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MI

MICROSTRATEGY Inc (MSTR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue fell 3.6% year over year to $111.1M and declined sequentially from Q4’s $120.7M; gross margin compressed to 69.4% vs 74.0% a year ago and 71.7% in Q4 .
  • GAAP diluted EPS was a loss of $16.49, driven by an unrealized fair value loss on bitcoin of $5.906B under newly adopted fair value accounting; non-GAAP diluted loss per share was $16.53 .
  • The company raised ~301K BTC year-to-date and ended Q1 with 528,185 BTC (cost basis $35.63B; fair value $43.55B); management increased 2025 BTC KPIs to 25% BTC Yield and $15B BTC $ Gain from prior 15% and $10B targets (positive strategic signal) .
  • Catalyst: Adoption of fair value accounting (newly visible earnings volatility), aggressive capital raising (new $21B common ATM) and raised BTC KPI targets; near-term stock reaction likely tied to bitcoin price path and investor perception of KPI credibility vs GAAP loss magnitude .

What Went Well and What Went Wrong

  • What Went Well

    • Subscription services revenue grew 61.6% YoY to $37.1M; product licenses + subscription services up 23.6% YoY to $44.4M (cloud migration traction) .
    • Capital markets execution: ~$7.7B net proceeds in Q1 and ~$2.3B additional in April via ATM equity, convertible notes, and preferred IPOs, supporting BTC accumulation .
    • Management raised BTC KPI targets (Yield to 25%, BTC $ Gain to $15B) reflecting confidence in treasury strategy and market momentum; CEO emphasized share price strength and leadership in corporate bitcoin adoption .

  • What Went Wrong

    • GAAP operating expenses surged to ~$6.0B due to $5.906B unrealized fair value loss on bitcoin under ASU 2023-08; operating loss was $5.921B and net loss $4.217B .
    • Gross margin declined to 69.4% from 74.0% YoY; total revenue down 3.6% YoY and sequentially lower vs Q4 .
    • Consensus misses: revenue below Street; EPS miss extreme given fair value loss; EBITDA swung deep negative, highlighting earnings volatility under fair value [GetEstimates Q1 2025; values from S&P Global]*.

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$115.246 $116.071 $120.697 $111.066
Gross Margin %74.0% 70.4% 71.7% 69.4%
Operating Income (Loss) ($USD Millions)$(203.702) $(432.582) $(1,016.420) $(5,921.412)
GAAP Diluted EPS ($)$(0.31) $(1.72) $(3.03) $(16.49)
Non-GAAP Diluted EPS ($)$(0.83) $(1.56) $(3.20) $(16.53)

Actual vs Consensus (S&P Global):

MetricQ1 2025 ConsensusQ1 2025 Actual
Revenue ($USD)$116.389M*$111.066M
Primary EPS ($)$(0.11)*$(16.53)*
EBITDA ($USD)$10.967M*$(5,914.837)M*

Values marked with * retrieved from S&P Global.

Segment Revenue Breakdown ($USD Millions):

SegmentQ1 2024Q4 2024Q1 2025
Product Licenses$12.938 $15.256 $7.270
Subscription Services$22.966 $31.930 $37.103
Product Support$62.685 $58.365 $52.529
Other Services$16.657 $15.146 $14.164
Total Revenue$115.246 $120.697 $111.066

Bitcoin Treasury KPIs and Holdings:

KPI / HoldingQ3 2024Q4 2024Q1 2025
BTC Yield (period/YTD)5.1% Q3; 17.8% YTD 74.3% FY 2024 11.0% Q1; 13.7% YTD
BTC Gain (BTC)—140,538 FY 2024 49,131 Q1; 61,497 YTD
BTC $ Gain ($USD)—Target $10B for 2025 $4.1B Q1
BTC Holdings (BTC)252,220 447,470 528,185
BTC Fair Value ($USD)$16.007B $41.789B $43.546B

