UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-42509
MICROSTRATEGY INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
51-0323571
(I.R.S. Employer
Identification Number)
1850 Towers Crescent Plaza, Tysons Corner, VA
(Address of Principal Executive Offices)
22182
(Zip Code)
(703) 848-8600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of Each Exchange on which Registered
Class A common stock, $0.001 par value per share
MSTR
The Nasdaq Global Select Market
8.00% Series A Perpetual Strike Preferred Stock, $0.001 par value per share
STRK
10.00% Series A Perpetual Strife Preferred Stock, $0.001 par value per share
STRF
10.00% Series A Perpetual Stride Preferred Stock, $0.001 par value per share
STRD
Variable Rate Series A Perpetual Stretch Preferred Stock, $0.001 par value per share
STRC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 31, 2025, the registrant had 263,912,697 and 19,640,250 shares of class A common stock and class B common stock outstanding, respectively.
TABLE OF CONTENTS
Page
PART I.
FINANCIAL INFORMATION
1
Item 1.
Financial Statements (unaudited)
Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2025 and 2024
2
Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2025 and 2024
3
Consolidated Statements of Mezzanine Equity and Stockholders’ Equity for the Three and Six Months Ended June 30, 2025
4
Consolidated Statements of Mezzanine Equity and Stockholders’ Equity for the Three and Six Months Ended June 30, 2024
5
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024
6
Notes to Consolidated Financial Statements
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
35
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
54
Item 4.
Controls and Procedures
PART II.
OTHER INFORMATION
56
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
87
Item 5.
Other Information
88
Item 6.
Exhibits
89
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
June 30,
December 31,
2025
2024
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
50,095
38,117
Restricted cash
2,037
1,780
Accounts receivable, net
117,870
181,203
Prepaid expenses and other current assets
43,459
31,224
Total current assets
213,461
252,324
Digital assets
64,362,798
23,909,373
Property and equipment, net
30,203
26,327
Right-of-use assets
51,573
54,560
Deposits and other assets
109,664
75,794
Deferred tax assets, net
5,716
1,525,307
Total assets
64,773,415
25,843,685
Liabilities, Mezzanine Equity and Stockholders' Equity
Current liabilities:
Accounts payable, accrued expenses, and operating lease liabilities
44,220
52,982
Accrued compensation and employee benefits
50,132
58,362
Accrued interest
5,620
5,549
Current portion of long-term debt, net
349
517
Deferred revenue and advance payments
214,251
237,974
Total current liabilities
314,572
355,384
Long-term debt, net
8,162,281
7,191,158
4,197
4,970
Operating lease liabilities
51,218
56,403
Other long-term liabilities
4,672
5,379
Deferred tax liabilities
5,865,510
407
Total liabilities
14,402,450
7,613,701
Commitments and Contingencies
Mezzanine Equity
8.00% Series A Perpetual Strike Preferred Stock, $0.001 par value; 269,800 shares authorized, 12,201 shares issued and outstanding at June 30, 2025; redemption value and liquidation preference of $1,220,137 at June 30, 2025
1,040,394
0
10.00% Series A Perpetual Strife Preferred Stock, $0.001 par value; 33,200 shares authorized, 10,067 shares issued and outstanding at June 30, 2025; redemption value and liquidation preference of $1,060,029 at June 30, 2025
874,041
10.00% Series A Perpetual Stride Preferred Stock, $0.001 par value; 11,765 shares authorized, 11,765 shares issued and outstanding at June 30, 2025; redemption value and liquidation preference of $1,176,470 at June 30, 2025
979,486
Total mezzanine equity
2,893,921
Stockholders’ Equity
Preferred stock undesignated, $0.001 par value; 690,235 and 5,000 shares authorized, no shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively
Class A common stock, $0.001 par value; 10,330,000 and 330,000 shares authorized, 261,318 and 226,138 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively
261
226
Class B common stock, $0.001 par value; 165,000 shares authorized, 19,640 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively
20
Additional paid-in capital
31,158,044
20,411,998
Accumulated other comprehensive loss
(5,020
)
(15,384
Retained earnings (accumulated deficit)
16,323,739
(2,166,876
Total stockholders’ equity
47,477,044
18,229,984
Total liabilities, mezzanine equity and stockholders' equity
The accompanying notes are an integral part of these Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
Six Months Ended
Revenues:
Product licenses
7,177
9,286
14,447
22,224
Subscription services
40,824
24,080
77,927
47,046
Total product licenses and subscription services
48,001
33,366
92,374
69,270
Product support
52,081
61,740
104,610
124,425
Other services
14,406
16,336
28,570
32,993
Total revenues
114,488
111,442
225,554
226,688
Cost of revenues:
1,169
794
2,133
1,361
15,906
9,560
30,335
18,164
17,075
10,354
32,468
19,525
7,291
8,193
14,645
16,740
11,384
12,388
22,608
24,685
Total cost of revenues
35,750
30,935
69,721
60,950
Gross profit
78,738
80,507
155,833
165,738
Operating expenses:
Sales and marketing
33,691
34,251
61,223
67,702
Research and development
24,071
30,311
48,494
59,494
General and administrative
36,500
36,129
77,047
70,795
Unrealized gain on digital assets
(14,047,514
(8,141,509
Digital asset impairment losses
180,090
371,723
Total operating expenses
(13,953,252
280,781
(7,954,745
569,714
Income (loss) from operations
14,031,990
(200,274
8,110,578
(403,976
Interest expense, net
(17,897
(15,466
(35,003
(27,347
Other (expense) income, net
(8,271
694
(12,207
2,390
Income (loss) before income taxes
14,005,822
(215,046
8,063,368
(428,933
Provision for (benefit from) income taxes
3,984,976
(112,487
2,259,892
(273,256
Net income (loss)
10,020,846
(102,559
5,803,476
(155,677
Dividends on preferred stock
(49,110
(58,347
Net income (loss) attributable to common stockholders of Strategy
9,971,736
5,745,129
Basic earnings (loss) per common share (1)
36.23
(0.57
21.61
(0.89
Weighted average common shares outstanding - Basic
275,244
178,607
265,910
175,326
Diluted earnings (loss) per common share (1)
32.60
19.43
Weighted average common shares outstanding - Diluted
306,764
298,039
(1)Basic and fully diluted earnings per common share for class A and class B common stock are the same.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
Other comprehensive income (loss), net of applicable taxes:
Foreign currency translation adjustment
6,947
(381
10,364
(2,106
Total other comprehensive income (loss)
Comprehensive income (loss)
10,027,793
(102,940
5,813,840
(157,783
CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2025
(in thousands, unaudited)
Stockholders' Equity
Perpetual
Total
Class A
Class B Convertible
Additional
Accumulated Other
Retained Earnings
Preferred Stock
Stockholders'
Common Stock
Paid-in
Comprehensive
(Accumulated
Shares
Amount
Equity
Capital
Loss
Deficit)
Balance at January 1, 2025
226,138
19,640
Opening balance adjustment due to the adoption of ASU 2023-08, net of tax
12,746,378
Other
(1,097
Net loss
(4,217,370
Other comprehensive income
3,417
Preferred stock cash dividends declared
(9,188
Issuance of class A common stock upon exercise of stock options
9,418
271
Issuance of class A common stock under employee stock purchase plan
2,703
26
Issuance of class A common stock upon vesting of restricted stock units, net of withholding taxes
104
Issuance of class A common stock under public offerings, net of issuance costs
4,399,205
12,625
13
4,399,192
Issuance of class A common stock upon conversions of convertible senior notes
1,045,132
7,373
8
1,045,124
Share-based compensation expense
12,654
Issuance of Series A Perpetual Strike Preferred Stock
7,650
593,624
Issuance of Series A Perpetual Strife Preferred Stock
8,500
710,873
Balance at March 31, 2025
16,150
1,304,497
32,221,236
246,537
247
25,881,089
(11,967
6,351,847
Net income
(48,954
12,451
325
230
5,248,692
14,225
14
5,248,678
84
15,742
4,551
446,770
1,567
163,168
Issuance of Series A Perpetual Stride Preferred Stock
11,765
Balance at June 30, 2025
34,033
261,318
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024
Treasury Stock
Balance at January 1, 2024
2,164,972
157,725
24
3,957,728
(8,684
(782,104
(11,444
(999,234
(53,118
Other comprehensive loss
(1,725
136,088
5,731
2,071
69
(1,273
39
137,152
1,952
15,938
Balance at March 31, 2024
2,400,105
165,516
4,247,704
(13,169
(1,052,352
17,261
1,215
(932
311
500,815
12,672
500,813
20,490
Balance at June 30, 2024
2,834,799
179,714
4,785,336
(782,104.0
(13,550
(1,154,911
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating activities:
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization
15,693
6,701
Reduction in carrying amount of right-of-use assets
4,526
4,126
Deferred taxes
2,254,166
(278,140
27,561
38,412
Unrealized (gain) on digital assets
Amortization of issuance costs on long-term debt
12,445
6,399
Changes in operating assets and liabilities:
Accounts receivable
14,962
20,075
(16,029
7,914
(2,429
(8,163
Accounts payable and accrued expenses
(3,250
(8,164
(28,187
(18,059
71
3,641
26,095
24,994
(5,308
(5,467
415
(5,057
Net cash (used in) provided by operating activities
(37,302
5,258
Investing activities:
Purchases of digital assets
(14,430,868
(2,433,137
Advance deposits on purchases of property and equipment
(22,000
Purchases of property and equipment
(4,831
(2,268
Net cash used in investing activities
(14,457,699
(2,435,405
Financing activities:
Proceeds from convertible senior notes
2,000,000
2,203,750
Issuance costs paid for convertible senior notes
(14,779
(42,008
Payments to settle conversions and redemption of convertible senior notes
(143
(44
Proceeds from other long-term secured debt, net of lender fees
16,000
Principal payments of other long-term secured debt
(282
(266
Proceeds from sale of preferred stock under public offerings
2,947,684
Issuance costs paid related to sale of preferred stock under public offerings
(56,372
Dividends paid on preferred stock
(58,142
Proceeds from sale of common stock under public offerings
9,663,697
137,765
Issuance costs paid related to sale of common stock under public offerings
(17,775
(613
Proceeds from exercise of stock options
21,869
153,349
Proceeds from sales under employee stock purchase plan
Payment of withholding tax on vesting of restricted stock units
(2,173
Net cash provided by financing activities
14,504,460
2,451,831
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash
2,776
(1,556
Net increase in cash, cash equivalents, and restricted cash
12,235
20,128
Cash, cash equivalents, and restricted cash, beginning of period
39,897
48,673
Cash, cash equivalents, and restricted cash, end of period
52,132
68,801
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying Consolidated Financial Statements of MicroStrategy Incorporated d/b/a Strategy (“Strategy,” “MicroStrategy” or the “Company”) are unaudited. In the opinion of management, all adjustments necessary for a fair statement of financial position and results of operations have been included. All such adjustments are of a normal recurring nature, unless otherwise disclosed. Interim results are not necessarily indicative of results for a full year.
On July 11, 2024, the Company announced a 10-for-1 stock split of the Company’s class A common stock and class B common stock. The stock split was effected by means of a stock dividend to the holders of record of the Company’s class A common stock and class B common stock as of the close of business on August 1, 2024, the record date for the dividend. Shares held in treasury by the Company were not impacted by the stock split. The dividend was distributed after the close of trading on August 7, 2024 and trading commenced on a split-adjusted basis at market open on August 8, 2024. As a result of the stock split, all applicable share, per share, and equity award information has been retroactively adjusted in the Consolidated Financial Statements and Notes to Consolidated Financial Statements to reflect the stock split for all periods presented.
The Consolidated Financial Statements and Notes to Consolidated Financial Statements are presented as required by the United States Securities and Exchange Commission (“SEC”) and do not contain certain information included in the Company’s annual financial statements and notes. These financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto filed with the SEC in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. There have been no significant changes in the Company’s accounting policies since December 31, 2024, except as discussed below in (b) Digital Assets related to ASU 2023-08.
The accompanying Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
(b) Digital Assets
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 requires in-scope crypto assets (including the Company's bitcoin holdings) to be measured at fair value in the statement of financial position, with gains and losses from changes in the fair value of such crypto assets recognized in net income each reporting period. ASU 2023-08 also requires certain interim and annual disclosures for crypto assets within the scope of the standard. The Company adopted this guidance effective January 1, 2025 on a prospective basis, with a cumulative-effect adjustment to the opening balance of retained earnings. Prior periods were not restated. As a result, the Company’s financial results for the three and six months ended June 30, 2025 are not directly comparable to the financial results for earlier periods.
The adoption of ASU 2023-08 resulted in the following impacts as of January 1, 2025:
December 31, 2024
Effect of the Adoption
January 1, 2025
Consolidated Balance Sheet
As Reported
of ASU 2023-08
As Adjusted
17,881,048
41,790,421
Deferred tax assets
(1,165,605
359,702
3,969,065
3,969,472
(Accumulated deficit) retained earnings
10,579,502
Although the Company continues to initially record its bitcoin purchases at cost, subsequent to the Company’s adoption of ASU 2023-08 on January 1, 2025, any increases or decreases in fair value are recognized as incurred in the Company's Consolidated Statements of Operations, and the fair value of the Company’s bitcoin is reflected within the Company's Consolidated Balance Sheets each reporting period-end. As a result of the adoption of ASU 2023-08, the Company no longer accounts for its bitcoin under a cost-less-impairment accounting model and no longer establishes a deferred tax asset related to bitcoin impairment losses. Instead, the Company establishes a deferred tax liability if the market value of bitcoin at the reporting date is greater than the average cost basis of the Company’s bitcoin holdings at such reporting date, and any subsequent increases or decreases in the market value of bitcoin increases or decreases the deferred tax liability. In determining the gain (loss) to be recognized upon sale, the Company calculates the difference between the sales price and carrying value of the specific bitcoin sold immediately prior to sale.
The U.S. enacted the Inflation Reduction Act of 2022 (“IRA”) in August 2022. Among other things, unless an exemption by statute or regulation applies, a provision of the IRA imposes a 15% corporate alternative minimum tax (“CAMT”) on a corporation with respect to an initial tax year and subsequent tax years, if the average annual adjusted financial statement income (“AFSI”) for any consecutive three-tax-year period preceding the initial tax year exceeds $1 billion. On September 12, 2024, the Department of the Treasury and the Internal Revenue Service (the “IRS”) issued proposed regulations with respect to the application of the CAMT. For purposes of calculating the AFSI, the Company will be required to ratably allocate the increase to the Company’s retained earnings over a four year period, from 2025 through 2028. When determining whether the Company is subject to CAMT and when calculating any related tax liability for an applicable tax year, the proposed regulations provide that, among other adjustments, the Company’s AFSI must include this ratable amount in addition to any unrealized gains or losses reported in the applicable tax year. Accordingly, as a result of the enactment of the IRA and the Company’s adoption of ASU 2023-08 on January 1, 2025, unless the IRA is amended or the proposed regulations, when finalized, are revised to provide relief (or other interim relief is granted), the Company could become subject to CAMT in the tax years 2026 and beyond. If the Company becomes subject to the CAMT, it could result in a material tax obligation that the Company would need to satisfy in cash, which could materially affect its financial results, including its earnings and cash flow, and its financial condition.
(c) Redeemable Preferred Stock
As of June 30, 2025, the following series of preferred stock of the Company were outstanding: (i) 8.00% Series A Perpetual Strike Preferred Stock (“STRK Stock”), (ii) 10.00% Series A Perpetual Strife Preferred Stock (“STRF Stock”), and (iii) 10.00% Series A Perpetual Stride Preferred Stock (“STRD Stock”). In these Notes to Consolidated Financial Statements, STRK Stock, STRF Stock and STRD Stock are collectively referred to as “Preferred Stock.” In accordance with Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity, each series of Preferred Stock outstanding as of June 30, 2025 is classified within mezzanine equity, as certain events that could cause shares of each such series of Preferred Stock to become redeemable are not solely within the control of the Company. In each case, the shares are initially recognized based on proceeds received, net of issuance costs, and are not accreted to their redemption value unless it becomes probable that the shares will become redeemable. Refer to Note 9, Redeemable Preferred Stock and Note 14, Subsequent Events for further discussion.
(d) Segment Reporting
The Company has adopted ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) for the year ended December 31, 2024, and for interim periods beginning January 1, 2025 as reflected in Note 12, Segment Information, to the Consolidated Financial Statements, including retroactive application to all prior periods presented. Refer to Note 3, Recent Accounting Pronouncements in the Company’s financial statements as of and for the year ended December 31, 2024 for further discussion.
(2) Recent Accounting Standards
Income Taxes
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires enhanced disclosures surrounding income taxes, particularly related to rate reconciliation and income taxes paid information. In particular, on an annual basis, companies will be required to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Companies will also be required to disclose, on an annual basis, the amount of income taxes paid, disaggregated by federal, state, and foreign taxes, and also disaggregated by individual jurisdictions above a quantitative threshold. The standard is effective for the Company for annual periods beginning January 1, 2025 on a prospective basis, with retrospective application permitted for all prior periods presented. The Company will adopt ASU 2023-09 for the annual period ending December 31, 2025 and is currently evaluating the impact of this guidance on its disclosures.
(3) Digital Assets
The Company accounts for its digital assets, which are comprised solely of bitcoin, as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other and ASU 2023-08. The Company’s digital assets are initially recorded at cost. Subsequent to the Company’s adoption of ASU 2023-08 on January 1, 2025, bitcoin assets are measured at fair value as of each reporting period. The Company determines the fair value of its bitcoin in accordance with ASC 820, Fair Value Measurement, based on quoted (unadjusted) prices on the Coinbase exchange, the active exchange that the Company has determined is its principal market for bitcoin (Level 1 inputs). Changes in fair value are recognized as incurred in the Company's Consolidated Statements of Operations, within “Unrealized loss on digital assets”, within operating expenses in the Company’s Consolidated Statement of Operations.
