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MI

MICROSTRATEGY Inc (MSTR)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $120.7M (−3.0% YoY) and up vs Q3 ($116.1M), driven by 48.4% YoY growth in Subscription Services while licenses/support declined; gross margin was 71.7% (vs 77.3% LY, 70.4% LQ) .
  • GAAP diluted EPS was $(3.03) vs $0.50 LY and $(1.72) LQ, reflecting $1.006B digital asset impairment; non‑GAAP diluted EPS was $(3.20) vs $0.56 LY .
  • Balance sheet/treasury: BTC holdings ended Q4 at 447,470 BTC (cost basis $27.97B; fair value proxy $41.79B); management adopted fair value accounting effective 1/1/25 with a $12.745B cumulative increase to retained earnings and introduced 2025 KPI targets of ≥15% BTC Yield and $10B BTC $ Gain .
  • Capital markets execution was a major catalyst: ~$15.1B raised via ATM in Q4, $3.0B 0% due 2029 converts, and in Q1 2025 a listed 8% perpetual preferred (STRK) raising ~$563M; NASDAQ‑100 inclusion and the corporate rebrand to “Strategy” broadened exposure .

What Went Well and What Went Wrong

  • What Went Well
    • Subscription Services revenue +48.4% YoY (now ~20% of total), with 57% YoY growth in subscription billings and the strongest quarter yet for cloud migrations; renewal rates remained elevated .
    • Treasury execution accelerated: issued $15.1B ATM equity in Q4 and $3.0B 0% 2029 converts, then launched STRK preferred in Q1 2025 ($563.4M net) to diversify the investor base; 2024 BTC Yield reached 74.3% .
    • Strategic clarity and brand: rebranded as Strategy, joined NASDAQ‑100, and launched a real‑time investor dashboard; management emphasized positioning at the intersection of Bitcoin and AI .
  • What Went Wrong
    • GAAP results remain highly volatile with a $1.006B Q4 digital asset impairment, driving a $(670.8)M net loss and margin compression vs LY; gross margin fell YoY to 71.7% as mix shifts and higher cloud hosting costs lifted COGS .
    • Declines in legacy revenue streams continued: product support (−10.8% YoY) and other services (−20.8% YoY) weighed on total revenue (−3.0% YoY) .
    • Cash and equivalents remained modest at $38.1M at year‑end given the capital‑intensive BTC strategy; subscription cost scaling (hosting) expected to continue near‑term .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Total Revenue ($M)$124.5 $116.1 $120.7
Gross Profit ($M)$96.3 $81.7 $86.5
Gross Margin (%)77.3% 70.4% 71.7%
Loss from Operations ($M)$(42.8) $(432.6) $(1,016.4)
Net (Loss)/Income ($M)$89.1 $(340.2) $(670.8)
Diluted EPS (GAAP)$0.50 $(1.72) $(3.03)
Diluted EPS (Non‑GAAP)$0.56 $(1.56) $(3.20)
Digital Asset Impairment ($M)$39.2 $412.1 $1,006.1

Revenue breakdown (Software Business):

Revenue Line ($M)Q4 2023Q3 2024Q4 2024
Product Licenses$18.4 $11.1 $15.3
Subscription Services$21.5 $27.8 $31.9
Product Support$65.5 $61.0 $58.4
Other Services$19.1 $16.2 $15.1
Total$124.5 $116.1 $120.7

Key KPIs and treasury metrics:

KPIQ4 2023Q3 2024Q4 2024
BTC Holdings (end of period, units)189,150 252,220 447,470
BTC Cost Basis ($B)$5.90 $9.90 $27.97
BTC Market Value at Period End ($B)$8.04 $16.01 $41.79
BTC Yield (FY / QTD)——74.3% FY24; 2.9% QTD’25

Notes:

  • Subscription Services revenues +48.4% YoY in Q4 and ~20% of total revenue; subscription billings +57% YoY; costs rose with cloud hosting .
  • Management adopted fair value accounting for bitcoin effective 1/1/25 with a $12.745B cumulative increase to opening retained earnings; future P&L will reflect fair value gains/losses each quarter .

