Q1 2025, receiving aggregate net proceeds of $7.7 billion during the quarter, with an additional $2.3 billion between April 1 and April 28, 2025. These funds were primarily used to finance the company’s bitcoin acquisition strategy.

The company’s largest source of capital was its Common Stock ATM Offering, which raised $4.4 billion in Q1 through the issuance of 12.6 million shares of Class A common stock. An additional $2.2 billion was raised in April through the issuance of 6.7 million shares. As of April 28, approximately $128.7 million remained available under the October 2024 ATM program.

Strategy also completed several debt and preferred stock offerings during the quarter. In February, the company issued $2.0 billion in 0% Convertible Senior Notes due 2030 with an initial conversion price of $433.43 per share of Class A common stock. Additionally, the company completed two preferred stock IPOs: $563.2 million from 8.00% Series A Perpetual Strike Preferred Stock (STRK) in January and $710.9 million from 10.00% Series A Perpetual Strife Preferred Stock (STRF) in March.

In a significant move for future capital raising, Strategy established a new $21 billion at-the-market (ATM) Perpetual Strike Preferred Stock offering in March. As of April 28, approximately $20.9 billion remained available under this ATM, providing substantial potential capital for future bitcoin acquisitions.

The company also significantly expanded its capital raising capacity by increasing authorized shares. In January 2025, Strategy’s stockholders approved an amendment to the Certificate of Incorporation increasing the number of authorized shares of Class A common stock from 330 million to 10.33 billion and the number of authorized shares of preferred stock from 5 million to 1.005 billion.

Strategy’s software business saw mixed performance in Q1 2025, with total revenues of $111.1 million, representing a 3.6% decrease year-over-year compared to Q1 2024. While overall revenues declined, there was a significant shift in revenue composition toward subscription-based models.

Subscription Services revenues showed impressive growth, increasing 61.6% year-over-year to $37.1 million. Similarly, combined Product Licenses and Subscription Services revenues grew 23.6% year-over-year to $44.4 million. This growth reflects the company’s ongoing transition from traditional perpetual licenses to a cloud subscription model.

However, this transition is affecting other revenue streams. Product Support revenues decreased 16.2% year-over-year to $52.5 million, while Other Services revenues declined 15.0% to $14.2 million. These decreases reflect the expected impact of moving customers from on-premises solutions requiring traditional support to cloud-based subscriptions.

Gross Profit for Q1 2025 was $77.1 million, representing a 69.4% gross margin, compared to $85.2 million and a 74.0% gross margin for Q1 2024. The decline in gross margin primarily reflects the higher costs associated with delivering subscription services compared to traditional software licenses and support.

The software business continues to provide a stable foundation for Strategy, though it has become a smaller part of the company’s overall focus as the bitcoin treasury operation has expanded dramatically. The transition to subscription-based models is progressing well, even as it creates temporary pressure on overall revenue and margins.

Strategy’s balance sheet expanded dramatically in Q1 2025, with total assets increasing to $43.9 billion as of March 31, 2025, compared to $25.8 billion at the end of 2024. This 69.9% increase was primarily driven by growth in the company’s digital assets, both from new bitcoin acquisitions and the accounting change to fair value.

Digital Assets represented the vast majority of the company’s assets at $43.5 billion (at fair value), up from $23.9 billion at the end of 2024. This increase reflects both new bitcoin purchases of $7.7 billion during Q1 and the impact of the accounting change to fair value. As of March 31, Strategy held 528,185 bitcoins at an average cost of approximately $67,457 per bitcoin.

Cash & Cash Equivalents increased to $60.3 million from $38.1 million at the end of 2024. While this represents a 58.3% increase, cash remains a very small portion of the company’s balance sheet, as Strategy continues to convert most available funds into bitcoin as part of its treasury strategy.

Debt and Financing increased during the quarter, with long-term debt (net) rising to $8.1 billion from $7.2 billion at the end of 2024. Additionally, the company reported $1.3 billion in mezzanine equity from its two new series of preferred stock. Total liabilities increased to $10.4 billion, up 36.5% from year-end 2024.

Stockholders’ Equity saw a dramatic increase to $32.2 billion from $18.2 billion at the end of 2024. This 76.7% increase was driven by three factors: capital raised through equity issuances, the $12.7 billion cumulative effect adjustment to retained earnings from adopting fair value accounting for bitcoin, and the impact of ongoing operations (including the $5.9 billion unrealized loss on digital assets during Q1).

Strategy has significantly raised its targets for 2025 based on strong year-to-date performance and favorable bitcoin market conditions:

Increased 2025 Targets

• BTC Yield Target: Increased from 15% to 25% for 2025
• BTC $ Gain Target: Increased from $10 billion to $15 billion for 2025

Strategic Focus and Positioning

• Bitcoin Treasury Company: Strategy continues to position itself as “the world’s first and largest Bitcoin Treasury Company” with bitcoin as its primary treasury reserve asset
• Capital Markets Strategy: The company has established a multi-faceted approach to raising capital through various instruments, including common stock, convertible notes, and preferred stock
• Software Business Transition: Ongoing shift from traditional license/support model to cloud subscriptions, with 61.6% growth in subscription services revenue
• Accounting Change: Adoption of fair value accounting for bitcoin holdings, providing more transparency into the market value of assets but introducing potential volatility to reported results

Recent Developments

Management highlighted a significant industry trend: over 70 public companies worldwide have now adopted a Bitcoin treasury standard, with Strategy at the forefront of this movement. The company also emphasized its dual focus on operational excellence in the software business and strategic bitcoin acquisition, positioning itself as a unique opportunity for investors seeking exposure to both enterprise analytics and bitcoin.

The establishment of a new $21 billion ATM offering for Perpetual Strike Preferred Stock represents one of the largest potential capital raises in the company’s history, providing capacity for substantial bitcoin acquisitions in the future. Additionally, the adoption of fair value accounting for bitcoin is a significant shift that aligns reported financial results more closely with the market value of the company’s primary asset.