Prior to the adoption of ASU 2023-08, the Company’s digital assets were initially recorded at cost, and subsequently measured at cost, net of any impairment losses incurred since acquisition. Impairment losses were recognized as “Digital asset impairment losses” in the Company’s Consolidated Statement of Operations in the period in which the impairment occurred. Gains (if any) were not recorded until
realized upon sale, at which point they were presented net of any impairment losses in the Company’s Consolidated Statements of Operations.
The following table summarizes the Company’s digital asset holdings (in thousands, except number of bitcoins), as of:
Approximate number of bitcoins held
597,325
447,470
Digital asset carrying value
Cumulative digital asset impairment losses
n/a
4,058,875
The carrying value on the Company’s Consolidated Balance Sheet at each period-end prior to the adoption of ASC 2023-08 represented the lowest fair value (based on Level 1 inputs in the fair value hierarchy) of the bitcoin at any time since their acquisition. Therefore, these fair value measurements were made during the period from their acquisition through December 31, 2024.
The following table summarizes the Company’s digital asset purchases, unrealized losses (gains) on digital assets as calculated after the adoption of ASU 2023-08 on January 1, 2025, and digital asset impairment losses as calculated prior to the adoption of ASU 2023-08 (in thousands, except number of bitcoins) for the periods indicated. The Company did not sell any of its bitcoins during the six months ended June 30, 2025 or 2024, respectively.
Approximate number of bitcoins purchased
69,140
12,053
149,855
37,181
Digital asset purchases
6,769,205
793,828
14,430,868
2,433,137
From time to time, the Company’s execution partners may extend short-term credits to the Company to purchase bitcoin in advance of using cash funds in the Company’s trading account. Trade credits are due and payable after the bitcoin purchases are completed. In 2025, certain bitcoin of the Company and MacroStrategy LLC (“MacroStrategy”), a wholly-owned subsidiary of the Company, and in 2024, certain bitcoin of MacroStrategy, were subject to a first priority security interest and lien in order to secure payments owed by the Company with respect to these arrangements. While trade credits are outstanding, the Company may incur interest fees and be required to maintain minimum balances in its trading and custody accounts with such execution partners. As of June 30, 2025, the Company had no outstanding trade credits payable.
The vast majority of the Company’s assets are concentrated in its bitcoin holdings. Bitcoin is a digital asset, which is a novel asset class that is subject to significant legal, commercial, regulatory and technical uncertainty. Holding bitcoin does not generate any cash flows and involves custodial fees and other costs. Additionally, the price of bitcoin has historically experienced significant price volatility, and a significant decrease in the price of bitcoin would adversely affect the Company’s financial condition and results of operations. The Company’s strategy of acquiring and holding bitcoin also exposes it to counterparty risks with respect to the custody of its bitcoin, cybersecurity risks, and other risks inherent to holding a digital asset. In particular, the Company is subject to the risk that, if its private keys with respect to its digital assets are lost or destroyed or other similar circumstances or events occur, the Company may lose some or all of its digital assets, which could materially adversely affect the Company’s financial condition and results of operations.
(4) Contract Balances
The Company invoices its customers in accordance with billing schedules established in each contract. The Company’s rights to consideration from customers are presented separately in the Company’s Consolidated Balance Sheets depending on whether those rights are conditional or unconditional.
The Company presents unconditional rights to consideration from customers within “Accounts receivable, net” in its Consolidated Balance Sheets. All of the Company’s contracts are generally non-cancellable and/or non-refundable, and therefore an unconditional right generally exists when the customer is billed or amounts are billable per the contract.
9
Accounts receivable (in thousands) consisted of the following, as of:
Billed and billable
120,818
183,391
Less: allowance for credit losses
(2,948
(2,188
Changes in the allowance for credit losses were not material for the three and six months ended June 30, 2025.
Rights to consideration that are subject to a condition other than the passage of time are considered contract assets until they are expected to become unconditional and transfer to accounts receivable. Current contract assets included in “Prepaid expenses and other current assets” in the Consolidated Balance Sheets consisted of $2.7 million and $2.6 million, as of June 30, 2025 and December 31, 2024, respectively, related to performance obligations or services being rendered in advance of future invoicing associated with multi-year contracts and accrued sales and usage-based royalty revenue. In royalty-based arrangements, consideration is not billed or billable until the royalty reporting is received, generally in the subsequent quarter, at which time the contract asset transfers to accounts receivable and a true-up adjustment is recorded to revenue. These true-up adjustments are generally not material. Non-current contract assets included in “Deposits and other assets” in the Consolidated Balance Sheets consisted of $10.4 million and $6.8 million, as of June 30, 2025 and December 31, 2024, respectively, related to performance obligations or services being rendered in advance of future invoicing associated with multi-year contracts. During the three and six months ended June 30, 2025 and 2024, there were no significant impairments to the Company’s contract assets, nor were there any significant changes in the timing of the Company’s contract assets being reclassified to accounts receivable.
Contract liabilities are amounts received or due from customers in advance of the Company transferring the software or services to the customer. In the case of multi-year service contract arrangements, the Company generally does not invoice more than one year in advance of services and does not record deferred revenue for amounts that have not been invoiced. Revenue is subsequently recognized in the period(s) in which control of the software or services is transferred to the customer. The Company’s contract liabilities are presented as either current or non-current “Deferred revenue and advance payments” in the Consolidated Balance Sheets, depending on whether the software or services are expected to be transferred to the customer within the next year.
The Company’s “Accounts receivable, net” and “Deferred revenue and advance payments” balances in the Consolidated Balance Sheets include unpaid amounts related to contracts under which the Company has an enforceable right to invoice the customer for non-cancellable and/or non-refundable software and services. Changes in accounts receivable and changes in deferred revenue and advance payments are presented net of these unpaid amounts in “Operating activities” in the Consolidated Statements of Cash Flows.
Deferred revenue and advance payments (in thousands) from customers consisted of the following, as of:
Current:
Deferred product licenses revenue
1,281
1,777
Deferred subscription services revenue
110,651
107,119
Deferred product support revenue
99,501
124,684
Deferred other services revenue
2,818
4,394
Total current deferred revenue and advance payments
Non-current:
133
174
913
2,263
2,878
2,111
273
422
Total non-current deferred revenue and advance payments
During the three and six months ended June 30, 2025, the Company recognized revenues of $71.5 million and $156.9 million, respectively, from amounts included in the total deferred revenue and advance payments balances at the beginning of 2025. During the three and six months ended June 30, 2024, the Company recognized revenues of $64.1 million and $145.0 million, respectively, from amounts included in the total deferred revenue and advance payments balances at the beginning of 2024. For the three and six months ended June 30, 2025 and 2024, there were no significant changes in the timing of revenue recognition on the Company’s deferred balances.
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The Company’s remaining performance obligation represents all future revenue under contract and includes deferred revenue and advance payments and billable non-cancellable amounts that will be invoiced and recognized as revenue in future periods. The remaining performance obligation excludes contracts that are billed in arrears, such as certain time and materials contracts. The portions of multi-year contracts that will be invoiced in the future are not presented on the balance sheet within accounts receivable and deferred revenues and are instead included in the following remaining performance obligation disclosure. As of June 30, 2025, the Company had an aggregate transaction price of $470.6 million allocated to the remaining performance obligation related to subscription services, product support, product licenses, and other services contracts. The Company expects to recognize $278.5 million within the next 12 months and the remainder thereafter.
(5) Long-term Debt
The net carrying value of the Company’s outstanding debt (in thousands) consisted of the following, as of:
June 30, 2025
2027 Convertible Notes
1,041,352
2028 Convertible Notes
1,000,634
998,543
2029 Convertible Notes
2,978,675
2,975,037
2030A Convertible Notes
787,135
785,172
2030B Convertible Notes
1,986,614
2031 Convertible Notes
595,613
594,476
2032 Convertible Notes
788,756
787,417
Other long-term secured debt
25,203
9,678
8,162,630
7,191,675
Reported as:
Convertible Senior Notes
As of June 30, 2025, the following convertible notes were outstanding (the “Outstanding Convertible Notes”):
Additionally, the Company also previously issued, in February 2021, the $1.050 billion aggregate principal amount of 0% Convertible Senior Notes due 2027 (the “2027 Convertible Notes”, and together with the Outstanding Convertible Notes, the “Convertible Notes”), all of which were redeemed or converted into the Company’s class A common stock during the first quarter of 2025.
Each of the Convertible Notes were issued in a private offering. The Outstanding Convertible Notes are, and the 2027 Convertible Notes were, senior unsecured obligations of the Company ranking senior in right of payment to any of the Company’s indebtedness expressly subordinated in right of payment to the Convertible Notes; equal in right of payment to any of the Company’s unsecured indebtedness not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.
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The following table summarizes the key terms of each of the Convertible Notes (principal at inception, net proceeds, and issuance costs are each reported in thousands):
Issuance Date
February 2021
September 2024
November 2024
March 2024
February 2025
June 2024
Maturity Date (1)
February 15, 2027
September 15, 2028
December 1, 2029
March 15, 2030
March 1, 2030
March 15, 2031
June 15, 2032
Principal at Inception
1,050,000
1,010,000
3,000,000
800,000
603,750
Stated Interest Rate (2)
0.000
%
0.625
0.875
2.250
Interest Payment Dates (3)
February 15 & August 15
March 15 & September 15
June 1 & December 1
March 1 & September 1
June 15 & December 15
Net Proceeds
1,025,830
997,375
2,974,250
782,000
1,984,852
592,567
786,000
Issuance Costs (4)
24,170
25,750
18,000
15,148
11,183
14,000
Effective Interest Rate (4)
0.39
1.05
0.24
1.14
0.25
1.30
2.63
Date of Holder Put Option (5)
September 15, 2027
June 1, 2028
March 1, 2028
June 15, 2029
Initial Conversion Rate (6)
6.981
5.4589
1.4872
6.677
2.3072
4.297
4.894
Initial Conversion Price (7)
143.25
183.19
672.40
149.77
433.43
232.72
204.33
Convertible at any time after the following date (8) (9)
January 24, 2025
March 15, 2028
June 1, 2029
September 15, 2029
December 3, 2029
September 15, 2030
December 15, 2031
Not redeemable by the Company prior to the following date (10)
February 20, 2024
December 20, 2027
December 4, 2026
March 22, 2027
March 5, 2027
March 22, 2028
June 20, 2029
Redemption Date (11)
February 24, 2025
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If the Company undergoes a “fundamental change,” as defined in the respective indentures governing the Convertible Notes prior to maturity, subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their respective Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the respective Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The respective indentures governing the Convertible Notes contain customary terms and covenants, including that upon certain events of default occurring and continuing, either the applicable trustee of the respective Convertible Notes or the holders of at least 25% in principal amount outstanding of the respective Convertible Notes may declare 100% of the principal of, and accrued and unpaid interest, if any, on, all the respective Convertible Notes to be due and payable.
Although the Convertible Notes contain embedded conversion features, the Company accounts for the Convertible Notes in their entirety as a liability because the conversion features are indexed to the Company’s class A common stock and meet the criteria for classification in stockholders’ equity and therefore do not qualify for separate derivative accounting.
Conversions and Redemption of Convertible Notes
On January 24, 2025, the Company delivered a notice of full redemption to the trustee of the Company’s 2027 Convertible Notes for the redemption of all $1.05 billion in aggregate principal amount of the 2027 Convertible Notes then outstanding on February 24, 2025 (the “2027 Redemption Date”), at a redemption price equal to 100% of the principal amount of the 2027 Convertible Notes to be redeemed, plus accrued and unpaid special interest, if any, to but excluding the 2027 Redemption Date, unless earlier converted. The Company elected to satisfy its conversion obligation with respect to the 2027 Convertible Notes by delivering solely shares of its class A common stock, together with cash in lieu of any fractional shares. Holders of the 2027 Convertible Notes requested to convert $1.050 billion in
principal amount of the 2027 Convertible Notes for which the Company issued 7,373,528 shares of the Company’s class A common stock and paid a nominal amount of cash in lieu of fraction shares upon settlement of such conversion requests, in accordance with the terms and provisions of the indenture governing the 2027 Convertible Notes.
During the three months ended March 31, 2025, the Company received from certain holders of the 2031 Convertible Notes requests to convert an immaterial principal amount of the 2031 Convertible Notes, which the Company settled in shares of class A common stock and cash in accordance with the terms and provisions of the indenture governing the 2031 Convertible Notes. The settlement was effected during the three months ended June 30, 2025. No shares of class A common stock were issued in respect of such conversions during the three months ended March 31, 2025.
During the three months ended June 30, 2024, the Company settled conversion requests in respect of $504.4 million in principal amount of the Company’s 0.750% Convertible Senior Notes due 2025 (the “2025 Convertible Notes”) resulting in the issuance of 12,672,400 shares of the Company’s class A common stock and payment of a nominal amount of cash in lieu of fractional shares in accordance with the terms and provisions of the indenture governing the 2025 Convertible Notes. All unconverted 2025 Convertible Notes outstanding as of June 30, 2024 were redeemed or converted into the Company’s class A common stock in the third quarter of 2024 and were not outstanding as of December 31, 2024 or June 30, 2025.
Collective Convertible Notes Disclosures
As of June 30, 2025, the maximum number of shares into which the Outstanding Convertible Notes could have been potentially converted if the conversion features were triggered at the conversion rates then in effect based on the Outstanding Convertible Notes then outstanding on such date was:
The 2028 Convertible Notes, 2030A Convertible Notes, 2031 Convertible Notes and 2032 Convertible Notes were convertible at the option of the holders during the three ended March 31, 2025. In addition, the 2027 Convertible Notes were convertible at the option of the holders during the three months ended March, 31, 2025 prior to their redemption. The 2028 Convertible Notes, 2030A Convertible Notes and 2032 Convertible Notes were convertible at the option of the holders during the three months ended June 30, 2025. The Outstanding Convertible Notes may be convertible in future periods if one or more of the conversion conditions is satisfied during future measurement periods. As of June 30, 2025, the last reported sale price of the Company’s class A common stock for at least 20 trading days during the 30 consecutive trading days ending on, and including, June 30, 2025 was greater than or equal to 130% of the conversion price of each of the 2028 Convertible Notes, 2030A Convertible Notes, 2031 Convertible Notes and 2032 Convertible Notes on each applicable trading day. Therefore, the 2028 Convertible Notes, 2030A Convertible Notes, 2031 Convertible Notes and 2032 Convertible Notes are convertible at the option of the holders of the respective Convertible Notes during the third quarter of 2025.
The Company did not receive conversion requests with respect to the Convertible Notes during the three and six months ended June 30, 2025 and 2024, except as described above under “Conversions and Redemption of Convertible Notes”.
As of June 30, 2025, and December 31, 2024, the net carrying value of the Convertible Notes was classified as a long-term liability in the “Long-term debt, net” line item in the Company’s Consolidated Balance Sheets.
The following is a summary of the Company’s Outstanding Convertible Notes outstanding as of June 30, 2025 (in thousands):
Outstanding
Unamortized
Net Carrying
Fair Value
Principal Amount
Issuance Costs
Value
Leveling
(9,366
2,356,465
Level 2
(21,325
2,826,180
(12,865
2,212,718
(13,386
1,143,397
603,661
(8,048
1,587,442
(11,244
2,347,154
8,213,661
(76,234
8,137,427
12,473,356
The following is a summary of the Company’s Convertible Notes outstanding as of December 31, 2024 (in thousands):
(8,648
2,134,125
(11,457
1,927,828
(24,963
2,447,682
(14,828
1,657,323
(9,274
877,559
(12,583
1,324,602
7,263,750
(81,753
7,181,997
10,369,119
The fair value of the Convertible Notes is determined using observable market data other than quoted prices, specifically the last traded price at the end of the reporting period of identical instruments in the over-the-counter market (Level 2).
For the three months ended June 30, 2025 and 2024, interest expense related to the Convertible Notes (including the 2025 Convertible Notes) was as follows (in thousands):
Three Months Ended June 30, 2025
Three Months Ended June 30, 2024
Contractual
Amortization of
Interest Expense
2025 Convertible Notes
1,129
712
1,841
1,011
1,578
1,047
2,625
1,819
1,250
983
2,233
972
2,222
1,249
1,320
614
1,934
1,321
603
1,924
4,500
671
5,171
650
95
745
8,648
6,383
15,031
4,350
3,393
7,743
For the six months ended June 30, 2025 and 2024, interest expense related to the Convertible Notes (including the 2025 Convertible Notes) was as follows (in thousands):
Six Months Ended June 30, 2025
Six Months Ended June 30, 2024
2,348
1,479
3,827
401
2,021
3,156
2,091
5,247
3,637
2,500
1,963
4,463
1,569
1,220
2,789
1,762
2,641
1,225
3,866
1,512
692
2,204
9,000
1,339
10,339
17,297
12,418
29,715
6,079
5,507
11,586
For the three and six months ended June 30, 2025, the Company paid $9.0 million and $17.2 million, respectively, in interest related to the Convertible Notes. For the six months ended June 30, 2024, the Company paid $2.4 million in interest related to the 2025 Convertible Notes. The Company has not paid any additional interest or special interest related to the Convertible Notes to date.
Senior Secured Notes
On June 14, 2021, the Company issued $500 million aggregate principal amount of 6.125% Senior Secured Notes due 2028 (the “2028 Secured Notes”) in a private offering. These notes, which were guaranteed by MicroStrategy Services Corporation, a wholly owned
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subsidiary of the Company (the “Subsidiary Guarantor”), bore a fixed interest rate of 6.125% per annum, payable semiannually, with a maturity date of June 15, 2028, unless earlier redeemed or repurchased in accordance with their terms and subject to a springing maturity feature described in the indenture governing the 2028 Secured Notes. The 2028 Secured Notes were secured by a first priority security interest in the Company's and the Subsidiary Guarantor’s assets, including bitcoins acquired by the Company or the Subsidiary Guarantor after June 14, 2021. The Company redeemed all 2028 Secured Notes on September 26, 2024, at a redemption price equal to $523.9 million, and all collateral securing the 2028 Secured Notes was released. For additional information about the 2028 Secured Notes, see Note 8 to the Company’s Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
For the three and six months ended June 30, 2024, interest expense related to the 2028 Secured Notes was as follows (in thousands):
2028 Secured Notes
7,657
435
8,092
15,313
864
16,177
For the three months ended June 30, 2024, the Company paid $7.7 million in interest related to the 2028 Secured Notes, and for the six months ended June 30, 2024, the Company paid $15.3 million in interest related to the 2028 Secured Notes.