Estimates vs. Actuals: S&P Global consensus estimates were unavailable at the time of analysis; comparison to Street was not possible (will update when accessible).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
BTC Yield TargetFY 20256–10% (announced Q3’24 for 2025–2027) ≥15% (minimum) Raised
BTC $ Gain TargetFY 2025N/A$10B New
Bitcoin AccountingFrom Q1 2025Indefinite‑lived intangible (impairment model)Fair value accounting; +$12.745B cumulative effect to retained earnings at 1/1/25 Method change
Leverage TargetOngoing20–30% of BTC holding value (long‑term)20–30% maintained; significant capacity below target Maintained
STRK Preferred DividendPerpetualN/A8.00% fixed on $100 liquidation preference New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2’24 and Q3’24)Current Period (Q4’24)Trend
Cloud transition and AIQ2: Subscr. rev +21.1% YoY; emphasized AI‑powered analytics . Q3: Subscr. rev +32.5% YoY .Q4: Subscr. rev +48.4% YoY; subs ≈20% of revenue; billings +57%; strongest migration quarter to date; higher cloud hosting costs .Accelerating mix shift to cloud; scaling costs near term.
Capital markets and leverageQ2: Issued $800M 2032 converts; called 2025 converts . Q3: Announced 21/21 plan; issued $1.01B 2028 converts; redeemed secured notes .Q4: ~$15.1B ATM; $3.0B 0% 2029 converts; Q1’25 STRK preferred ~$563M net; capacity remains below 20–30% leverage target .Expanded toolkit; diversified investor base; room to increase leverage.
Bitcoin accounting and KPIsPrior: management advocated fair value; introduced BTC Yield KPI (12.2% YTD in Q2) . Q3: YTD BTC Yield 17.8%; set 2025–27 target 6–10% .Q4: Adopt fair value in Q1’25; cumulative +$12.745B to retained earnings; set 2025 targets of ≥15% BTC Yield and $10B BTC $ Gain .More transparent P&L; higher 2025 ambition.
Branding/indexation—Rebrand to “Strategy”; inclusion in NASDAQ‑100; investor dashboard launch .Broadening awareness and liquidity.
Regulatory/macro backdrop—Management cites supportive political/regulatory momentum (ETFs, repeal of SAB 121) and rising institutional adoption .Constructive environment for Bitcoin exposure.

Management Commentary

  • “We have completed $20 billion of our $42 billion capital plan, significantly ahead of our initial timelines…Looking ahead to the rest of 2025, we are well‑positioned to further enhance shareholder value…” — Phong Le, CEO .
  • “Q4 2024 marked our largest ever increase in quarterly bitcoin holdings… 218,887 bitcoins… We… adopt fair value accounting… transforming our financial results and bringing more transparency…” — Andrew Kang, CFO .
  • “Our BTC yield in 2024 of 74.3% surpassed… initial target… We are revising our targets for 2025 to achieve a minimum of 15% BTC yield and a $10 billion BTC dollar gain.” — Andrew Kang, CFO .
  • “Strategy is the world’s first and largest Bitcoin treasury company… brand simplification is a natural evolution… focused on Bitcoin and AI.” — Phong Le, CEO .

Q&A Highlights

  • STRK dividend funding: Management expects to use all capital sources (primarily ATM) to fund the $14M quarterly ($58M annual) STRK dividend, citing >$20B capital raised since Q4 as evidence of capacity .
  • Potential unrealized gains tax: Management does not see broad support; if implemented, would be a “second‑order” impact that could modestly slow growth but not alter core strategy .

Estimates Context

  • S&P Global consensus for Q4 2024 (revenue/EPS) was unavailable at the time of analysis due to access limits; therefore, a comparison to Street was not possible. We will update this section when consensus data is available.

Key Takeaways for Investors

  • Subscription pivot is gaining momentum: Subscription Services +48% YoY in Q4 with record cloud migrations; watch margin evolution as hosting costs scale and mix shifts .
  • GAAP volatility will increase under fair value accounting for bitcoin starting Q1’25, but transparency improves; retained earnings reset higher by $12.745B at adoption .
  • Capital structure optionality remains high: with ATM equity, 0% converts, and STRK preferred, Strategy can pursue accretive BTC accumulation while staying below its 20–30% leverage target .
  • KPI bar raised: 2025 targets of ≥15% BTC Yield and $10B BTC $ Gain signal continued aggressive treasury execution; track issuance cadence vs premiums .
  • Legacy revenue headwinds persist (support/other services down YoY), but growing subscription mix and elevated renewals underpin longer‑term software durability .
  • Risk lens: results are highly sensitive to BTC price, capital market conditions, and dilution mechanics; STRK dividends add a recurring obligation but are modest vs capital raise capacity .

Additional Detail

BTC and balance sheet disclosures at 12/31/24:

  • Carrying value $23.909B (447,470 BTC); cost basis $27.968B (avg cost ~$62,503); period‑end market value ~$41.789B (price ~$93,390) .
  • Segment view shows all revenue in Software Business; Corporate & Other captures bitcoin‑related costs/impairments and financing effects .

Appendix: Documented YoY changes called out by management in Q4:

  • Total revenue −3.0% YoY; Subscription Services +48.4% YoY; Product support −10.8% YoY; Other services −20.8% YoY; gross margin 71.7% vs 77.3% LY .