Executive Summary

Q2 2025 delivered a step‑change in reported GAAP earnings due to FASB fair‑value accounting for bitcoin: net income of $10.02B and diluted EPS of $32.60, alongside stable software revenues of $114.5M; EPS beat consensus by an extraordinary margin and revenue modestly exceeded expectations .
Software mix continued transitioning to subscription: subscription services revenue rose to $40.8M while product support remained the largest contributor; gross profit was $78.7M with 68.8% gross margin .
Balance sheet bitcoin KPIs surged: bitcoin holdings reached ~597,325 at Q2‑end; Q2 unrealized gain on digital assets was $14.05B, with deferred tax liabilities rising to ~$5.87B under fair value accounting .
Management raised 2025 guidance: BTC yield to 30% (from 15%), BTC dollar gain to $20B (from $10B), and introduced GAAP targets of $34B operating income, $24B net income, and $80 EPS for FY25; they also codified disciplined ATM issuance tied to M NAV thresholds (≥2.5x) .
Strategic capital formation accelerated: preferred (STRC) IPO closed ($2.474B net) and a $4.2B STRC ATM launched; aggregate Q2 capital markets proceeds totaled ~$6.8B, supporting bitcoin accumulation and liquidity for dividend/interest obligations .

What Went Well and What Went Wrong

What Went Well
- Fair‑value accounting unlocked massive reported GAAP earnings: “unrealized gain on digital assets of $14.05 billion” in Q2 drove $10.02B net income and $32.60 diluted EPS .
- Subscription momentum and stable software gross margin: gross profit of $78.7M and 68.8% gross margin while subscription services reached $40.8M in Q2 .
- Strategic capital innovation and scale: STRC IPO ($2.474B net), and ATM frameworks across equity and preferred expanded access to diverse investor pools . Quote: “We believe we’ve created a breakthrough instrument… variable monthly dividend preferred stock… and we did it with AI” .
What Went Wrong
- Reported software revenue was essentially flat QoQ and down YoY versus Q4’s $121M, with product support revenue declining as the business migrates to cloud .
- Deferred tax liabilities expanded materially under fair‑value accounting to ~$5.87B at Q2‑end, reducing future flexibility if bitcoin prices reverse .
- Elevated fixed dividend/interest load from preferred and converts (annualized obligations ~$614M) requires continued capital access discipline and market liquidity .

Financial Results

Software revenues by quarter

Metric	Q4 2024	Q1 2025	Q2 2025
Total Revenues ($M)	$121.0	$111.1	$114.5

GAAP results and digital asset impacts

Metric	Q1 2025	Q2 2025
Net Income (Loss) ($M)	$(4,217.4)	$10,020.8
Diluted EPS ($)	$(16.49)	$32.60
Unrealized Gain (Loss) on Digital Assets ($M)	$(5,906.0)	$14,047.5
Gross Profit ($M)	$77.1	$78.7
Gross Profit Margin (%)	69.4% (calc from )	68.8%

Segment revenue mix

Metric	Q1 2025	Q2 2025
Product Licenses ($M)	$7.3	$7.2
Subscription Services ($M)	$37.1	$40.8
Product Support ($M)	$52.5	$52.1
Other Services ($M)	$14.2	$14.4

Key KPIs

KPI	Q4 2024	Q1 2025	Q2 2025
Bitcoin Held (units)	447,470	528,185	597,325
Digital Assets Carrying Value ($B)	$23.91	$43.55	$64.36
Deferred Tax Liabilities ($B)	n/a	$1.88	$5.87

Consensus vs Actual (Q2 2025) — Values retrieved from S&P Global*

Metric	Consensus	Actual
Primary EPS ($)	6.76*	32.60
Revenue ($M)	112.5*	114.5
EBITDA ($M)	10.0*	14,041.1*

Bold surprises: EPS beat was extraordinary; revenue modest beat vs consensus.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
BTC Yield (%)	FY 2025	15% (Q4/Q1 guidance)	30%	Raised
BTC Dollar Gain ($B)	FY 2025	$10	$20	Raised
GAAP Operating Income ($B)	FY 2025	n/a	$34	New
GAAP Net Income ($B)	FY 2025	n/a	$24	New
GAAP EPS ($)	FY 2025	n/a	$80	New
Equity ATM Policy	Ongoing	Opportunistic (no threshold)	Issue ≥2.5x M NAV; repurchase <1.0x M NAV	Clarified

Dividend/interest obligations and coverage: total annualized ~$614M; management emphasized ample liquidity and over‑collateralization by bitcoin holdings .