In June 2022, the Company, through a wholly-owned subsidiary, entered into a secured term loan agreement in the amount of $11.1 million, bearing interest at an annual rate of 5.2%, and maturing in June 2027. The loan is secured by certain non-bitcoin assets of the Company that are not otherwise serving as collateral for any of the Company’s other indebtedness.
Additionally, during the three months ended June 30, 2025, the Company entered into a loan agreement that provides for aggregate borrowings of up to $31.1 million, available in multiple tranches and bearing interest, with respect to each tranche, at a variable rate equal to the one-year Secured Overnight Financing Rate plus 4.24%. The loan was made to fund a capital asset purchase and is secured by non-bitcoin assets that will not otherwise serve as collateral for any of the Company’s other indebtedness. The loan will mature in December 2026.
After monthly payments made under the terms of these other long-term secured debt agreements, the other long-term secured debt had an aggregate net carrying value of $25.2 million and $9.7 million as of June 30, 2025 and December 31, 2024, respectively, and an aggregate outstanding principal balance of $25.6 million and $9.8 million as of June 30, 2025 and December 31, 2024, respectively. As of June 30, 2025 and December 31, 2024, $0.3 million and $0.5 million of the respective net carrying values were short-term and were presented in “Current portion of long-term debt, net” in the Consolidated Balance Sheets.
Maturities
The following table shows the maturities of the Company’s debt instruments outstanding as of June 30, 2025 (in thousands). The principal payments related to the 2028 Convertible Notes, 2029 Convertible Notes, 2030A Convertible Notes, 2030B Convertible Notes, 2031 Convertible Notes, and 2032 Convertible Notes are included in the table below as if the holders exercised their right to require the Company to repurchase all of the respective convertible notes on their respective Date of Holder Put Option.
Payments due by period ended June 30,
2026
585
2027
25,006
2028
6,010,000
2029
2,203,661
2030
Thereafter
25,591
8,239,252
(6) Commitments and Contingencies
(a) Commitments
From time to time, the Company enters into certain types of contracts that require it to indemnify parties against third-party claims. These contracts primarily relate to agreements under which the Company assumes indemnity obligations for intellectual property infringement or death, bodily harm, or damage to tangible personal property due to the Company’s personnel's gross negligence or willful misconduct
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in providing contracted services, as well as other obligations from time to time depending on arrangements negotiated with customers and other third parties. The conditions of these obligations vary. Thus, the overall maximum amount of the Company’s indemnification obligations cannot be reasonably estimated. Historically, the Company has not been obligated to make significant payments for these obligations and does not currently expect to incur any material obligations in the future. Accordingly, the Company has not recorded an indemnification liability on its Consolidated Balance Sheets as of June 30, 2025 or December 31, 2024.
(b) Contingencies
Brazil Matter
Following an internal review initiated in 2018, the Company disclosed its belief that its Brazilian subsidiary failed or likely failed to comply with local procurement regulations in conducting business with certain Brazilian government entities.
In 2020 the Company learned that the Brazilian Federal Police were investigating alleged corruption and procurement fraud involving certain government officials, including a transaction that was part of the basis of the Company’s previously reported failure or likely failure of its Brazilian subsidiary to comply with local procurement regulations. To the best of the Company’s knowledge, this investigation was concluded in 2023. Neither employees of the Company’s Brazilian subsidiary nor the subsidiary itself were targets of the Federal Police investigation.
The Company’s Brazilian subsidiary voluntarily disclosed information from its 2018 internal review to Brazil’s General Superintendence of the Administrative Council for Economic Defense (“SG/CADE”), the Federal Comptroller General (“CGU”), and the Office of the Comptroller General of the State of São Paulo (“CGE-SP”). Following this voluntary disclosure and cooperation with these agencies, the Company’s Brazilian subsidiary signed leniency agreements with the SG/CADE in September 2020, with the CGU and the Federal General Attorney’s Office (“AGU”) in July 2024, and with the CGE-SP and the Office of the Attorney General of the State of São Paulo (“PGE-SP”) in April 2025.
In 2023, the SG/CADE launched a public administrative proceeding to investigate potentially anticompetitive conduct by various entities and individuals in Brazil based in part on the information voluntarily disclosed by the Company’s Brazilian subsidiary, which is also one of the defendants in the proceeding. If at the end of the proceeding, SG/CADE’s Tribunal confirms that the Brazilian subsidiary’s obligations under the leniency agreement it signed with SG/CADE have been fulfilled, the Brazilian subsidiary will receive full immunity from fines.
Pursuant to its leniency agreement with the CGU and the AGU, the Brazilian subsidiary (i) paid approximately BRL 6.16 million (equivalent to approximately $1.1 million) in July 2024, (ii) agreed to certain undertakings regarding its compliance program, and (iii) has been granted immunity from debarment and other sanctions. As a result of this leniency agreement, the CGU dismissed its pending administrative action against the Brazilian subsidiary over alleged procurement violations.
Pursuant to its leniency agreement with the CGE-SP and PGE-SP, the Brazilian subsidiary (i) paid approximately BRL 2.38 million (equivalent to approximately $406,000) in April 2025, and (ii) has been granted immunity from debarment and other sanctions.
The Company’s Brazilian subsidiary continues to cooperate with requests from government authorities related to the above matters. As of June 30, 2025, the Company remained unable to reasonably estimate a range of loss beyond the 2024 third quarter payment and April 2025 payment described above.
Shareholder and Derivative Actions
Hamza Securities Action. On May 16, 2025, Anas Hamza filed a purported class action lawsuit in the U.S. District Court for the Eastern District of Virginia against the Company, Michael J. Saylor, Phong Q. Le, and Andrew Kang, alleging violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 thereunder, and Section 20(a) of the Exchange Act. Plaintiff Hamza purports to assert claims on behalf of a purported class of investors, for a period running from April 30, 2024 to April 4, 2025, alleging that the named defendants made false and/or misleading statements with respect to and/or failed to disclose information with respect to the anticipated profitability of the Company’s bitcoin-focused investment strategy and treasury operations, and the various risks associated with bitcoin’s volatility and the magnitude of the losses the Company could recognize following its adoption of ASU 2023-08. The complaint seeks unspecified damages to the class, interest, attorneys’ fees, costs, and other relief. The Company intends to vigorously defend against these claims. At this time, the Company cannot predict the outcome, or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter.
Parmar Derivative Action. On June 19, 2025, Abhey Parmar filed a shareholder derivative lawsuit in the U.S. District Court for the Eastern District of Virginia against the Company’s officers and/or directors Michael J. Saylor, Phong Q. Le, Stephen X. Graham, Andrew Kang, Jarrod M. Patten, Carl J. Rickertsen, and former director Leslie J. Rechan, and against the Company as nominal defendant. Plaintiff Parmar purports to assert claims on behalf of the Company against the individual defendants for breaches of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, waste, and contribution. The complaint makes claims based on factual allegations similar to those asserted in the Hamza securities action described above, namely that the individual defendants caused or allowed the Company to make false or misleading disclosures or omissions, and failed to correct such false or misleading disclosures or omissions, concerning the risks and financial impact associated with the Company’s adoption of ASU 2023-08, the risks associated with bitcoin’s volatility, and the
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profitability of the Company’s bitcoin-driven strategy and treasury operations. The complaint also alleges the individual defendants caused the Company to fail to maintain adequate internal controls, and that Messrs. Le, Kang, Graham, and Rechan allegedly engaged in insider selling because they sold shares of the Company’s stock at various times from April 30, 2024 to April 4, 2025. The complaint seeks damages against the individual defendants on behalf of the Company, the imposition of certain corporate governance and internal procedures changes by the Company, restitution from the individual defendants, attorneys’ fees, costs, and other relief. The Company intends to vigorously defend against these claims. At this time, the Company cannot predict the outcome, or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter.
Chen Derivative Action. On June 25, 2025, Zhenqiu Chen filed a shareholder derivative lawsuit in the U.S. District Court for the Eastern District of Virginia against the Company’s officers and/or directors Michael J. Saylor, Phong Q. Le, Andrew Kang, Brian P. Brooks, Jane A. Dietze, Jarrod M. Patten, Stephen X. Graham, Carl J. Rickertsen, Gregg J. Winiarski, and former director Leslie J. Rechan, and against the Company as nominal defendant. Plaintiff Chen purports to assert claims on behalf of the Company against the individual defendants for breaches of fiduciary duties, aiding and abetting breaches of fiduciary duties, unjust enrichment, waste, and contribution. The complaint makes claims based on factual allegations similar to those asserted in the Hamza securities action and the Parmar derivative action described above, namely that the individual defendants caused or allowed the Company to make false or misleading disclosures or omissions, and failed to correct such false or misleading disclosures or omissions, concerning the risks and financial impact associated with the Company’s adoption of ASU 2023-08, the risks associated with bitcoin’s volatility, and the profitability of the Company’s bitcoin-driven strategy and treasury operations. The complaint also alleges the individual defendants caused the Company to fail to maintain adequate internal controls, and that Messrs. Le, Kang, Graham, and Rechan allegedly engaged in insider selling because they sold shares of the Company’s stock at various times from April 30, 2024 to April 4, 2025. The complaint seeks money damages against the individual defendants, imposition of a constructive trust on damages allegedly caused and benefits allegedly received by the individual defendants as a result of their disputed conduct, punitive damages, attorneys’ fees, costs, and other relief. The Company intends to vigorously defend against these claims. At this time, the Company cannot predict the outcome, or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter.
Dodge Class Action. On July 21, 2025, David Dodge filed a purported class action lawsuit in the Court of Chancery of the State of Delaware against the Company and the Company’s board of directors alleging violations of the Delaware General Corporation Law (the “DGCL”), and asserting a claim against the Company’s board of directors for breach of fiduciary duty in connection with the purported DGCL violation. Plaintiff Dodge purports to assert claims on behalf of himself and similarly situated holders of the Company’s common stock alleging that pursuant to Section 242 of the DGCL (“Section 242”), the holders of the Company’s common stock were entitled to vote on the STRK Amendment (as defined in Note 14, Subsequent Events) the Company filed on July 7, 2025 with the Secretary of State of the State of Delaware. Refer to Note 14, Subsequent Events, for additional information on the STRK Amendment. Plaintiff Dodge seeks, among other things, an order (i) finding, determining and declaring that the Company violated Section 242; (ii) finding, determining and declaring that the board of directors has breached its fiduciary duties; (iii) deeming the STRK Amendment ineffective and requiring that the Company file a certificate of correction with the Delaware Secretary of State invalidating the STRK Amendment; (iv) awarding unspecified damages to Plaintiff Dodge and the class, including interest; (v) awarding attorneys’ fees and costs; and (vi) granting other relief. At this time, the Company cannot predict the outcome or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in these matters.
Various Legal Proceedings and Contingent Liabilities
The Company is also involved in various legal proceedings arising in the normal course of business. Although the outcomes of these legal proceedings are inherently difficult to predict, management does not expect the resolution of these legal proceedings to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.
The Company has contingent liabilities that, in management’s judgment, are not probable of assertion. If such unasserted contingent liabilities were to be asserted, or become probable of assertion, the Company may be required to record significant expenses and liabilities in the period in which these liabilities are asserted or become probable of assertion.
(7) Income Taxes
The Company computes its year-to-date provision for (benefit from) income taxes by applying the estimated annual effective tax rate to year-to-date pretax income or loss and adjusts the provision for (benefit from) income taxes for discrete tax items recorded in the period. The estimated effective tax rate is subject to fluctuation based on the level and mix of earnings and losses by tax jurisdiction, foreign tax rate differentials, and the relative impact of permanent book to tax differences. Each quarter, a cumulative adjustment is recorded for any fluctuations in the estimated annual effective tax rate as compared to the prior quarter. As a result of these factors, and due to potential changes in the Company’s period-to-period results, fluctuations in the Company’s effective tax rate and respective tax provisions or benefits may occur. For the six months ended June 30, 2025, the Company recorded a provision for income tax of $2.26 billion on a pretax income of $8.06 billion, which resulted in an effective tax rate of 28.0%. For the six months ended June 30, 2024, the Company recorded a benefit from income taxes of $273.3 million on a pretax loss of $428.9 million, which resulted in an effective tax rate of 63.7%. During the six months ended June 30, 2025, the Company’s income taxes primarily related to the tax effect of the unrealized gain on digital assets. During the six months ended June 30, 2024, the Company’s benefit from income taxes primarily related to (i) a tax benefit related to
18
share-based compensation (including the income tax effects of exercises of stock options and vesting of share-settled restricted stock units) and (ii) a tax benefit from an increase in the Company’s deferred tax asset related to the impairment on its bitcoin holdings.
As of June 30, 2025, the Company had a valuation allowance of $0.5 million primarily related to the Company’s deferred tax assets related to foreign tax credits in certain jurisdictions that, in the Company’s present estimation, more likely than not will not be realized. As of June 30, 2025, the Company had deferred tax liabilities with respect to the unrealized gain on its bitcoin holdings of approximately $6.31 billion. The Company’s deferred tax liabilities are partially offset by deferred tax assets, such as net operating losses and capitalized research and development costs. If the market value of bitcoin declines in future periods, the Company’s deferred tax liability with respect to the unrealized gain on its bitcoin holdings will decrease, and the Company may be required to establish additional valuation allowances against its deferred tax assets. The Company will continue to regularly assess the realizability of deferred tax assets.
The Company records liabilities related to its uncertain tax positions. As of June 30, 2025, the Company had gross unrecognized income tax benefits, including accrued interest, of $10.5 million, of which $3.1 million was recorded in “Other long-term liabilities” and $7.4 million was recorded in “Deferred tax liabilities” in the Company’s Consolidated Balance Sheet. As of December 31, 2024, the Company had gross unrecognized income tax benefits of $10.2 million, including accrued interest, $2.9 million of which was recorded in “Other long-term liabilities” and $7.3 million of which was recorded in “Deferred tax assets, net” in the Company’s Consolidated Balance Sheet. During the second quarter of 2025, the Company was notified that it was selected for examination by the IRS for its 2022 federal income tax return.
On July 4, 2025, the One Big Beautiful Bill Act was enacted in the U.S., introducing several changes to corporate taxation. These changes include modifications to capitalization of research and development expenses, limitations on deductions for interest expense, accelerated fixed asset depreciation, and adjustments to the international tax framework. We are currently evaluating the full impact of this legislation on our consolidated financial statements. Since the legislation was signed into law after the close of our second quarter, its impacts are not included in our operating results for the six months ended June 30, 2025.
(8) Share-based Compensation
Stock Incentive Plans
Prior to its expiration, the Company maintained the 2013 Stock Incentive Plan (as amended, the “2013 Equity Plan”), under which the Company’s employees, officers, and directors were awarded various types of share-based compensation, including options to purchase shares of the Company’s class A common stock, restricted stock units, and other stock-based awards. In May 2023, the 2013 Equity Plan expired and no new awards may be granted under the 2013 Equity Plan, although awards previously granted under the 2013 Equity Plan will continue to remain outstanding in accordance with their terms.
The Company maintains the 2023 Equity Incentive Plan (as amended, the “2023 Equity Plan”) under which the Company’s employees, officers, directors, and other eligible participants may be awarded various types of share-based compensation, including options to purchase shares of the Company’s class A common stock, restricted stock units, performance stock units, and other stock-based awards. An aggregate of up to 19,327,030 shares of the Company’s class A common stock were authorized for issuance under the 2023 Equity Plan. As of June 30, 2025, there were 2,878,780 shares of class A common stock reserved and available for future issuance under the 2023 Equity Plan. The 2013 Equity Plan and the 2023 Equity Plan together are referred to herein as the “Stock Incentive Plans.”
19
Stock option awards
As of June 30, 2025, there were options to purchase 4,158,290 shares of class A common stock outstanding under the Stock Incentive Plans. The following table summarizes the Company’s stock option activity (in thousands, except per share data and years) for the six months ended June 30, 2025:
Stock Options Outstanding
Weighted Average
Aggregate
Exercise Price
Intrinsic
Remaining Contractual
Per Share
Term (Years)
Balance as of January 1, 2025
4,956
38.56
Granted
51
296.15
Exercised
(624
36.94
196,136
Forfeited/Expired
(225
46.11
Balance as of June 30, 2025
4,158
41.54
Exercisable as of June 30, 2025
3,022
38.80
1,104,323
5.4
Expected to vest as of June 30, 2025
1,136
48.82
403,849
7.3
1,508,172
5.9
Stock options outstanding as of June 30, 2025 are comprised of the following range of exercise prices per share (in thousands, except per share data and years):
Stock Options Outstanding at June 30, 2025
Range of Exercise Prices per Share
$12.45 - $20.00
1,114
15.55
4.5
$20.01 - $30.00
912
24.59
7.0
$30.01 - $40.00
23
30.16
5.3
$40.01 - $50.00
1,171
41.30
6.3
$50.01 - $70.00
807
69.12
5.7
$70.01 - $220.00
76
159.52
8.6
$220.01 - $300.00
41
261.29
9.6
$300.01 - $364.20
364.20
9.5
$364.21 and over
369.06
9.9
An aggregate of 1,161,010 stock options with an aggregate grant date fair value of $34.5 million vested during the six months ended June 30, 2025. An aggregate of 1,384,650 stock options with an aggregate grant date fair value of $37.5 million vested during the six months ended June 30, 2024. The weighted average grant date fair value of stock option awards using the Black-Scholes valuation model was $296.15 and $111.23 for each share subject to a stock option granted during the six months ended June 30, 2025 and 2024, respectively, based on the following assumptions:
Expected term of awards in years
5.5-6.3
5.5 - 6.3
Expected volatility
83.8% - 91.5%
75.1% - 82.8%
Risk-free interest rate
4.0% - 4.4%
4.2% - 4.5%
Expected dividend yield
0.0%
For the three and six months ended June 30, 2025, the Company recognized approximately $5.2 million and $11.8 million, respectively, in share-based compensation expense from stock options granted under the Stock Incentive Plans. For the three and six months ended June 30, 2024, the Company recognized approximately $10.3 million and $20.1 million, respectively, in share-based compensation expense from stock options granted under the Stock Incentive Plans. As of June 30, 2025, there was approximately $29.5 million of total unrecognized share-based compensation expense related to unvested stock options, which the Company expects to recognize over a weighted average vesting period of approximately 2.3 years.
