Today, we delve into Strategy Corporation’s (formerly MicroStrategy) Q2 2025 earnings report, marking the company’s first quarter of net positive earnings under the fair-value Bitcoin accounting standard and one of the largest quarterly profits in its history.

Key Points

• Strategy’s Bitcoin treasury strategy generated $10 billion in net income (vs. a $102.6M loss in Q2 2024), entirely driven by $14 billion in unrealized Bitcoin gains under the new accounting standard.

• Software operations remained stable but secondary, with revenue of $114.5M (up 2.7% YoY) and narrowing margins, contributing ~$32M in underlying operating income.

• Aggressive capital raising continued, with $6.8B raised via equity/preferred stock in Q2, expanding Bitcoin holdings to 597,325 BTC (3% of circulating supply) worth ~$64.4B.

• Post-earnings, Strategy’s stock fell 8%, from $401 to $367; it has since recovered above $370.

• Strategy shares trade at a 60% premium to Bitcoin NAV, meaning investors pay $1.60 for every $1 of Bitcoin exposure.

Thesis: Strategy’s Bitcoin treasury strategy works as long as Bitcoin prices rise and capital markets remain open, but introduces massive earnings volatility and dilution risk, rendering traditional software metrics irrelevant. However, its early entry provides ample buffer against Bitcoin price crashes.

Financial Performance: Bitcoin as the Key Driver

Strategy reported GAAP net income of $10.02B in Q2 2025, a stark reversal from a $102.6M net loss in Q2 2024. Diluted EPS hit $32.60 vs. a $0.57 loss in Q2 2024.

The 9,870% YoY net income surge stemmed almost entirely from $14B in unrealized Bitcoin gains recognized under the fair-value accounting standard adopted in January 2025. This diverges from the old cost-minus-impairment model, where Bitcoin price increases were excluded from earnings while declines triggered impairments.

The accounting impact is stark when compared to operational revenue: Q2 total revenue was just $114.5M, implying a >8,700% net margin—entirely attributable to crypto appreciation.

Excluding Bitcoin revaluation, underlying operating income was ~$32M, with software margins at a healthy 28%, but trivial relative to crypto gains.

GAAP operating income hit $14.03B, a dramatic improvement from a $200M operating loss in Q2 2024 (which included heavy Bitcoin impairments under the old standard).

Quarterly swings are extreme: Q1 2025 saw a $4.22B GAAP net loss as Bitcoin dipped to ~$82,400 in March. With Bitcoin rebounding to $107,800 by June, Q2’s $10B profit marked a $14B+ sequential swing.

Management acknowledges fair-value accounting makes earnings “highly sensitive” to Bitcoin’s market price. Profitability now hinges on crypto volatility, not software sales.

Adjusted net income (excluding stock comp and minor items) was ~$9.95B vs. -$136M a year earlier, aligning closely with GAAP as Bitcoin-related adjustments dwarf traditional add-backs.

Treasury Financing

As of June 30, 2025, Strategy held 597,325 Bitcoin, up 2.5x from 226,331 a year earlier. Holdings now stand at 628,946 BTC after Q3 purchases. The total cost basis is $46.094B (~$73,290/BTC), with a market value of ~$74.805B, implying ~$29B in unrealized gains—double Q2’s reported figure.

In Q2, Strategy acquired 69,140 BTC for ~$6.8B, matching total capital raised. The average purchase price was ~$98,000/BTC, reflecting steady accumulation as prices rose from April lows. No Bitcoin was sold, adhering to Chairman Michael Saylor’s “HODL” strategy.

Financing has evolved into complex capital markets operations:

• ATM Equity Program: Raised $5.2B via ~14.23M shares in Q2, plus $1.1B in July, with ~$17B remaining capacity.

• Preferred Stock: Multiple perpetual preferred series fund Bitcoin purchases while limiting common dilution, with varying yields/terms to match investor demand.

• Convertible Debt: In February, Strategy issued $2B in 0% convertible notes (2030 maturity, $433.43 conversion price). These allow conversion if shares exceed $433.43, diluting equity but avoiding debt repayment. The company redeemed $1.05B in 2027 convertibles in Q1.

This structure supports Bitcoin accumulation but introduces fixed costs: preferred dividends (8-10% yields, totaling hundreds of millions annually) must be paid regardless of Bitcoin’s performance. Strategy maintains ~20-30% leverage (debt-to-BTC assets), meaning most purchases are funded via equity/preferred issuance, not debt.