Earnings Call Themes & Trends

Topic	Q4 2024 (Prior 2 Quarters)	Q1 2025 (Prior Quarter)	Q2 2025 (Current)	Trend
Capital formation and instruments	21‑21 plan; largest equity ATM and converts; STRK launch	Converts redeemed/extended maturities; fair‑value accounting adoption	STRC IPO ($2.474B), $4.2B STRC ATM; disciplined ATM thresholds	Broadening instruments; retail/institutional penetration rising
Software transition to cloud	Subscriptions up 48% YoY; total $121M Q4	Revenues $111.1M; stable gross profit	Revenues $114.5M; gross margin ~69%/69%	Mix shift to subscription; support declines offset by subs
Regulatory environment	Emphasis on fair‑value accounting, ETF approvals	CAMT scrutiny noted; IRS exam notice in Q2 disclosures	“Supportive White House”; crypto policy report; in‑kind ETF creation	Improving regulatory stance; tax clarity still evolving
Leverage policy	Long‑term leverage target 20–30% of BTC value	Below target; more fixed‑income issuance planned	Path to 30–50% longer‑term if preferred replaces converts; vol‑dependent	Flexibility; leverage tuned to volatility/structure
BTC Treasury KPIs	Targets introduced (BTC yield, BTC dollar gain)	BTC holdings grew to 528K; unrealized loss under fair value in Q1	BTC holdings 597K; $14.05B unrealized gain; BPS narrative; yield 25% YTD	Accumulation accelerating; fair‑value drives GAAP volatility

Management Commentary

“Q2 we achieved a record $14 billion in GAAP operating income and $10 billion in net income, reflecting fully diluted EPS of $32.60 per share” .
“We have purposely engineered MSTR to be the most volatile security in our portfolio and STRC to be the least volatile” .
“Below 1.0x M NAV, we’ll consider issuing credit to repurchase MSTR; equity issuance to buy bitcoin starts at 2.5x M NAV” .
“BTC yield of 25% year to date… BTC dollar gain of $13.2B so far this year” .
“Total annualized interest and dividend obligations stand at $614M… ample daily market liquidity… fortress Bitcoin balance sheet” .
“Average end‑of‑year analyst price forecast covering MSTR is $168,000 per bitcoin” .

Q&A Highlights

Concentration risk and proliferation of BTC treasury companies: Management argued additional BTC treasury peers are additive to adoption and capital access; MSTR isn’t competing with peers so much as legacy credit instruments .
Stress testing leverage in bear markets: Preferred structure (perpetual, non‑maturing) designed to be robust to 80–90% drawdowns; may suspend non‑cumulative tranches at extremes while preserving long‑term solvency .
Preferred credit effectiveness in sideways (“crab”) markets: Lower BTC vol compresses risk; education of institutional/retail channels and rating agencies seen as key drivers of spread premia improvement .
Regulatory asks: Clarify digital asset taxonomy (security vs commodity vs tokenization) to unlock issuance and reduce friction; broader framework (Clarity Act) expected to help .
Proof‑of‑reserves: Open to approaches that balance transparency with operational/security risks; robust audit controls via Big Four cited as primary assurance .

Estimates Context

Q2 2025 vs consensus (S&P Global): EPS $32.60 vs $6.76 (major beat); revenue $114.5M vs $112.5M (modest beat); EBITDA actual reflects recognition of fair‑value gains under FASB, making consensus frameworks less comparable*.
Implication: Street models will likely lift FY25 EPS and GAAP income targets materially to incorporate bitcoin end‑quarter fair‑value sensitivities and raised BTC yield/$ gain guidance*.
Note: Values retrieved from S&P Global*.

Key Takeaways for Investors

Fair‑value accounting turns bitcoin end‑quarter mark into GAAP P&L, driving extreme EPS variability; quarter‑end BTC prices become principal EPS driver .
Subscription pivot remains intact; watch subscription services momentum to gauge underlying software stability independent of bitcoin .
Capital stack increasingly diversified (STRK/STRF/STRD/STRC); preferred instruments broaden addressable markets and can support leverage while limiting refinancing risk .
ATM discipline tied to M NAV thresholds reduces issuance uncertainty and may support options premium/value perception .
Elevated deferred tax liabilities are the flip side of fair‑value gains; plan for cash tax outflows under potential CAMT in 2026+ if unrealized gains persist .
Guidance upgrades (BTC yield 30%, BTC $ gain $20B; GAAP targets) plus proactive communications suggest confidence in capital access and treasury execution .
Trading lens: EPS is now a function of bitcoin’s quarter‑end mark; catalysts include continued preferred issuance/ATM activity, regulatory clarity, and subscription billings.

Citations:
Financials and KPIs from SEC filings and 10‑Qs: .
Capital markets and preferred details: .
Earnings call transcript themes, quotes, and guidance: ; alternates .
Q4 2024 call references: .

Estimates Note: Values retrieved from S&P Global*.

MICROSTRATEGY Inc (MSTR)·Q2 2025 Earnings Summary