Share-settled restricted stock units
As of June 30, 2025, there were 880,064 share-settled restricted stock units outstanding under the Stock Incentive Plans. The following table summarizes the Company’s share-settled restricted stock unit activity (in thousands) for the periods indicated:
Share-Settled Restricted Stock Units Outstanding
Units
Intrinsic Value
1,231
140
Vested
(334
120,067
Forfeited
(157
880
355,748
During the six months ended June 30, 2025, 334,120 share-settled restricted stock units vested having an aggregate grant date fair value of $18.3 million. During the six months ended June 30, 2024, 374,580 share-settled restricted stock units having an aggregate grant date fair value of $11.7 million vested, and 25,060 shares were withheld to satisfy tax obligations, resulting in 349,520 issued shares. The weighted average grant date fair value of share-settled restricted stock units granted during the six months ended June 30, 2025 and 2024 was $281.30 and $145.22, respectively, based on the fair value of the Company’s class A common stock.
For the three and six months ended June 30, 2025, the Company recognized approximately $7.1 million and $12.3 million, respectively, in share-based compensation expense from share-settled restricted stock units granted under the Stock Incentive Plans. For the three and six months ended June 30, 2024, the Company recognized approximately $7.4 million and $12.1 million, respectively, in share-based compensation expense from share-settled restricted stock units granted under the Stock Incentive Plans. As of June 30, 2025, there was approximately $74.3 million of total unrecognized share-based compensation expense related to unvested share-settled restricted stock units, which the Company expects to recognize over a weighted average vesting period of approximately 3.0 years.
Share-settled performance stock units
As of June 30, 2025, there were 279,264 performance stock units outstanding under the 2023 Equity Plan. The following table summarizes the Company’s performance stock unit activity (in thousands) for the periods indicated:
Share-Settled Performance Stock Units Outstanding
307
(52
279
225,774
The weighted average grant date fair value of performance stock units using the Monte-Carlo simulation model was $445.66 and $307.13 for each performance stock unit granted during the six months ended June 30, 2025 and 2024, respectively, based on the following assumptions:
3.0
99.2
92.7
3.9
4.4
0.0
No performance stock units vested during the six months ended June 30, 2025 and 2024. For the three and six months ended June 30, 2025, the Company recognized approximately $2.7 million and $3.4 million, respectively, in share-based compensation expense from performance stock units granted under the 2023 Equity Plan. For the three and six months ended June 30, 2024, the Company recognized approximately $2.4 million and $3.5 million, respectively, in share-based compensation expense from performance stock units granted under the 2023 Equity Plan. As of June 30, 2025, there was approximately $21.9 million of total unrecognized share-based compensation
21
expense related to unvested performance stock units, which the Company expects to recognize over a weighted average vesting period of approximately 2.1 years.
Other stock-based awards and cash-settled restricted stock units
From time to time the Company has granted “other stock-based awards” and “cash-settled restricted stock units” under the 2013 Equity Plan. Other stock-based awards are similar to stock options, and cash-settled restricted stock units are similar to the Company’s share-settled restricted stock units, except in each case these awards are settled in cash only and not in shares of the Company’s class A common stock. Due to their required cash settlement feature, these awards are classified as liabilities in the Company’s Consolidated Balance Sheets and the fair value of the awards is remeasured each quarterly reporting period. For the three and six months ended June 30, 2025, the Company recognized zero expense and a reduction of approximately $1.1 million, respectively, in share-based compensation expense from other stock-based awards and cash-settled restricted stock units. For the three and six months ended June 30, 2024, the Company recognized approximately $0.1 million and $1.9 million, respectively, in share-based compensation expense from other stock-based awards and cash-settled restricted stock units. As of June 30, 2025, there were no other stock-based awards or cash-settled restricted stock units outstanding and there was no unrecognized share-based compensation expense.
2021 ESPP
The Company also maintains the 2021 Employee Stock Purchase Plan (the “2021 ESPP”). The purpose of the 2021 ESPP is to provide eligible employees of the Company and certain of its subsidiaries with opportunities to purchase shares of the Company’s class A common stock in 6-month offering periods commencing on each March 1 and September 1. An aggregate of 1,000,000 shares of the Company’s class A common stock has been authorized for issuance under the 2021 ESPP. During the six months ended June 30, 2025, 25,998 shares of class A common stock were issued in connection with the 2021 ESPP. As of June 30, 2025, 476,404 shares of the Company’s class A common stock remained available for issuance under the 2021 ESPP.
For the three and six months ended June 30, 2025, the Company recognized approximately $0.8 million and $1.2 million, respectively, in share-based compensation expense related to the 2021 ESPP. For the three and six months ended June 30, 2024, the Company recognized approximately $0.4 million and $0.8 million, respectively, in share-based compensation expense related to the 2021 ESPP. As of June 30, 2025, there was approximately $0.5 million of total unrecognized share-based compensation expense related to the 2021 ESPP, which the Company expects to recognize over a period of approximately 0.2 years.
Tax Benefits Related to Equity Plans
The following table summarizes the tax benefit related to the Company’s equity plans (in thousands) for the three and six months ended June 30, 2025 and 2024:
Tax benefit related to:
(2,443
(3,887
(4,331
(8,079
Exercises of stock options and vesting of share-settled restricted stock units
(40,192
(52,960
(64,797
(157,266
Total tax benefit related to the Company's equity plans
(42,635
(56,847
(69,128
(165,345
(9) Redeemable Preferred Stock
The STRK Stock, STRF Stock, and STRD Stock discussed in this note below are classified within mezzanine equity, as certain events that could cause such shares to become redeemable are not solely within the control of the Company. Issuances of the Preferred Stock are recognized based on proceeds received, net of issuance costs and are not accreted to its redemption value unless it is probable that the Preferred Stock will become redeemable. The Company has evaluated the probability of a redemption in connection with a Fundamental Change (defined below). Based on current facts and circumstances and the Company’s current and projected capital structure, management has determined that the occurrence of a Fundamental Change is remote. Accordingly, the Company concluded that accretion to the redemption value of the Preferred Stock is not required as of the reporting date.
22
The following table summarizes the key terms and provisions of each series of Preferred Stock, and information relating to the initial offerings of Preferred Stock and offerings completed as of June 30, 2025. The summaries below are qualified in their entirety by the full text of the applicable certificate of designations.
STRK Stock
STRF Stock
STRD Stock
Trading Symbol on NASDAQ
Initial Issuance Date
February 5, 2025
March 25, 2025
June 10, 2025
Initial Shares Issued
7,300,000
8,500,000
11,764,700
Initial Public Offering Price
$80.00 per share
$85.00 per share
Initial Net Proceeds (in thousands)
563,226
Initial Issuance Costs (in thousands)
20,774
11,627
20,514
Shares Issued as of June 30, 2025
12,201,367
10,066,750
Par Value Per Share
0.001
Liquidation Preference Per Share as of June 30, 2025 (1)
100.00
105.30
Stated Amount
Dividend Rate Per Annum
Cumulative Dividends
Yes
No
Dividend Payment Method
Cash, class A common stock, or a combination of both
Cash
Conversion Privilege
Convertible to class A common stock at any time
None
Initial Conversion Rate
0.1 shares of class A common stock per share of STRK Stock
Redemption Rights (2)
Repurchase Rights (3)
Yes, upon a fundamental change
Board Rights (4)
At-the Market Offerings of Preferred Stock
As of June 30, 2025, the Company has entered into the following at-the-market offering programs with respect to the Preferred Stock:
Refer to Note 14, Subsequent Events, for additional information regarding the Company’s at-the-market offering programs with respect to the Preferred Stock.
Dividends paid on Preferred Stock
On June 2, 2025, the Company announced that its board of directors declared a quarterly cash dividend of approximately $2.00 per share payable on the STRK Stock, and approximately $2.64 per share payable on the STRF Stock. The calculation of the STRF Stock per share dividend amount reflects the quarterly dividend accrued from March 25, 2025, the issuance date of the STRF Stock.
The Company declared and paid dividends of $32.6 million on the STRK Stock for the six months ended June 30, 2025 and $25.5 million on the STRF Stock for the six months ended June 30, 2025. As of June 30, 2025, there were no preferred stock dividends in arrears.
(10) Basic and Diluted Earnings (Loss) per Common Share
Basic earnings (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average common stock outstanding during the respective period. Net income (loss) attributable to common stockholders is computed by deducting both the dividends declared in the period on the Company’s redeemable preferred stock and the dividends accrued for the period on the Company’s redeemable preferred stock, if any, from net income (loss). As of June 30, 2025, there were no cumulative preferred dividends payable in arrears on the Company’s redeemable preferred stock.
The Company has two classes of common stock: class A common stock and class B common stock. Holders of class A common stock generally have the same rights, including rights to dividends, as holders of class B common stock, except that holders of class A common stock have one vote per share while holders of class B common stock have ten votes per share. Each share of class B common stock is convertible at any time, at the option of the holder, into one share of class A common stock. As such, basic and fully diluted earnings per common share for class A common stock and for class B common stock are the same. The Company has never declared or paid any cash dividends on either class A or class B common stock.
As of June 30, 2025, the Company had three series of preferred stock outstanding: STRK Stock, STRF Stock, and STRD Stock. Holders of the Preferred Stock do not have voting rights, except for rights to appoint a director to the Company’s board upon certain failures to pay dividends on preferred stock, and have rights to dividends and other rights as discussed in Note 9, Redeemable Preferred Stock, to the Consolidated Financial Statements. Additionally, each share of the STRK Stock is convertible at any time, at the option of the holder, into 0.1 shares of class A common stock.
The impact from potential shares of common stock on the diluted earnings per common share calculation are included when dilutive. Potential shares of class A common stock issuable upon the exercise of outstanding stock options, the vesting of restricted stock units and performance stock units considered probable of achievement, and in connection with the 2021 ESPP are computed using the treasury stock method. Potential shares of class A common stock issuable upon conversion of the Convertible Notes and upon conversion of the STRK Stock are computed using the if-converted method. In computing diluted earnings per common share, the Company first calculates the earnings per incremental share (“EPIS”) for each class of potential shares of common stock and ranks the classes from the most dilutive (i.e., lowest EPIS) to the least dilutive (i.e., highest EPIS). Basic earnings per common share is then adjusted for the effect of each class of shares, in sequence and cumulatively, until a particular class no longer produces further dilution.
The following table sets forth the computation of basic and diluted earnings (loss) per common share (in thousands, except per share data) for the periods indicated:
Numerator:
Net income (loss) attributable to common stockholders of Strategy - Basic
Effect of dilutive shares on net income {loss}:
Interest expense on 2027 Convertible Notes, net of tax
286
Interest expense on 2028 Convertible Notes, net of tax
1,887
3,755
Interest expense on 2029 Convertible Notes, net of tax
1,308
2,603
Interest expense on 2030A Convertible Notes, net of tax
1,606
3,194
Interest expense on 2030B Convertible Notes, net of tax
898
1,264
Interest expense on 2031 Convertible Notes, net of tax
1,390
2,767
Interest expense on 2032 Convertible Notes, net of tax
3,718
7,400
Dividends on STRK Stock
16,756
23,550
Net income (loss) - Diluted
9,999,300
5,789,949
Denominator:
Weighted average common shares of class A common stock
255,604
158,967
246,270
155,686
Weighted average common shares of class B common stock
Total weighted average shares of common stock outstanding - Basic
Effect of dilutive shares on weighted average common shares outstanding:
Stock options
3,615
3,847
Restricted stock units
495
Performance stock units
494
511
Employee stock purchase plan
Convertible preferred stock
963
702
1,439
5,513
4,462
5,342
4,614
3,307
2,594
3,915
Total weighted average shares of common stock outstanding - Diluted
Income (loss) per share:
Basic income (loss) per share (1)
Diluted income (loss) per share (1)
25
For the three and six months ended June 30, 2025 and 2024, the following weighted average shares of potential class A common stock were excluded from the diluted earnings (loss) per common share calculation because their impact would have been anti-dilutive (in thousands).
50
6,140
46
8,310
877
1,870
1,840
610
560
3,660
10,000
7,330
5,340
3,380
2,590
1,500
600
300
927
28,160
33,230
(11) At-the-Market Offerings
Common Stock ATM Offerings
From time to time, the Company has entered into sales agreements with agents pursuant to which the Company could issue and sell shares of its class A common stock through at-the-market equity offering programs (the “Common Stock ATM Offerings”). Pursuant to these agreements, the Company agreed to pay the sales agents commissions for their services in acting as agents with respect to the sale of shares through the Common Stock ATM Offerings and also agreed to provide the sales agents with reimbursement for certain incurred expenses and customary indemnification and contribution rights. The following table summarizes the terms and provisions of each sales agreement, and each Common Stock ATM Offering that was active during the six months ended June 30, 2025 and the year ended December 31, 2024. The maximum aggregate offering price and cumulative net proceeds (less sales commissions and expenses) for each Common Stock ATM Offering in the following table are reported in thousands.
May 2025 Sales Agreement
October 2024 Sales Agreement
August 2024 Sales Agreement
November 2023 Sales Agreement
Agreement effective date
May 1, 2025
October 30, 2024
August 1, 2024
November 30, 2023
Maximum aggregate offering price
21,000,000
750,000
Maximum commissions payable to sales agents on gross proceeds from the sale of shares
2.0
Date terminated/substantially depleted
April 30, 2025
November 19, 2024
July 31, 2024
As of June 30, 2025:
Cumulative shares of class A common stock sold under such sales agreement
7,137,083
58,384,669
11,685,355
12,720,770
Cumulative net proceeds received from shares of class A common stock sold under such sales agreement
2,885,277
20,962,051
1,993,273
747,025
Maximum aggregate offering price remaining available for sale under such sales agreement (1)
18,111,044
The following table summarizes the sales activity of each sales agreement that was active during 2025 or 2024 for the periods indicated. The net proceeds (less sales commissions and expenses) for each Common Stock ATM Offering in the following table are reported in thousands.
Number of shares of class A common stock sold under such sales agreement:
1,951,620
7,088,537
19,713,132
Total shares of class A common stock sold pursuant to Common Stock ATM Offerings
14,225,620
26,850,215
Net proceeds received from shares of class A common stock sold under such sales agreement:
2,363,415
6,762,620
Total net proceeds received from shares of class A common stock sold pursuant to Common Stock ATM Offerings
9,647,897
The sales commissions and expenses related to each of the above Common Stock ATM Offerings are considered direct and incremental costs and are charged against “Additional paid-in capital” on the Consolidated Balance Sheet in the period in which the corresponding shares are issued and sold.
Preferred Stock ATM Offerings
As of June 30, 2025, the Company has entered into sales agreements with agents pursuant to which the Company could issue and sell shares of its STRK Stock having an aggregate offering price of up to $21.0 billion (“STRK ATM Shares”) through the STRK ATM Offering and shares of its STRF Stock having an aggregate offering price of up to $2.1 billion (“STRF ATM Shares”) through the STRF ATM Offering. Refer to Note 14, Subsequent Events, for additional information on the Company’s at-the-market offering programs of preferred stock, including the STRK ATM Offering and the STRF ATM Offering. Pursuant to these agreements, the Company agreed to pay the sales agents commissions for their services in acting as agents with respect to the sale of shares through the Preferred Stock ATM Offerings and also agreed to provide the sales agents with reimbursement for certain incurred expenses and customary indemnification and contribution rights. The following table summarizes the terms and provisions of each sales agreement, and each Preferred Stock ATM Offering that was active during the six months ended June 30, 2025. The maximum aggregate offering price and cumulative net proceeds (less sales commissions and expenses) for each Preferred Stock ATM Offering in the following table are reported in thousands.
STRK Sales Agreement
STRF Sales Agreement
March 10, 2025
May 22, 2025
2,100,000
Cumulative shares of Preferred Stock sold under such sales agreement
4,901,367
1,566,750
Cumulative net proceeds received from shares of Preferred Stock sold under such sales agreement
477,190
163,034
20,522,113
1,936,702
27
The following table summarizes the sales activity of each Preferred Stock ATM Offering that was active during 2025 for the periods indicated. The net proceeds (less sales commissions and expenses) for each Preferred Stock ATM Offering in the following table are reported in thousands.
Three MonthsEnded
Six MonthsEnded
Number of shares of Preferred Stock sold under such sales agreement:
4,551,460
Total shares of Preferred Stock sold pursuant to Preferred Stock ATM Offerings (1)
6,118,210
6,468,117
Net proceeds received from shares of Preferred Stock sold under such sales agreement:
446,792
Total net proceeds received from shares of Preferred Stock sold pursuant to Preferred Stock ATM Offerings (1)
609,826
640,224
(12) Segment Information
The Company has one reportable operating segment, the “Software Business,” which is engaged in the design, development, marketing, and sales of the Company’s enterprise analytics software platform through cloud subscriptions and licensing arrangements and related services (i.e., product support, consulting and education). The “Corporate & Other” category presented in the following tables is not considered an operating segment. It consists primarily of costs and expenses related to executing the Company’s bitcoin strategy and includes the unrealized gain or loss on digital assets, impairment charges and other third-party costs associated with the Company’s bitcoin holdings, net interest expense primarily related to long-term debt obligations (the net proceeds of which were primarily used to purchase bitcoin), and income tax effects generated from the Company’s bitcoin holdings and related debt issuances. Beginning in 2025, the Company has dedicated certain corporate resources to its bitcoin strategy. These costs, including related Share-based compensation expense are included within the “Corporate resources” and the “Share-based compensation expense” segment expense line items to better align with their activities and utilization.