KPIs are company-defined and not operating performance measures; see disclosures .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
BTC Yield TargetFY 202515% 25% Raised
BTC $ Gain TargetFY 2025$10B $15B Raised
Accounting PolicyEffective Jan 1, 2025Cost-less-impairment Fair value (ASU 2023-08) Adopted
Capital Program (ATM common)Ongoing$21B ATM (Oct 2024) New $21B ATM announced May 1, 2025 Expanded
STRK DividendQ1 2025—~$1.24 per share; ~$9.2M paid Mar 31, 2025 Initiated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Capital raising and treasury planIntroduced 21/21 $42B plan; new $21B ATM; converts issued Announced “42/42” plan to double equity and fixed income targets; new $21B ATM filed Scaling up
Fair value accountingAnnounced adoption starting Q1 2025 Adopted; $5.9B unrealized loss; CFO illustrated Q2 sensitivity Implemented; earnings volatility visible
BTC KPIsFY24 BTC Yield 74.3%; 2025 targets set (15%/ $10B) Raised targets to 25% / $15B More ambitious
Cloud subscription momentumQ3: subscription +32.5% YoY ; Q4: +48.4% YoY Q1: +61.6% YoY Accelerating
Credit instruments and investor mixConverts, preferred as capital tools Detailed BTC credit/risk framework; push for ratings; BMAX ETF access Investor education and market development
Regulatory/macro for bitcoinPrior general commentary CEO highlighted broader adoption; management cited government actions and institutional interest Supportive tone

Management Commentary

  • CEO Phong Le: “We successfully executed our record $21 billion common stock ATM, adding 301,335 BTC… Our capital markets strategy continues to grow our Bitcoin holdings while delivering superior shareholder value.”
  • CFO Andrew Kang: “We adopted the long-awaited fair value accounting… resulting in a significant $12.7 billion uplift in the beginning balance of retained earnings… we recorded an unrealized fair value loss on digital assets of $5.9 billion.”
  • Andrew Kang (call): “Using a bitcoin price of $95,000… our unrealized fair market value gain would be approximately $6.7 billion” (illustrative Q2 sensitivity) .
  • Michael Saylor: detailed rationale for premium to NAV (compliance, credit, volatility/liquidity durability, options ecosystem) and intent to pursue credit ratings for fixed-income instruments .

Q&A Highlights

  • Fair value transparency and earnings swings: Management emphasized fair value as more transparent and illustrated potential quarterly gains given BTC price recovery .
  • Corporate adoption of bitcoin standard: Saylor framed multi-company adoption as a virtuous cycle for capital inflows and BTC price stability .
  • Dilution and accretion framework: Phong reiterated BTC KPI-based lens (BTC Yield, BTC per share, BTC Gain) and that fixed income can be more accretive; equity issuance accretive when mNAV>1 .

Estimates Context

  • Revenue missed consensus ($111.1M vs $116.4M); EPS miss was extreme due to the $5.906B unrealized loss (actual non-GAAP diluted EPS $(16.53) vs $(0.11) consensus); EBITDA swung to $(5.915)B vs ~$11M consensus*.
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • GAAP losses under fair value accounting will be highly sensitive to quarter-end BTC price; near-term earnings optics remain volatile even as BTC reserves grow .
  • Subscription services growth is robust (+61.6% YoY), partially offsetting declines in licenses and support; cloud mix shift likely continues to pressure near-term margins while improving revenue quality .
  • Raised BTC KPI targets (25% Yield, $15B BTC $ Gain) and expanded capital programs (new $21B ATM) underscore management’s intent to scale BTC holdings aggressively; success depends on market access and BTC trajectory .
  • The company is actively developing the fixed-income investor base and pursuing credit frameworks/ratings for BTC-collateralized instruments; progress here could lower spreads and diversify funding .
  • Trading implications: stock likely reacts more to BTC price and perceived premium-to-NAV drivers (vol/liquidity/options ecosystem) than to traditional software metrics in the near term .
  • Watch subsequent events: May update shows continued ATM issuance and BTC purchases (now 580,250 BTC as of May 25) supporting KPI trajectory into Q2 .
  • Risk: income statement volatility, regulatory/tax exposure (e.g., CAMT potential), and the need to service ~$8.14B long-term debt and preferred dividends from financing activity or equity issuance if software cash flows are insufficient .