Software Business: Stable but Secondary

Legacy analytics revenue reached $114.5M in Q2 2025 (up 2.7% YoY), rebounding from a 3.6% Q1 decline. Revenue mix shifted further toward subscriptions:

• Subscriptions: $40.8M (up 69.5% YoY), now ~36% of revenue vs. 22% a year ago.

• Product Licenses: ~$7.2M (down ~22%), as clients shift to cloud.

• Support: $52.1M (down 15.6%), with maintenance revenue declining amid cloud transition.

• Other Services: $14.4M (down 11.8%), reflecting reduced consulting.

Software gross profit was $78.7M (68.8% margin) vs. $80.5M (72.2%) in Q2 2024. Margin compression stems from higher subscription costs (cloud hosting, customer success) and lower-margin support revenue.

Historically, operating expenses matched gross profit, leaving minimal software income. Q2’s ~$32M non-Bitcoin operating profit reflects modest core profitability after years of cost-cutting. This helps cover interest ($17.9M) and preferred dividends ($49.1M) but contributes <1% of total earnings.

Strategy will likely maintain its analytics business as its sole cash-generating operation (given its “buy, hold, never sell” Bitcoin stance), but management’s focus on accumulation over product roadmaps suggests software is no longer a growth driver or valuation component.

Cash Flow Quality & Sustainability

While earnings can be massaged, cash flow doesn’t lie. Strategy’s cash flows reveal the low quality of its reported profits: the $10B net income (excluding $14B unrealized gains) generated almost no cash. Despite $5.75B in GAAP net income, cash balances rose just $12M in H1 2025.

• Operating Cash Flow: Software likely generated modest positive cash flow, barely covering expenses. After non-cash items (depreciation, stock comp), true operating cash flow is near breakeven.

• Investing Cash Flow: Dominated by $6.8B in Bitcoin purchases, fully funded by financing.

• Financing Cash Flow: $6.8B net equity/preferred issuance, immediately deployed into Bitcoin with little cash retained.

This pattern—negative investing, positive financing, minimal operating cash flow—confirms Strategy as an asset accumulator, not a cash-generating business.

Fixed costs (annualized ~$68M interest + ~$200M preferred dividends) could pressure liquidity if Bitcoin stalls or capital markets tighten, forcing Bitcoin sales or dilutive equity issuance.

Market Reaction & Valuation

Despite record earnings, Strategy’s stock dipped post-earnings as markets priced in Bitcoin’s gains. A subsequent $4.2B stock sale further pressured shares, reflecting investor awareness that these are mark-to-market gains, not operating profits.

Yet, the stock remains tightly correlated to Bitcoin.
At a 60% premium to NAV, MSTR investors pay $1.60 for $1 of Bitcoin exposure. Reasons for the premium include:

1. Equity-structured Bitcoin upside

2. Michael Saylor’s execution and market timing

3. Scarcity as a liquid Bitcoin proxy

4. Optionality for future accretive financing

This premium enables a self-reinforcing cycle: issuing shares above NAV to buy more Bitcoin, increasing per-share BTC holdings. At $370/share ($250 NAV), selling new shares at $370 funds $370 worth of Bitcoin, boosting existing shareholders’ per-share exposure. Strategy’s “Bitcoin per share” metric has risen 25% YTD despite dilution, validating the strategy in a bull market.

Strategy demands unconventional valuation: with $114M quarterly revenue ($450M annualized) against a $120.35B enterprise value, it trades at >250x sales—an astronomical multiple. But investors aren’t betting on software; they’re pricing leveraged Bitcoin upside.

Investment Perspective

Q2 results cement Strategy’s transformation from software firm to leveraged Bitcoin vehicle. The $10B profit reflects unrealized appreciation, not operational success. For equity investors, Strategy offers high-risk Bitcoin exposure with active accumulation, but extreme volatility and dilution.

The model thrives in Bitcoin bull markets, where accretive financing fuels buying and mark-to-market gains inflate earnings. Yet sustainability hinges on perpetual market access and Bitcoin appreciation. A major crypto downturn could swiftly reverse Q2’s results, while fixed obligations persist.

Among Bitcoin treasuries, Strategy is uniquely resilient, having started accumulating early at lower costs. Its 3% of circulating supply and premium valuation reflect confidence in Saylor’s vision and execution.

With Bitcoin now >99% of economic value, traditional software metrics are irrelevant to Strategy’s crypto narrative.

This concludes our analysis of Strategy’s Q2 earnings. More coverage to follow soon.