The Company’s chief operating decision maker (“CODM”), is the Company’s Chief Executive Officer, who manages the entity on a consolidated basis. The CODM uses “net income (loss)” to assess the profitability of the software business by comparing actual to budgeted results on a monthly basis. In doing so, he focuses on “controllable costs” across main functions of the Software Business and will allocate personnel and budget accordingly to maximize potential profitability. The CODM also uses “net income (loss)” to understand the impact from income taxes and debt-related items for general tax and liquidity planning purposes.
28
The following tables present (for each of the Software Business segment and Corporate & Other category, and on a consolidated basis) the Company’s revenues and significant expenses regularly provided to the CODM, reconciled to net income (loss) (in thousands) for each of the periods presented. Total segment assets (in thousands) provided to the CODM are also disclosed in the tables below for each period presented.
Software Business
Corporate & Other
Total Consolidated
Significant expenses (1)
Controllable
(26,236
Maintenance
(6,970
Consulting
(12,096
Cloud
(16,043
Technology
(21,597
Corporate resources
(16,406
(6,120
(22,526
Non-Controllable
14,047,514
Digital asset custody fees
(4,881
(12,543
(3,199
(15,742
Payroll taxes on equity award exercises and vestings
(2,620
(65
(2,685
Other segment items (2)
(9,507
Interest income (expense), net (3)
(17,973
Income tax benefit (expense) (4)
39,893
(4,024,869
(3,984,976
30,439
9,990,407
Total assets, as of June 30, 2025 (5)
410,617
(26,433
(7,015
(13,485
(9,619
(25,981
(22,869
Impairment losses on digital assets
(180,090
(1,344
(20,621
(3,702
(110
137
Interest expense, net (3)
Income tax benefit (4)
55,818
56,669
112,487
37,782
(140,341
Total assets, as of June 30, 2024 (5)
585,503
6,467,570
7,053,073
29
(49,884
(13,734
(23,710
(30,601
(46,299
(35,072
(13,824
(48,896
8,141,509
(9,003
(21,205
(6,356
(27,561
(4,661
(96
(4,757
(14,247
(35,177
62,252
(2,322,144
(2,259,892
48,567
5,754,909
(49,577
(14,550
(27,949
(18,227
(52,858
(44,215
(371,723
(2,098
(38,412
(11,228
3,096
(533
2,563
157,724
115,532
273,256
130,492
(286,169
30
The following table presents total revenues and long-lived assets (in thousands) according to geographic region. Long-lived assets are comprised of right-of-use assets and property and equipment, net. The Corporate & Other category disclosed above is included within the U.S. region.
Geographic regions:
U.S.
EMEA
Other Regions
Consolidated
Three months ended June 30, 2025
65,315
39,444
9,729
Three months ended June 30, 2024
63,778
36,968
10,696
Six months ended June 30, 2025
128,775
77,326
19,453
Six months ended June 30, 2024
128,157
75,321
23,210
Long-lived assets
As of June 30, 2025
70,385
3,469
7,922
81,776
As of December 31, 2024
69,767
3,556
7,564
80,887
The EMEA region includes operations in Europe, the Middle East, and Africa. The other regions include all other foreign countries, generally comprising Latin America, the Asia Pacific region, and Canada. For the three and six months ended June 30, 2025, Germany accounted for 10% or more of total consolidated revenues. For the three and six months ended June 30, 2024, no country accounted for 10% or more of total consolidated revenues.
For the three and six months ended June 30, 2025 and 2024, no individual customer accounted for 10% or more of total consolidated revenues.
(13) Related Party Transactions
Saylor Indemnification Agreements
On June 24, 2022, concurrently with binding directors and officers (“D&Os”) liability insurance policies (the “Initial Commercial Policies”) with several third-party carriers, the Company and Michael J. Saylor, the Company’s Chairman of the Board of Directors and Executive Chairman, entered into (i) an indemnification agreement (the “Excess Agreement”) for Mr. Saylor to provide $10 million in excess indemnity coverage payable only after the exhaustion of the Initial Commercial Policies, and (ii) an indemnification agreement (the “Tail Agreement”) for Mr. Saylor to provide $40 million in indemnity coverage for claims made at any time based on actions or omissions occurring prior to the inception date of the Initial Commercial Policies. The Company paid Mr. Saylor $600,000 for a one-year term under the Excess Agreement, and $150,000 for a 90-day term under the Tail Agreement. At the option of the Company, the Company was permitted to extend the term under the Tail Agreement for up to a total of twenty-three additional 90-day periods, for $150,000 per additional 90-day term. The Company elected to extend the term of the Tail Agreement for three consecutive additional 90-day periods and paid Mr. Saylor $150,000 for each extension.
On August 30, 2022, the Company bound additional D&O liability insurance policies (the “Excess Commercial Policies”) with third-party carriers for excess coverage payable only after the exhaustion of the Initial Commercial Policies. Effective as of the same date, the Company and Mr. Saylor executed an amendment (the “Amendment”) to the Excess Agreement to limit Mr. Saylor’s obligation to provide indemnification under the Excess Agreement to claims made during the term of the Excess Agreement which arise from wrongful acts occurring upon or after the commencement of the Excess Agreement but prior to the effective date of the Amendment. In connection with the Amendment, Mr. Saylor refunded $489,863 to the Company, representing the pro rata portion of the $600,000 originally paid by the Company to Mr. Saylor under the Excess Agreement attributable to the period from the date of the Amendment through the end of the original term of the Excess Agreement.
On June 12, 2023, the Company bound new D&O liability insurance policies (the “2023 Commercial Policies”) with third-party carriers that provide coverage substantially equivalent to the aggregate coverage provided under the Initial Commercial Policies and the Excess Commercial Policies for a policy period running from June 12, 2023 through June 12, 2024 except that the 2023 Commercial Policies also provide coverage for claims made with respect to wrongful acts or omissions occurring prior to the binding of the Initial Commercial Policies subject to exclusions with respect to claims previously noticed to and accepted by an earlier D&O insurer, claims related to acts or omissions giving rise to such claims, and demands, investigations, suits or other proceedings entered against an insured prior to June 24, 2022, as well as future interrelated wrongful acts.
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On June 12, 2023, the Company entered into a new indemnification agreement with Mr. Saylor (the “2023 Tail Agreement”) pursuant to which Mr. Saylor agreed to provide coverage that is similar to the coverage provided under the Tail Agreement, but only for matters excluded from coverage under the 2023 Commercial Policies for an initial one-year term for a payment of $157,000. Pursuant to the terms of the 2023 Tail Agreement, the Company elected to extend the term of the 2023 Tail Agreement for a period of one-year commencing on June 12, 2024, and paid Mr. Saylor $157,000 during the three months ended June 30, 2024. Additionally, during the three months ended June 30, 2024, the 2023 Commercial Policies were also extended for another policy year running from June 12, 2024 to June 12, 2025, on substantially the same terms, but with an increase in the aggregate indemnity coverage provided by the commercial carriers from $40 million to $60 million.
On June 12, 2025, the Company bound new D&O liability insurance policies (the “2025 Commercial Policies”) with third-party carriers that provide $120 million in aggregate coverage for a policy period running from June 12, 2025 through June 12, 2026. The Company has determined that the 2025 Commercial Policies provide sufficient D&O coverage; accordingly, the 2023 Tail Agreement was not extended beyond June 12, 2025.
The Excess Agreement, Tail Agreement and other related party transactions between the Company and Mr. Saylor are described more fully in Note 17 to the Consolidated Financial Statements of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.
Allocation Agreements
On August 31, 2022, the District of Columbia (the “District”), through its Office of the Attorney General, filed a civil complaint in the Superior Court of the District of Columbia naming as defendants (i) Michael J. Saylor, the Chairman of the Company’s board of directors and the Company’s Executive Chairman, in his personal capacity, and (ii) the Company. The District sought, among other relief, monetary damages under the District’s False Claims Act for the alleged failure of Mr. Saylor to pay personal income taxes to the District over a number of years together with penalties, interest, and treble damages. The complaint alleged in the sole claim against the Company that it violated the District’s False Claims Act by conspiring to assist Mr. Saylor’s alleged failure to pay personal income taxes. On May 31, 2024, the District, Mr. Saylor, and the Company stipulated to the entry of a Consent Order and Judgment (“Consent Order”) with the court pursuant to which the District, upon receipt of all amounts due under the Consent Order, released Mr. Saylor and the Company from all claims and liabilities that the District asserted, could have asserted, or may assert in the future based on the conduct described in the complaints filed in the case.
In connection with the Consent Order, on May 31, 2024, the Company and Mr. Saylor entered into an agreement pursuant to which Mr. Saylor and the Company agreed that Mr. Saylor would pay $40,000,000 due to the District to settle the case and resolve the litigation with the District. Pursuant to a separate agreement between Mr. Saylor and the Company, Mr. Saylor paid this settlement amount to the District in full and the Company is not obligated to make any contribution to the settlement payment. On July 15, 2024, Mr. Saylor and the Company entered into a separate agreement with counsel to Tributum, LLC, the relator in the case (“Relator”), to resolve the amount due to such counsel in satisfaction of Relator’s claims for statutory expenses, attorneys’ fees and costs. Pursuant to the separate agreement between Mr. Saylor and the Company, Mr. Saylor paid this settlement amount in full and the Company is not obligated to make any contribution to this settlement payment.
(14) Subsequent Events
From July 1, 2025 through July 31, 2025, the Company has purchased approximately 31,466 bitcoins for 3.68 billion, or approximately $116,860 per bitcoin.
Amendment to STRK Stock
On July 7, 2025, the Company filed a certificate of amendment (the “STRK Amendment”) with the Secretary of State of the State of Delaware to the STRK Stock certificate of designations so that, together with other conforming changes, the STRK Stock has a liquidation preference that is initially $100 per share; provided, however, that, effective immediately after the close of business on each business day on or after July 7, 2025 (and, on or after July 7, 2025, if applicable, during the course of a business day on which any sale transaction to be settled by the issuance of STRK Stock is executed, from the exact time of the first such sale transaction during such business day until the close of business of such business day), the liquidation preference per share of STRK Stock will be adjusted to be the greatest of (i) the stated amount of $100 per share of STRK Stock (the “Stated Amount”); (ii) in the case of any business day on or after July 7, 2025 with respect to which Strategy has, on such business day or any business day during the ten trading day period preceding such business day, executed any sale transaction to be settled by the issuance of STRK Stock, an amount equal to the Last Reported Sale Price (as defined in the certificate of designations for the STRK Stock) per share of STRK Stock on the trading day immediately before such business day; and (iii) the arithmetic average of the Last Reported Sale Prices per share of STRK Stock for each trading day of the ten consecutive trading days immediately preceding such business day; provided that, for purposes of the definition of liquidation preference,
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the execution of the STRK Amendment will be treated as an execution of a sale transaction settled by the issuance of STRK Stock. See Note 6, Commitments and Contingencies.
Initial public offering of STRC Stock
On July 29, 2025, the Company completed a registered public offering of 28,011,111 shares of its Variable Rate Series A Perpetual Stretch Preferred Stock (“STRC Stock”), at a price to the public of $90.00 per share, for net proceeds of approximately $2.47 billion, after deducting the underwriting discounts and commissions and the Company’s estimated offering expenses. The Company filed a certificate of designations with the Secretary of State of the State of Delaware designating and establishing the terms of the STRC Stock. The STRC Stock is listed for trading on the Nasdaq Global Select Market under the symbol “STRC.”
The STRC Stock will accumulate cumulative dividends at a variable rate (as described below) per annum on the stated amount of $100 per share thereof. Regular dividends on the STRC Stock will be payable when, as and if declared by the Company’s board of directors or any duly authorized committee thereof, out of funds legally available for their payment, monthly in arrears on the last calendar day of each calendar month, beginning on August 31, 2025. The initial monthly regular dividend rate per annum will be 9.00%. However, the Company will have the right, in its sole and absolute discretion, to adjust the monthly regular dividend rate per annum applicable to subsequent regular dividend periods. The Company’s right to adjust the monthly regular dividend rate per annum will be subject to certain restrictions. For example, the Company will not be permitted to reduce the monthly regular dividend rate per annum that will apply to any regular dividend period (i) by more than the following amount from the monthly regular dividend rate per annum applicable to the prior regular dividend period: the sum of (1) 25 basis points; and (2) the excess, if any, of (x) the one-month term secured overnight financing rate (“SOFR”) rate on the first business day of such prior regular dividend period, over (y) the minimum of the one-month term SOFR rates that occur on the business days during the period from, and including, the first business day of such prior regular dividend period to, and including, the last business day of such prior regular dividend period; or (ii) to a rate per annum that is less than the one-month term SOFR rate in effect on the business day before the Company provides notice of the next monthly regular dividend rate per annum. In addition, the Company will not be entitled to elect to reduce the monthly regular dividend rate per annum unless all accumulated regular dividends, if any, on the STRC Stock then outstanding for all prior completed regular dividend periods, if any, have been paid in full. The Company’s current intention (which is subject to change in the Company’s sole and absolute discretion) is to adjust the monthly regular dividend rate per annum in such manner as the Company believes is designed to cause the STRC Stock to trade at prices at or close to its stated amount of $100 per share. Declared regular dividends on the STRC Stock will be payable solely in cash. In the event that any accumulated regular dividend on the STRC Stock is not paid on the applicable regular dividend payment date, then additional regular dividends (“STRC compounded dividends”) will accumulate on the amount of such unpaid regular dividend, compounded monthly on each subsequent regular dividend payment date at the monthly regular dividend rate per annum applicable to the relevant regular dividend period, from, and including, the calendar day after such regular dividend payment date to, and including, the date the same, including all STRC compounded dividends thereon, is paid in full. The STRC Stock also has certain redemption and repurchase rights, in the manner, and subject to the terms, set forth in the STRC Stock certificate of designations.
At-the-market offerings
ATM Updates
During the period from July 1, 2025 through July 31, 2025, the Company sold an aggregate of 2,433,381 shares of its class A common stock under the May 2025 Sales Agreement for aggregate net proceeds to the Company (less sales commissions) of approximately $1.07 billion. As of July 31, 2025, $17.04 billion of shares of the Company’s class A common stock remained available for issuance and sale pursuant to the May 2025 Sales Agreement.
During the period from July 1, 2025 through July 31, 2025, the Company sold an aggregate of 579,417 STRK ATM Shares under the STRK ATM Offering, for aggregate net proceeds to the Company (less sales commissions) of approximately $71.8 million. As of July 31, 2025, approximately $20.45 billion of STRK ATM Shares remained available for issuance and sale pursuant to the STRK ATM Offering.
On July 7, 2025, the Company amended the Original STRF Sales Agreement to include an additional sales agent. During the period from July 1, 2025 through July 31, 2025, the Company sold an aggregate of 446,005 STRF ATM Shares under the STRF ATM Offering, for aggregate net proceeds to the Company (less sales commissions) of approximately $55.6 million. As of July 31, 2025, approximately $1.88 billion of STRF ATM Shares remained available for issuance and sale pursuant to the STRF ATM Offering.
STRD ATM
On July 7, 2025, the Company entered into a sales agreement (the “STRD Sales Agreement”) with agents pursuant to which the Company could issue and sell shares of its STRD Stock through an at-the-market equity offering program (the “STRD ATM Offering”) and filed a prospectus supplement for the STRD ATM Offering, pursuant to which the Company may issue and sell shares of its STRD Stock having an aggregate offering price of up to $4.2 billion (“STRD ATM Shares”) from time to time through the sales agents under the STRD ATM Offering. During the period from July 7, 2025 through July 31, 2025, the Company sold an aggregate of 189,560 STRD ATM Shares
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under the STRD ATM Offering, for aggregate net proceeds to the Company (less sales commissions) of approximately $17.9 million. As of July 31, 2025, approximately 4.18 billion of STRD ATM Shares remained available for issuance and sale pursuant to the STRD ATM Offering.
STRC ATM
On July 31, 2025, the Company entered into a sales agreement (the “STRC Sales Agreement”) with agents pursuant to which the Company could issue and sell shares of its STRC Stock through an at-the-market equity offering program (the “STRC ATM Offering”) and filed a prospectus supplement for the STRC ATM Offering, pursuant to which the Company may issue and sell shares of its STRC Stock having an aggregate offering price of up to $4.2 billion (the “STRC ATM Shares”) from time to time through sales agents under the STRC ATM Offering. As of July 31, 2025, the Company has not sold any STRC ATM Shares under the STRC ATM Offering and approximately $4.2 billion of STRC ATM Shares remained available for issuance and sale pursuant to the STRC ATM Offering.
Dividend on STRC Stock
As contemplated by the prospectus supplement for the initial public offering of STRC Stock, on July 31, 2025, the Company announced that its board of directors declared monthly cash dividends of $0.80 per share payable on the STRC Stock. The calculation of the monthly dividend takes into account the dividend accrued from, but excluding, July 29, 2025, the issuance date of the STRC Stock. Payment will be made on August 31, 2025 (or, if such date is not a business day, the next business day) to stockholders of record of the STRC Stock at the close of business on August 15, 2025.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Information
This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For this purpose, any statements contained herein that are not statements of historical fact, including without limitation, certain statements regarding industry prospects and our results of operations or financial position, may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. The important factors discussed under “Part II. Item 1A. Risk Factors,” among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time. Such forward-looking statements represent management’s current expectations and are inherently uncertain. Investors are warned that actual results may differ from management’s expectations.
10-for-1 stock split
On August 7, 2024, we completed a 10-for-1 stock split of our class A and class B common stock. See Note 1, Summary of Significant Accounting Policies, to the Consolidated Financial Statements, for further information. As a result of the stock split, all applicable share and per share information presented within this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been retroactively adjusted to reflect the stock split for all periods presented.
Business Overview
Strategy is the world's first and largest Bitcoin Treasury Company. We are a publicly traded company that has adopted Bitcoin as our primary treasury reserve asset. By using proceeds from equity and debt financings, as well as cash flows from our operations, we strategically accumulate Bitcoin and advocate for its role as digital capital. Our treasury strategy is designed to provide investors varying degrees of economic exposure to Bitcoin by offering a range of securities, including equity and fixed income instruments.
In addition, we provide industry-leading AI-powered enterprise analytics software, advancing our vision of Intelligence Everywhere. We leverage our development capabilities to explore innovation in Bitcoin applications, integrating analytics expertise with our commitment to digital asset growth. We believe our combination of operational excellence, strategic Bitcoin reserve, and focus on technological innovation positions us as a leader in both the digital asset and enterprise analytics sectors, offering a unique opportunity for long-term value creation.
Our Bitcoin Strategy
Our bitcoin strategy generally involves from time to time, subject to market conditions, (i) issuing debt or equity securities or engaging in other capital raising transactions with the objective of using the proceeds to purchase bitcoin and (ii) acquiring bitcoin with our liquid assets that exceed working capital requirements. We intend to fund further bitcoin acquisitions primarily through issuances of common stock and a variety of fixed-income instruments, including debt, convertible notes and preferred stock.
We view our bitcoin holdings as long-term holdings and expect to continue to accumulate bitcoin. We have not set any specific target for the amount of bitcoin we seek to hold, and we will continue to monitor market conditions in determining whether to engage in additional financings to purchase additional bitcoin. This overall strategy also contemplates that we may (i) periodically sell bitcoin for general corporate purposes or in connection with strategies that generate tax benefits in accordance with applicable law, (ii) enter into additional capital raising transactions that are collateralized by our bitcoin holdings, and (iii) consider pursuing strategies to create income streams or otherwise generate funds using our bitcoin holdings.
Additionally, we periodically engage in advocacy and educational activities regarding the continued acceptance and value of Bitcoin as an open, secure protocol for an internet-native digital capital asset, and we leverage our software development capabilities to explore innovation in Bitcoin applications.
Under our Treasury Reserve Policy, our treasury reserve assets consist of:
During 2024 and 2025, we used proceeds from various capital raising transactions to purchase bitcoin. As of June 30, 2025, we held an aggregate of approximately 597,325 bitcoins.
Although we continue to initially record our bitcoin purchases at cost, upon adoption of ASU 2023-08 on January 1, 2025, any subsequent increases or decreases in fair value are recognized as incurred in the Consolidated Statements of Operations, and the fair value of our bitcoin is reflected within the Consolidated Balance Sheets each reporting period-end.
Since adopting ASU 2023-08, we are no longer required to account for our bitcoin under a cost-less-impairment accounting model and we no longer record a deferred tax asset related to bitcoin impairment losses. Instead, we establish a deferred tax liability if the market value of bitcoin at the reporting date is greater than the average cost basis of our bitcoin holdings at such reporting date, and any subsequent increases or decreases in the market value of bitcoin will increase or decrease the deferred tax liability.
The following table presents a roll-forward of our bitcoin holdings, including additional information related to our bitcoin purchases, bitcoin sales (if any), unrealized loss (gain) on digital assets, digital asset impairment losses, and cumulative effect adjustments within the respective periods:
Source of Capital Used to Purchase Bitcoin
Digital Asset Original Cost Basis (in thousands)
Digital Asset Impairment Losses(in thousands)
Digital Asset Carrying Value (in thousands)
Approximate Number of Bitcoins Held
Approximate Average Purchase Price Per Bitcoin
8,328,626
(2,640,736
5,687,890
226,331
36,798
(a)
1,575,073
25,889
60,839
(412,084
Balance at September 30, 2024
9,903,699
(3,052,820
6,850,879
252,220
39,266
(b)
18,064,549
195,250
92,520
(1,006,055
Balance at December 31, 2024
27,968,248
(4,058,875
62,503
Digital Asset Carrying Value(in thousands)
Balance at December 31, 2024 (before adoption of ASU 2023-08)
Cumulative effect upon adoption of ASU 2023-08
Balance immediately following adoption of ASU 2023-08
(c)
7,661,663
80,715
94,922
Unrealized loss on digital assets
(5,906,005
35,629,911
43,546,079
528,185
67,457
(d)
97,906
42,399,116
70,982
Excess Cash refers to cash in excess of the minimum Cash Assets that we are required to hold under our Treasury Reserve Policy, which may include cash generated by operating activities and cash from the proceeds of financing activities.
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The following table shows the approximate number of bitcoins held at the end of each respective period, as well as market value calculations of our bitcoin holdings based on the lowest, highest, and ending market prices of one bitcoin on the Coinbase exchange (our principal market) for each respective quarter, as further defined below:
Approximate Number of Bitcoins Held at End of Quarter
Lowest Market Price Per Bitcoin During Quarter (a)
Market Value of Bitcoin Held at End of Quarter Using Lowest Market Price (in thousands) (b)
Highest Market Price Per Bitcoin During Quarter (c)
Market Value of Bitcoin Held at End of Quarter Using Highest Market Price (in thousands) (d)
Market Price Per Bitcoin at End of Quarter (e)
Market Value of Bitcoin Held at End of Quarter Using Ending Market Price (in thousands) (f)
June 30, 2024
56,500.00
12,787,702
72,777.00
16,471,691
61,926.69
14,015,930
September 30, 2024
49,050.01
12,371,394
70,000.00
17,655,400
63,462.97
16,006,630
58,863.90
26,339,829
108,388.88
48,500,772
93,390.21
41,789,317
March 31, 2025
76,555.00
40,435,222
109,358.01
57,761,287
82,444.71
74,420.69
44,453,357
112,000.00
66,900,427
107,751.68
The amounts reported as “Market Value” in the above table represent only a mathematical calculation consisting of the price for one bitcoin reported on the Coinbase exchange (our principal market) in each scenario defined above multiplied by the number of bitcoins held by us at the end of the applicable period. Bitcoin and bitcoin markets may be subject to manipulation and the spot price of bitcoin may be subject to fraud and manipulation. Accordingly, the Market Value amounts reported above may not accurately represent fair market value, and the actual fair market value of our bitcoin may be different from such amounts and such deviation may be material. Moreover, (i) the bitcoin market historically has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks that are, or may be, inherent in its entirely electronic, virtual form and decentralized network and (ii) we may not be able to sell our bitcoins at the Market Value amounts indicated above, at the market price as reported on the Coinbase exchange (our principal market) on the date of sale, or at all.
Unrealized (gains) losses on digital assets and digital asset impairment losses have significantly contributed to our results of operations. During the three and six months ended June 30, 2025, the unrealized gain on digital assets of $14.048 billion and $8.14 billion, respectively, effectively offset our operating expenses, representing 100.7% and 102.3%, of our operating expenses, respectively. During the three and six months ended June 30, 2024, digital asset impairment losses of $180.1 million and $371.7 million, respectively, represented 64.1% and 65.2% of our operating expenses, respectively.
As of July 31, 2025, we held approximately 628,791 bitcoins that were acquired at an aggregate purchase price of $46.08 billion and an average purchase price of approximately $73,277 per bitcoin, inclusive of fees and expenses. As of July 31, 2025, at 4:00 p.m. Eastern Time, the market price of one bitcoin reported on the Coinbase exchange was $116,760.
Enterprise Analytics Software Strategy
Strategy is a pioneer in AI-powered intelligence solutions delivering a comprehensive portfolio that addresses a wide spectrum of enterprise data challenges. We provide software and services designed to transform complex, fragmented data environments into unified
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reliable information ecosystems that drive insight and action across organizations worldwide. Our vision is to drive growth and competitive advantage for our customers by delivering Intelligence Everywhere™.
Strategy One™, our cloud-native analytics platform, powers some of the largest business intelligence deployments in the world. It delivers visualization, reporting, and embedded analytics capabilities across retail, banking, technology, manufacturing, insurance, consulting, healthcare, telecommunications, and the public sector. Complementing this, Strategy Mosaic™ is a universal intelligence layer that enables organizations to achieve a single source of truth across their data. It provides enterprises with consistent definitions and governance across data sources, regardless of where that data resides or which tools access it. AI-assisted data modeling hastens data product creation, while its intelligent architecture promotes accelerated performance for all workloads.
Integral to the Strategy portfolio are generative AI capabilities that are designed to automate and accelerate the deployment of AI-enabled applications across the enterprise. By making advanced analytics accessible through conversational AI, we provide non-technical users with timely, actionable insights for decision-making.
The AI and analytics markets are highly competitive and subject to rapidly changing technology and market conditions. Our ability to compete successfully depends on a number of factors within and outside of our control. Some of these factors include software quality, performance and reliability; the quality of our service and support teams; marketing and prospecting effectiveness, the ability to incorporate artificial intelligence and other technically advanced features; and our ability to differentiate our products.
Operating Highlights
The following table sets forth certain operating highlights (in thousands) for the three and six months ended June 30, 2025 and 2024:
Revenues
Cost of revenues
Operating expenses
Prior to our adoption of ASU 2023-08 on January 1, 2025, we incurred significant impairment losses on our digital assets, and we recognized gains upon sale of our digital assets, which were presented net of any impairment losses within operating expenses. However, the accounting for our digital assets changed upon our adoption of ASU 2023-08. See Note 1, Summary of Significant Accounting Policies to the Consolidated Financial Statements for further information. As a result, fluctuations in the price of bitcoin and fair value changes associated therewith have had and will have a significant impact on our future operating results.
In addition, we base our operating expense budgets on expected revenue trends and strategic objectives. Many of our expenses, such as interest expense on debt, declared dividends on our STRK Stock, STRF Stock, STRD Stock and STRC Stock (hereinafter collectively
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referred to as “Preferred Stock”), tax liabilities, office leases and certain personnel costs, are relatively fixed. We may be unable to adjust spending quickly enough to offset any unexpected shortfall in our cash flow. Accordingly, we may be required to take actions to pay expenses, such as selling bitcoin or using proceeds from equity or debt financings, some of which could significantly impact our operating results in any period. We therefore believe that period-to-period comparisons of our operating results may not be a good indication of our future performance.
Employees
As of June 30, 2025, we had a total of 1,512 employees, of whom 469 were based in the United States and 1,043 were based internationally. The following table summarizes employee headcount as of the dates indicated:
188
99
66
163
197
253
275
350
Education
288
295
483
498
625
220
208
Total headcount
1,534
1,839
Share-based Compensation Expense
As discussed in Note 8, Share-based Compensation, to the Consolidated Financial Statements, we have awarded stock options to purchase shares of our class A common stock, restricted stock units, performance stock units, and certain other stock-based awards under our Stock Incentive Plans. Each restricted stock unit and performance stock unit represents a contingent right to receive a share of our class A common stock upon the satisfaction of applicable vesting requirements. We also provide opportunities for eligible employees to purchase shares of our class A common stock under our 2021 ESPP. Share-based compensation expense (in thousands) from these awards was recognized in the following cost of revenues and operating expense line items for the periods indicated:
Cost of subscription services revenues
331
119
434
189
Cost of product support revenues
298
1,067
698
1,985
Cost of consulting revenues
473
496
866
881
Cost of education revenues
48
62
2,124
3,865
3,289
8,566
2,096
4,014
1,372
7,117
10,372
11,024
20,815
19,612
Total share-based compensation expense
20,621
The $4.9 million decrease in share-based compensation expense during the three months ended June 30, 2025, as compared to the same period in the prior year, was primarily due to the forfeiture of certain stock awards and certain awards that became fully vested, partially offset by the grant of additional awards under the Stock Incentive Plans. The $10.9 million decrease in share-based compensation expense during the six months ended June 30, 2025, as compared to the same period in the prior year, was primarily due to the forfeiture of certain stock awards and certain awards that became fully vested, partially offset by the grant of additional awards under the Stock Incentive Plans. As of June 30, 2025, we estimated that an aggregate of approximately $126.2 million of additional share-based compensation expense associated with the Stock Incentive Plans and the 2021 ESPP will be recognized over a remaining weighted average period of 2.7 years.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of our Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and equity, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results and outcomes could differ from these estimates and assumptions.
Critical accounting estimates involve a significant level of estimation uncertainty and are estimates that have had or are reasonably likely to have a material impact on our financial condition or results of operations. We consider certain estimates and judgments related to revenue recognition to be critical accounting estimates for us, as discussed under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. There have been no significant changes in such estimates and judgments since December 31, 2024.
Results of Operations
Comparison of the three and six months ended June 30, 2025 and 2024
Except as otherwise indicated herein, the term “domestic” refers to operations in the United States and Canada and the term “international” refers to operations outside of the United States and Canada.
Product licenses and subscription services revenues. The following table sets forth product licenses and subscription services revenues (in thousands) and related percentage changes for the periods indicated:
Change
Product Licenses and Subscription Services Revenues:
Product Licenses
Domestic
5,059
4,804
8,512
9,811
-13.2
International
2,118
4,482
-52.7
5,935
12,413
-52.2
Total product licenses revenues
-22.7
-35.0
Subscription Services
23,653
14,916
58.6
45,303
29,508
53.5
17,171
9,164
87.4
32,624
17,538
86.0
Total subscription services revenues
69.5
65.6
Total product licenses and subscription services revenues
43.9
33.4
Product licenses revenues. Product licenses revenues decreased $2.1 million and $7.8 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in the prior year, primarily due to an overall decrease in the volume and average size of deals. We expect our product licenses revenues to continue to experience declines in future periods as we continue to promote our cloud offering to new and existing customers.
Subscription services revenues. Subscription services revenues are derived from our Cloud subscription service and are recognized ratably over the service period in the contract. Subscription services revenues increased $16.7 million and $30.9 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in the prior year, primarily due to conversions to cloud-based subscriptions from existing on-premises customers, a net increase in the use of subscription services by existing customers, and sales contracts with new customers. We expect our subscription services revenues to continue to grow in future periods as we continue to promote our cloud offering to new and existing customers.
Product support revenues. The following table sets forth product support revenues (in thousands) and related percentage changes for the periods indicated:
Product Support Revenues:
29,946
37,049
-19.2
61,721
74,457
-17.1
22,135
24,691
-10.4
42,889
49,968
-14.2
Total product support revenues
-15.6
-15.9
40
Product support revenues are derived from providing technical software support and software updates and upgrades to customers. Product support revenues are recognized ratably over the term of the contract, which is generally one year. Product support revenues decreased $9.7 million and $19.8 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in the prior year, primarily due to existing customers converting from on-premises product licenses with support contracts to our Cloud subscription services offerings and non-renewals of existing support contracts. We expect our product support revenues to experience declines in future periods as we continue to promote our cloud offering to new and existing customers.
Other services revenues. The following table sets forth other services revenues (in thousands) and related percentage changes for the periods indicated:
Other Services Revenues:
6,561
6,912
-5.1
13,020
14,319
-9.1
7,435
8,692
-14.5
14,679
17,100
Total consulting revenues
13,996
15,604
-10.3
27,699
31,419
-11.8
410
732
-44.0
871
1,574
-44.7
Total other services revenues
-13.4
Consulting revenues. Consulting revenues are derived from helping customers plan and execute the deployment of our software. Consulting revenues decreased $1.6 million and $3.7 million for the three and six months ended June 30, 2025, respectively, as compared to the same period in the prior year, primarily due to a decrease in demand for consulting services.
Education revenues. Education revenues are derived from the education and training that we provide to our customers to enhance their ability to fully utilize the features and functionality of our software. Education revenues did not materially change for the three and six months ended June 30, 2025, as compared to the same periods in the prior year.
Costs and Expenses
Cost of revenues. The following table sets forth cost of revenues (in thousands) and related percentage changes for the periods indicated:
Cost of Revenues:
Product licenses and subscription services:
47.2
56.7
66.4
67.0
64.9
66.3
-11.0
-12.5
Other services:
10,692
11,795
-9.4
21,271
23,541
-9.6
593
16.7
1,337
1,144
16.9
Total other services
-8.1
-8.4
15.6
14.4
Cost of product licenses revenues. Cost of product licenses revenues consists of referral fees paid to channel partners, the costs of product manuals and media, and royalties paid to third-party software vendors. Cost of product licenses revenues did not materially change for the three and six months ended June 30, 2025, as compared to the same periods in the prior year.
Cost of subscription services revenues. Cost of subscription services revenues consists of equipment, facility and other related support costs (including cloud hosting infrastructure costs), and personnel and related overhead costs. Cost of subscription services revenues increased $6.3 million for the three months ended June 30, 2025, as compared to the same period in the prior year, primarily due to a $6.0 million increase in cloud hosting infrastructure costs, which is a result of the increased usage by new and existing cloud subscription services customers. Cost of subscription services revenues increased $12.2 million for the six months ended June 30, 2025, as compared to the same period in the prior year, primarily due to a $13.2 million increase in cloud hosting infrastructure and service costs, which is a result of the increased usage by new and existing cloud subscription services customers, partially offset by a $1.5 million decrease in personnel costs due to headcount reductions and changes in the mix between domestic employees and international employees with lower average personnel costs.
Cost of product support revenues. Cost of product support revenues consists of personnel and related overhead costs. Cost of product support revenues decreased $0.9 million for the three months ended June 30, 2025, as compared to the same period in the prior year, primarily due to a decrease in personnel costs due to headcount reductions. Cost of product support revenues decreased $2.1 million for the six months ended June 30, 2025, as compared to the same period in the prior year, primarily due to a $1.3 million decrease in share-based compensation expense primarily attributable to the forfeiture of certain awards and a decrease in personnel costs of $0.5 million due to headcount reductions.
Cost of consulting revenues. Cost of consulting revenues consists of personnel and related overhead costs. Cost of consulting revenues decreased $1.1 million for the three months ended June 30, 2025, as compared to the same period in the prior year, primarily due to a decrease in personnel costs of $1.9 million due to headcount reductions, partially offset by a $0.8 million increase in billable hours from outside contractor labor costs. Cost of consulting revenues decreased $2.3 million for the six months ended June 30, 2025, as compared to the same period in the prior year, primarily due to a decrease in personnel costs of $3.8 million due to headcount reductions, partially offset by a $1.5 million increase in billable hours from outside contractor labor costs.
Cost of education revenues. Cost of education revenues consists of personnel and related overhead costs. Cost of education revenues did not materially change for the three and six months ended June 30, 2025, as compared to the same periods in the prior year.
Sales and marketing expenses. Sales and marketing expenses consist of personnel costs, commissions, office facilities, travel, advertising, public relations programs, and promotional events, such as trade shows, seminars, and technical conferences. The following table sets forth sales and marketing expenses (in thousands) and related percentage changes for the periods indicated:
Sales and marketing expenses
-1.6
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Sales and marketing expenses did not materially change for the three months ended June 30, 2025, as compared to the same period in the prior year and decreased $6.5 million for the six months ended June 30, 2025, as compared to the same period in the prior year. The six month decrease was primarily due to (i) a decrease of $3.8 million in employee salaries and related benefits primarily attributable to a decrease in average staffing levels, and (ii) a $5.2 million net decrease in share-based compensation expense primarily attributable to the forfeiture of certain awards, partially offset by (iii) an increase in expense of $2.4 million due to a reduction in capitalized commissions.
Research and development expenses. Research and development expenses consist of the personnel costs for our software engineering personnel and related overhead costs. The following table summarizes research and development expenses (in thousands) and related percentage changes for the periods indicated:
Research and development expenses
-20.6
-18.5
Research and development expenses decreased $6.2 million for the three months ended June 30, 2025, as compared to the same period in the prior year, primarily due to a $4.0 million decrease in employee salaries primarily attributable to a decrease in average staffing levels, and a $1.9 million net decrease in share-based compensation expense primarily due to the forfeiture of certain awards.
Research and development expenses decreased $11.0 million for the six months ended June 30, 2025, as compared to the same period in the prior year, primarily due to (i) a $9.2 million decrease in employee salaries and bonuses primarily attributable to a decrease in average staffing levels, and (ii) a $5.8 million net decrease in share-based compensation expense primarily due to the forfeiture of certain awards, partially offset by a (iii) a $3.4 million increase in severance costs due to headcount reductions.
General and administrative expenses. General and administrative expenses consist of personnel and related overhead costs, and other costs of our executive, finance, human resources, information systems, and administrative departments, as well as third-party consulting, legal, and other professional fees, and third-party costs associated with our digital asset holdings. The following table sets forth general and administrative expenses (in thousands) and related percentage changes for the periods indicated:
General and administrative expenses
1.0
8.8
General and administrative expenses did not materially change for the three months ended June 30, 2025, as compared to the same period in the prior year, and increased $6.3 million for the six months ended June 30, 2025, as compared to the same period in the prior year, primarily due to (i) a $6.9 million increase in bitcoin custody fees; (ii) a $3.4 million increase related to various bitcoin advocacy initiatives, including political contributions and sponsorships; (iii) a $2.7 million increase in increased public filing costs; (iv) a $1.5 million increase in bonus and other employee benefit costs; (v) $1.3 million net increase in share-based compensation expense primarily attributable to the grant of additional awards under the Stock Incentive Plans; and (vi) a $1.1 million increase in bad debt, partially offset by (vii) a $6.5 million decrease due to employer payroll taxes for stock options exercised in 2024; and (viii) a $4.3 million decrease in legal and professional fees.
(Gains) losses associated with digital assets and digital asset impairment losses Upon adoption of ASU 2023-08 on January 1, 2025, any subsequent increases or decreases in fair value are recognized as incurred in the Consolidated Statements of Operations, and the fair value of our bitcoin is reflected within the Consolidated Balance Sheets each reporting period-end. Since adopting ASU 2023-08, we are no longer required to account for our bitcoin under a cost-less-impairment accounting model and no longer establish a deferred tax asset related to bitcoin impairment losses. Instead, we establish a deferred tax liability if the market value of bitcoin at the reporting date is greater than the average cost basis of our bitcoin holdings at such reporting date, and any subsequent increases or decreases in the market value of bitcoin will increase or decrease the deferred tax liability.
The following table sets forth the unrealized (gains) losses on our digital assets for the three and six months ended June 30, 2025 and impairment losses on our digital assets for the three and six months ended June 30, 2024 (in thousands):
-100.0
We did not sell any of our digital assets during the three and six months ended June 30, 2025 and 2024.
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Interest Expense, Net
Interest expense, net, primarily relates to the contractual interest expense and amortization of issuance costs related to our long-term debt arrangements. The following table sets forth interest expense, net (in thousands) for the periods indicated:
Interest expense, net:
Other interest (income) expense, net
2,866
(369
5,288
(416
Total interest expense, net
17,897
15,466
35,003
27,347
Interest expense, net, increased $2.4 million for the three months ended June 30, 2025, as compared to the same period in the prior year, primarily as a result of interest incurred related to new Convertible Notes issued subsequent to June 2024 partially offset by reductions in interest expense due to the 2025 Convertible Notes having been converted or redeemed in their entirety in July 2024, the 2027 Convertible Notes having been converted or redeemed in their entirety in January 2025 and the 2028 Secured Notes having been redeemed in their entirety in September 2024.
Interest expense, net, increased $7.7 million for the six months ended June 30, 2025, as compared to the same period in the prior year, primarily as a result of interest incurred related to the new Convertible Notes issued subsequent to June 2024 partially offset by reductions in interest expense due to the 2025 Convertible Notes having been converted or redeemed in their entirety in July 2024, the 2027 Convertible Notes having been converted or redeemed in their entirety in January 2025 and the 2028 Secured Notes having been redeemed in their entirety in September 2024.
Interest expense for future periods in 2025 is expected to increase compared to the same periods in 2024 as a result of increased debt outstanding as of June 30, 2025. Refer to Note 5, Long-term Debt, to the Consolidated Financial Statements for further information.
Other (Expense) Income, Net
For the three and six months ended June 30, 2025, other expense, net, of $8.3 million and $12.2 million, respectively, was comprised primarily of foreign currency transaction net losses. For the three and six months ended June 30, 2024, other income, net, of $0.7 million and $2.4 million, respectively, was comprised primarily of foreign currency transaction net gains.
We recorded a provision for income taxes of $2.26 billion on a pretax income of $8.06 billion that resulted in an effective tax rate of 28.0% for the six months ended June 30, 2025, as compared to a benefit from income taxes of $273.3 million on a pretax loss of $428.9 million that resulted in an effective tax rate of 63.7% for the six months ended June 30, 2024. During the six months ended June 30, 2025, our provision for income taxes primarily related to the tax effect of the unrealized gain on digital assets. During the six months ended June 30, 2024, our benefit from income taxes primarily related to (i) a tax benefit related to share-based compensation (including the income tax effects of exercises of stock options and vesting of share-settled restricted stock units) and (ii) a tax benefit from an increase in our deferred tax asset related to the impairment on our bitcoin holdings.
As of June 30, 2025, we had a valuation allowance of $0.5 million primarily related to our deferred tax assets related to foreign tax credits in certain jurisdictions. As of June 30, 2025, we had deferred tax liabilities with respect to the unrealized gain on our bitcoin holdings of approximately $6.31 billion. Our deferred tax liabilities are partially offset by deferred tax assets, such as net operating losses and capitalized research and development costs. If the market value of bitcoin declines in future periods, our deferred tax liability with respect to the unrealized gain on our bitcoin holdings will decrease, and we may be required to establish additional valuation allowances against our deferred tax assets. Such increases in valuation allowances could materially and adversely affect net income in periods in which such charges are incurred. We routinely consider actions necessary to preserve or utilize tax attributes. We will continue to regularly assess the realizability of deferred tax assets.
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Our effective tax rate may fluctuate due to changes in our domestic and foreign earnings and losses, material discrete tax items, or a combination of these factors resulting from transactions or events.
The U.S. enacted the IRA in August 2022. Among other things, unless an exemption by statute or regulation applies, a provision of the IRA imposes a 15% CAMT on a corporation with respect to an initial tax year and subsequent tax years, if the average annual adjusted financial statement income (“AFSI”) for any consecutive three-tax-year period preceding the initial tax year exceeds $1 billion. On September 12, 2024, the Department of the Treasury and the IRS issued proposed regulations with respect to the application of the CAMT. On June 2, 2025, the IRS published Notice 2025-27, which signaled that the IRS plans to issue additional interim guidance on how unrealized gains and losses on certain investment assets reported for financial statement purposes should be taken into account for purposes of determining AFSI. On July 30, 2025, a White House working group established by President Trump in January 2025 published a report on strengthening American leadership in digital financial technology, which called for the Department of the Treasury and the IRS to publish guidance addressing the determination of AFSI with respect to financial accounting for unrealized gains and losses on investment assets other than stock and partnership interests. Due to our adoption of ASU 2023-08 as of January 1, 2025, we were required to recognize a cumulative-effect adjustment of $12.75 billion to the opening balance of our retained earnings as of January 1, 2025. We will additionally be required to recognize unrealized gains or losses from changes in the fair value of digital assets in future reporting periods as income or losses. For purposes of calculating the AFSI, we will be required to ratably allocate this increase to our retained earnings over a four year period, from 2025 through 2028. When determining whether we are subject to CAMT and when calculating any related tax liability for an applicable tax year, the proposed regulations provide that, among other adjustments, our AFSI must include this ratable amount in addition to any unrealized gains or losses reported in the applicable tax year. Accordingly, as a result of the enactment of the IRA and our adoption of ASU 2023-08 on January 1, 2025, unless the IRA is amended or the proposed regulations, when finalized, are revised to provide relief (or other interim relief is granted), we expect, given the magnitude of our unrealized gain on digital assets as of June 30, 2025, that we would become subject to CAMT in the tax years beginning in 2026 and beyond. As the taxes to which we would be subject will depend in significant part on the future price of bitcoin and the size of our bitcoin holdings, we are not able to estimate the impact of CAMT on our future income tax expense. See “Risk Factors—Risks Related to Our Business in General—We may have exposure to greater than anticipated tax liabilities.”
On July 4, 2025, the One Big Beautiful Bill Act was enacted in the U.S., introducing several changes to corporate taxation. These changes include modifications to capitalization of research and development expenses, limitations on deductions for interest expense, accelerated fixed asset depreciation, and adjustments to the international tax framework. We are currently evaluating the full impact of this legislation on our consolidated financial statements. Since the legislation was signed into law after June 30, 2025, its impacts are not included in our operating results for the six months ended June 30, 2025.
Deferred Revenue and Advance Payments
Deferred revenue and advance payments represent amounts received or due from our customers in advance of our transferring our software or services to the customer. In the case of multi-year service contract arrangements, we generally do not invoice more than one year in advance of services and do not record deferred revenue for amounts that have not been invoiced. Revenue is subsequently recognized in the period(s) in which control of the software or services is transferred to the customer.
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The following table summarizes deferred revenue and advance payments (in thousands), as of:
4,200
69,566
127,170
3,901
204,837
1,623
3,974
367
5,964
Total current and non-current:
1,414
1,951
111,564
109,382
71,189
102,379
126,795
131,144
3,091
4,816
4,268
Total current and non-current deferred revenue and advance payments
218,448
242,944
210,801
The portions of multi-year contracts that will be invoiced in the future are not presented on the balance sheet in “Accounts receivable, net” and “Deferred revenue and advance payments” and instead are included in the remaining performance obligation disclosure below. Total deferred revenue and advance payments decreased $24.5 million as of June 30, 2025, as compared to December 31, 2024, primarily due to (i) a decrease in deferred product support revenue due to the timing of product support renewals and an increase in conversions from on-premises to subscription services contracts, partially offset by (ii) an increase in deferred subscription services revenue due to the timing of cloud renewal contracts, and (iii) an increase in deferred revenue from new subscription service contracts. Total deferred revenue and advance payments increased $7.6 million as of June 30, 2025, as compared to June 30, 2024, primarily due to (i) an increase in deferred revenue from new subscription services contracts, partially offset by (ii) a decrease in deferred product support revenue from existing customers migrating from on-premises to subscription services contracts.
Our remaining performance obligation represents all future revenue under contract and includes deferred revenue and advance payments and billable non-cancellable amounts that will be invoiced and recognized as revenue in future periods. The remaining performance obligation excludes contracts that are billed in arrears, such as certain time and materials contracts. As of June 30, 2025, we had an aggregate transaction price of $470.6 million allocated to the remaining performance obligation related to subscription services, product support, product licenses, and other services contracts. We expect to recognize approximately $278.5 million of the remaining performance obligation over the next 12 months and the remainder thereafter. However, the timing and ultimate recognition of our deferred revenue and advance payments and other remaining performance obligations depend on our satisfaction of various performance obligations, and the amount of deferred revenue and advance payments and remaining performance obligations at any date should not be considered indicative of revenues for any succeeding period.
Liquidity and Capital Resources
Liquidity
Principal and Potential Sources of Liquidity
Our principal sources of liquidity are cash and cash equivalents and on-going collection of our accounts receivable. Cash and cash equivalents may include holdings in bank demand deposits, money market instruments, certificates of deposit, and U.S. Treasury securities. As of June 30, 2025 and December 31, 2024, the amount of cash and cash equivalents held by our U.S. entities was $14.7 million and $8.8 million, respectively, and by our non-U.S. entities was $35.4 million and $29.3 million, respectively. We earn a significant amount of our revenues outside the United States. We did not repatriate any foreign earnings and profits during the three and six months ended June 30, 2025 and 2024.
Under our Treasury Reserve Policy and bitcoin strategy, we use the vast majority of our cash, including cash generated from capital raising transactions, to acquire bitcoins, which are classified as indefinite-lived intangible assets. As of June 30, 2025 and December 31, 2024, we held approximately 597,325 and 447,470 bitcoins, respectively, all of which are unencumbered. As of July 31, 2025, we held approximately 628,791 bitcoins, all of which are unencumbered, and which had an aggregate market value of $73.42 billion as of July 31,
2025, based on the market price of one bitcoin as reported on the Coinbase exchange as of 4:00 p.m. Eastern Time. As discussed further below, although we do not anticipate needing to use our bitcoin to meet our obligations in the next twelve months, we believe our substantial bitcoin holdings can serve as a source of liquidity, if necessary. See “—Availability of Bitcoin for Liquidity” below.
On May 1, 2025, we entered into the May 2025 Sales Agreement and filed a prospectus supplement for an at-the-market equity offering program pursuant to which we may sell shares of class A common stock having an aggregate offering price of up to $21.0 billion, from time to time, through TD Securities (USA) LLC, The Benchmark Company, LLC, BTIG, LLC, Canaccord Genuity LLC, Cantor Fitzgerald & Co., Mizuho Securities USA LLC, Santander US Capital Markets LLC, and SG Americas Securities, LLC, as sales agents. As of June 30, 2025 and July 31, 2025, approximately $18.11 billion and $17.04 billion, respectively, of our class A common stock remained available for issuance and sale pursuant to the May 2025 Sales Agreement. To the extent we make sales under the May 2025 Sales Agreement, we can use the net proceeds from such sales for general corporate purposes, including the acquisition of bitcoin, paying cash dividends on our outstanding preferred stock, and for working capital. See “—At-the-Market Equity Offerings” below.
On March 10, 2025, we entered into the STRK Sales Agreement and filed a prospectus supplement for a new at-the-market equity offering program pursuant to which we may issue and sell shares of our STRK Stock, having an aggregate offering price of up to $21.0 billion. As of June 30, 2025 and July 31, 2025, approximately $20.52 billion and $20.45 billion, respectively, of our STRK Stock remained available for issuance and sale pursuant to the STRK Sales Agreement. To the extent we make sales under the STRK Sales Agreement, we can use the net proceeds from such sales for general corporate purposes, including the acquisition of bitcoin and for working capital. See “—At-the-Market Equity Offerings” below.
On May 22, 2025, we entered into the Original STRF Sales Agreement and filed a prospectus supplement for a new at-the-market equity offering program pursuant to which we may issue and sell shares of our STRF Stock, having an aggregate offering price of up to $2.1 billion. On July 7, 2025, we amended the Original STRF Sales Agreement to include an additional sales agent. As of June 30, 2025 and July 31, 2025, approximately $1.94 billion and $1.88 billion, respectively, of our STRF Stock remained available for issuance and sale pursuant to the STRF Sales Agreement. To the extent we make sales under the STRF Sales Agreement, we can use the net proceeds from such sales for general corporate purposes, including the acquisition of bitcoin and for working capital. See “—At-the-Market Equity Offerings” below.
On July 7, 2025, we entered into the STRD Sales Agreement and filed a prospectus supplement for a new at-the-market equity offering program pursuant to which we may issue and sell shares of our STRD Stock, having an aggregate offering price of up to $4.2 billion. As of July 31, 2025, approximately $4.18 billion of our STRD Stock remained available for issuance and sale pursuant to the STRD Sales Agreement. To the extent we make sales under the STRD Sales Agreement, we can use the net proceeds from such sales for general corporate purposes, including the acquisition of bitcoin and for working capital, and may also use the net proceeds to pay cash dividends on STRF Stock and STRD Stock. See “—At-the-Market Equity Offerings” below.
On July 31, 2025, we entered into the STRC Sales Agreement and filed a prospectus supplement for a new at-the-market equity program pursuant to which we may issue and sell shares of our STRC Stock, having an aggregate offering price of up to $4.2 billion. As of July 31, 2025, approximately $4.2 billion of our STRC Stock remained available for issuance and sale pursuant to the STRC Sales Agreement. To the extent we make sales under the STRC Sales Agreement, we can use the net proceeds from such sales for general corporate purposes, including the acquisition of bitcoin and for working capital, and may also use the net proceeds to pay cash dividends on shares of any class or series of our preferred stock, other than our STRC Stock, then outstanding. See “—At-the-Market Equity Offerings” below.
Initial Public Offerings of Preferred Stock
On February 5, 2025, we issued 7,300,000 shares of STRK Stock in a public offering registered under the Securities Act of 1933, as amended (the “Securities Act”). In connection with such issuance, we filed the certificate of designations for the STRK Stock with the Secretary of State of the State of Delaware designating an aggregate of 7,300,000 shares of, and establishing the terms of, the STRK Stock. We received approximately $563.2 million of net proceeds, after deducting the underwriting discounts and commissions and our offering expenses, from the issuance of our STRK Stock in the initial public offering of STRK Stock. All net proceeds from the offering were used for general corporate purposes, including the acquisition of bitcoin and for working capital.
On March 25, 2025, we issued 8,500,000 shares of STRF Stock in a public offering registered under the Securities Act. In connection with such issuance, we filed the certificate of designations for the STRF Stock with the Secretary of State of the State of Delaware designating an aggregate of 8,500,000 shares of, and establishing the terms of, the STRF Stock. We received approximately $710.9 million of net proceeds, after deducting the underwriting discounts and commissions and our offering expenses, from the issuance of our STRF Stock in the initial public offering of STRF Stock. All net proceeds from the offering were used for general corporate purposes, including the acquisition of bitcoin and for working capital.
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On June 10, 2025, we issued 11,764,700 shares of STRD Stock in a public offering registered under the Securities Act. In connection with such issuance, we filed the certificate of designations for the STRD Stock with the Secretary of State of the State of Delaware designating an aggregate of 11,764,700 shares of, and establishing the terms of, the STRD Stock. We received approximately $979.5 million of net proceeds, after deducting the underwriting discounts and commissions and our offering expenses, from the issuance of our STRD Stock in the initial public offering of STRD Stock. All net proceeds from the offering were used for general corporate purposes, including the acquisition of bitcoin and for working capital.
On July 29, 2025, we issued 28,011,111 shares of STRC Stock in a public offering registered under the Securities Act. In connection with such issuance, we filed the certificate of designations for the STRC Stock with the Secretary of State of the State of Delaware designating an aggregate of 28,011,111 shares of, and establishing the terms of, the STRC Stock. We received approximately $2.47 billion of net proceeds, after deducting the underwriting discounts and commissions and our offering expenses, from the issuance of our STRC Stock in the initial public offering of STRC Stock. All net proceeds from the offering were used for general corporate purposes, including the acquisition of bitcoin and for working capital.
For a discussion of the dividends payable on and other rights of the STRK Stock, STRF Stock, STRD Stock and STRC Stock, see Note 9, Redeemable Preferred Stock and Note 14, Subsequent Events to the Consolidated Financial Statements included in this Quarterly Report.
Contractual and Other Obligations
Our material contractual obligations and cash requirements consist of:
The above items are explained in further detail in Note 5, Long-term Debt and Note 9 - Redeemable Preferred Stock, to the Consolidated Financial Statements included in this Quarterly Report as well as under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and in the Notes to the Consolidated Financial Statements included therein.
On June 2, 2025, we announced that our board of directors declared quarterly cash dividends of approximately $2.00 per share payable on the STRK Stock, and approximately $2.64 per share payable on the STRF Stock. The calculation of the STRF Stock per share dividend amount reflected the quarterly dividend accrued from March 25, 2025, the issuance date of the STRF Stock.
We declared and paid dividends of $32.6 million on the STRK Stock for the six months ended June 30, 2025 and $25.5 million on the STRF Stock for the six months ended June 30, 2025. As of June 30, 2025, there were no preferred stock dividends in arrears.
As contemplated by the prospectus supplement for the initial public offering of STRC Stock, on July 31, 2025, we announced that our board of directors declared monthly cash dividends of $0.80 per share payable on the STRC Stock. The calculation of the monthly dividend takes into account the dividend accrued from, but excluding, July 29, 2025, the issuance date of the STRC Stock. Payment will be made on August 31, 2025 (or, if such date is not a business day, the next business day) to stockholders of record of the STRC Stock at the close of business on August 15, 2025.
Other than (i) our issuance of the 2030B Convertible Notes, (ii) the conversions and redemption of the 2027 Convertible Notes, (iii) the required dividends on our STRK Stock, STRF Stock, and STRC Stock, and (iv) the regular dividends on our STRD Stock, all of which are described more fully above and in Note 5, Long-term Debt, Note 9, Redeemable Preferred Stock, and Note 14, Subsequent Events, to the Consolidated Financial Statements included in this Quarterly Report, there have been no changes to our material contractual obligations and cash requirements since December 31, 2024.
Short-term and Long-term Liquidity
Short-term Liquidity. Our short-term liquidity needs include working capital requirements, anticipated capital expenditures, dividend obligations on our STRK Stock to the extent that we do not pay such dividends in the form of shares of our class A common stock, dividend obligations on our STRF Stock and STRC Stock, regular dividends on our STRD Stock and contractual obligations due within the next twelve months. We expect that our cash and cash equivalents as of June 30, 2025, together with cash and cash equivalents generated by our operations, will not be sufficient to satisfy these needs over the next twelve months. However, we anticipate being able to use proceeds from equity or debt financings to meet these needs. Our ability to obtain equity and debt financing is subject to market conditions and other factors outside of our control, and we may not be able to obtain equity or debt financing in a timely manner, on favorable terms, or at all. Although we do not anticipate needing to use our bitcoin to meet our short-term liquidity needs, to the extent necessary, we would seek to use proceeds from the sale of our bitcoin to meet such needs. See “—Availability of Bitcoin for Liquidity” below and “Item 1A. Risk Factors— Risks Related to Our Business in General— A significant decrease in the market value of our bitcoin holdings could adversely affect our ability to satisfy our financial obligations or liquidity needs” for additional information.
Long-Term Liquidity. Beyond the next 12 months, our long-term cash needs are primarily for obligations related to our long-term debt and for payment of dividend obligations on our STRK Stock to the extent that we do not pay such dividends in the form of shares of our class A common stock, STRF Stock, and STRC Stock, and regular dividends on our STRD Stock. We also have long-term cash requirements for needs related to our operating leases, delivery of our new corporate aircraft, our various purchase agreements, and potentially CAMT. We expect our cash and cash equivalents as of June 30, 2025, together with cash and cash equivalents generated by our operations, will not be sufficient to satisfy these needs. As a result, we would seek to satisfy these needs through various options that we expect to be available to us, such as refinancing our debt or generating cash from other sources, which may include proceeds from equity or debt financings, or the sale of our bitcoin. See “—Availability of Bitcoin for Liquidity” below and “Item 1A. Risk Factors—Risks Related to Our Business in General—A significant decrease in the market value of our bitcoin holdings could adversely affect our ability to satisfy our financial obligations or liquidity needs” for additional information.
Furthermore, if the conditional conversion features of the Outstanding Convertible Notes are triggered, we may elect to settle the conversions of such Outstanding Convertible Notes in shares of our class A common stock, or a combination of cash and shares of class A common stock, rather than in all cash, which may enable us to reduce the amount of our cash obligations under the Outstanding Convertible Notes.
In addition, while the 2028 Convertible Notes, the 2029 Convertible Notes, the 2030A Convertible Notes, the 2030B Convertible Notes, the 2031 Convertible Notes, and the 2032 Convertible Notes have maturity dates of September 15, 2028, December 1, 2029, March 15, 2030, March 1, 2030, March 15, 2031, and June 15, 2032, respectively, the holders of the Outstanding Convertible Notes each have the right to require us to repurchase for cash all or any portion of the Outstanding Convertible Notes on September 15, 2027, in the case of the 2028 Convertible Notes, June 1, 2028, in the case of the 2029 Convertible Notes, September 15, 2028, in the case of the 2030A Convertible Notes and the 2031 Convertible Notes, March 1, 2028, in the case of the 2030B Convertible Notes, or June 15, 2029, in the case of the 2032 Convertible Notes, at a repurchase price in each case equal to 100% of the principal amount of the applicable Outstanding Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding the repurchase date.
In May 2025, we announced a capital plan to raise $84 billion in the medium-to-long term, including $42 billion of equity capital and $42 billion of fixed-income instruments, including debt, convertible notes and preferred stock. This capital plan reflects an increase from our capital plan initially announced in October 2024 to raise $42 billion in aggregate, and includes capital raised through the original plan.
Availability of Bitcoin for Liquidity
We do not believe we will need to sell or engage in other transactions with respect to any of our bitcoins within the next twelve months to meet our liquidity needs, although we may from time to time sell or engage in other transactions with respect to our bitcoins as part of treasury management operations, as noted above. The bitcoin market historically has been characterized by significant volatility in its price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of instability in the bitcoin market, we may not be able to sell our bitcoins at reasonable prices or at all. As a result, our bitcoins are less liquid than our existing cash and cash equivalents
49
and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. In addition, upon sale of our bitcoin, we may incur additional taxes related to any realized gains or we may incur capital losses as to which the tax deduction may be limited. See “Item 1A. Risk Factors— Risks Related to Our Bitcoin Strategy and Holdings—Our bitcoin holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.”
The following table sets forth a summary of our cash flows (in thousands) and related percentage changes for the periods indicated:
Six Months Ended June 30,
809.4
493.6
491.6
Net cash (used in) provided by operating activities. The primary sources of our cash provided by operating activities are cash collections of our accounts receivable from customers following the sales and renewals of our product licenses, subscription services and product support, as well as consulting and education services. Our primary uses of cash in operating activities are for personnel-related expenditures for software development, personnel-related expenditures for providing consulting, education, and subscription services, and for sales and marketing costs, general and administrative costs, interest expense related to our long-term debt arrangements, and income taxes. Non-cash items to further reconcile net income (loss) to net cash (used in) provided by operating activities consist primarily of depreciation and amortization, reduction in the carrying amount of operating lease right-of-use assets, deferred taxes, release of liabilities for unrecognized tax benefits, share-based compensation expense, unrealized loss or gain on digital assets, digital asset impairment losses, and amortization of the issuance costs on our long-term debt.
Net cash used in operating activities increased $42.6 million for the six months ended June 30, 2025, as compared to the same period in the prior year, due to a $5.96 billion increase in net income and a $25.4 million decrease from changes in operating assets and liabilities, which was partially offset by a $5.98 billion increase in non-cash items principally related to unrealized gains on digital assets. In particular, our cash from operations has been negatively impacted by our continued transition of customers to subscription services offerings, which has resulted in (i) reduced cash collections due to invoicing over multiple years, (ii) increased commissions and (iii) increased costs of our cloud infrastructure to support increased usage. We have also incurred additional bitcoin advocacy costs, custodial fees and personnel costs as we continue to pursue our bitcoin strategy. Our interest payments for the six months ended June 30, 2025 have increased compared to the same period in the prior year primarily due to the issuances of the 2028 Convertible Notes and 2032 Convertible Notes.
Net cash used in investing activities. The changes in net cash used in investing activities primarily relate to purchases of digital assets, advance deposits on a new corporate aircraft, and expenditures on property and equipment. Net cash used in investing activities increased $12.02 billion for the six months ended June 30, 2025, as compared to the same period in the prior year, primarily due to a $12.00 billion increase in purchases of bitcoins and a $22.0 million deposit on a new corporate aircraft. During the six months ended June 30, 2025, we purchased $14.43 billion of bitcoin using net proceeds from the issuances of our 2030B Convertible Notes; net proceeds from the public offerings of our STRK Stock, STRF Stock and STRD Stock; net proceeds from the sale of class A common stock under our at-the-market common stock equity offering program; and net proceeds from the sale of STRK Stock and STRF Stock under our at-the-market STRK Stock and STRK Stock offering programs, respectively; while during the six months ended June 30, 2024, we purchased $2.433 billion of bitcoin using net proceeds from the issuances of our 2030A Convertible Notes, 2031 Convertible Notes, and 2032 Convertible Notes, net proceeds from the sale of class A common stock under our at-the-market equity offering program then in place, and Excess Cash.
Net cash provided by financing activities. The changes in cash provided by financing activities primarily relate to the issuance and subsequent repayment of long-term debt; the sale of class A common stock under our at-the-market common stock offering program; the sale of our STRK Stock and STRF Stock under our at-the-market STRK Stock and STRF Stock offering programs, respectively; dividends paid on our STRK Stock and STRF Stock, net proceeds from the initial public offerings of our STRK Stock, STRF Stock, and STRD Stock; the exercise or vesting of certain awards under the Stock Incentive Plans, and the sales of class A common stock under the 2021 ESPP. Net cash provided by financing activities increased $12.05 billion for the six months ended June 30, 2025, as compared to the same period in the prior year, primarily due to (i) a $9.51 billion increase in net proceeds from our sale of class A common stock under our at-the-market offering programs and (ii) $2.891 billion in aggregate net proceeds from the initial public offerings of our STRK Stock, STRF Stock, STRD Stock, and sales of STRK Stock and STRF Stock under our at-the-market STRK Stock and STRF Stock offering programs, respectively during the six months ended June 30, 2025, partially offset by (iii) a $176.5 million decrease in long-term debt proceeds, net of issuance costs, during the six months ended June 30, 2025, as compared to the same period in the prior year, (iv) a $131.5 million decrease in proceeds from the exercise of stock options under the Stock Incentive Plans in the six months ended June 30, 2025, as
compared to the same period in the prior year and (v) $58.1 million in dividends paid on our preferred stock during six months ended June 30, 2025.
Long-term Debt
The terms of each of the long-term debt instruments are discussed more fully in Note 5, Long-term Debt, to the Consolidated Financial Statements included in this Quarterly Report as well as Note 8, Long-term Debt, to the Consolidated Financial Statements of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
In February 2021, we issued $1.050 billion aggregate principal amount of the 2027 Convertible Notes; in March 2024, we issued $800.0 million aggregate principal amount of the 2030A Convertible Notes and $603.7 million aggregate principal amount of the 2031 Convertible Notes; in June 2024, we issued $800.0 million aggregate principal amount of the 2032 Convertible Notes; in September 2024 we issued $1.010 billion aggregate principal amount of the 2028 Convertible Notes, in November 2024 we issued $3.000 billion aggregate principal amount of the 2029 Convertible Notes, and in February 2025 we issued $2.000 billion aggregate principal amount of the 2030B Convertible Notes. We principally used the net proceeds from the issuances of the Convertible Notes to acquire bitcoin, and we used a portion of the net proceeds from the 2028 Convertible Notes to redeem the 2028 Secured Notes, as discussed further below.
During the six months ended June 30, 2025, we paid $17.23 million in interest to holders of the Convertible Notes. During the six months ended June 30, 2024, we paid $2.4 million in interest to holders of the Convertible Notes. During the six months ended June 30, 2025, we issued 7,373,528 shares of class A common stock and paid a nominal amount of cash in lieu of fractional shares in connection with the full conversion of $1.050 billion aggregate principal amount of 2027 Convertible Notes then outstanding equal to 100% of the principal amount of the 2027 Convertible Notes redeemed, plus accrued and unpaid interest, to but excluding such date. During the six months ended June 30, 2024, we issued 12,672,400 shares of class A common stock and paid a nominal amount of cash in lieu of fractional shares in connection with the conversion requests in respect to $504.4 million in principal amount of the 2025 Convertible Notes. The remaining 2025 Convertible Notes were redeemed or converted into class A common stock in the third quarter of 2024 and were not outstanding as December 31, 2024 or June 30, 2025.
In June 2021, we issued $500.0 million aggregate principal amount of the 2028 Secured Notes. We used the net proceeds from the issuance of the 2028 Secured Notes to acquire bitcoin. We did not pay any interest related to the 2028 Secured Notes during the six months ended June 30, 2025 or 2024. On September 26, 2024, we redeemed all of the outstanding 2028 Secured Notes at an aggregate redemption price of approximately $523.9 million and all collateral securing the 2028 Secured Notes was released.
In June 2022, we, through one of our wholly-owned subsidiaries, entered into a secured term loan agreement in the amount of $11.1 million, bearing interest at an annual rate of 5.2%, and maturing in June 2027. During each of the six months ended June 30, 2025 and 2024, we paid $0.5 million in principal and interest to the lender.
In June 2025, we entered into a loan agreement that provides for aggregate borrowings of up to $31.1 million, available in multiple tranches, and bearing interest, with respect to each tranche, at a variable rate equal to the one-year Secured Overnight Financing Rate plus 4.24%. The loan will mature in December 2026. As of June 30, 2025, the loan had a net carrying value of $15.8 million, and an outstanding principal balance of $16.07 million.
Other than as discussed above, during the six months ended June 30, 2025 and 2024, we did not repurchase or prepay any of our outstanding debt. We or our affiliates may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. We may also seek to prepay our outstanding indebtedness. The amounts involved in any such repurchase or prepayment may be material. We could seek to fund any such debt repurchases or prepayments using proceeds from equity offerings that we may choose to undertake from time-to-time.
At-the-Market Equity Offerings
From time to time, we have entered into sales agreements with agents pursuant to which we could issue and sell shares of our class A common stock through at-the-market equity offering programs, which we refer to as the Common Stock ATM Offerings.
On March 10, 2025, we entered into a sales agreement with agents pursuant to which we may issue and sell shares of our STRK Stock through the STRK ATM Offering. On May 22, 2025, we entered into a sales agreement with agents pursuant to which we may issue and sell shares of our STRF Stock through the STRF ATM Offering. On July 7, 2025, we amended this sales agreement to add another sales agent. Also on July 7, 2025, we entered into a sales agreement with agents pursuant to which we may issue and sell shares of our STRD Stock through the STRD ATM Offering. On July 31, 2025, we entered into a sales agreement with agents pursuant to which we may issue and sell shares of our STRC Stock through the STRC ATM Offering.
See Note 11, At-the-Market Offerings and Note 14, Subsequent Events to the Consolidated Financial Statements for additional information regarding the Common Stock ATM Offerings, the STRK ATM Offering, the STRF ATM Offering, the STRD ATM Offering and the STRC ATM Offering.
The following table sets forth total shares sold and total net proceeds received (net of sales commissions and expenses) from shares sold under our at-the-market equity offering programs for the periods indicated (in thousands, except number of shares).
Number of shares sold pursuant to at-the-market sales offerings:
Shares of class A common stock sold pursuant to the Common Stock ATM Offerings
Shares of STRK Stock sold pursuant to the STRK ATM Offering
Shares of STRF Stock sold pursuant to the STRF ATM Offering
Net proceeds received from shares sold pursuant to at-the-market sales offerings:
Net proceeds received from sales made pursuant to the Common Stock ATM Offerings
Net proceeds received from sales made pursuant to the STRK ATM Offering
Net proceeds received from sales made pursuant to the STRF ATM Offering
Total net proceeds received from shares sold pursuant to at-the-market equity offering programs
5,858,518
10,288,121
Non-GAAP Financial Measures
We are providing supplemental non-GAAP financial measures below which management uses internally to help understand, manage, and evaluate our business performance and to help make operating decisions. We believe that these non-GAAP financial measures are also useful to investors and analysts in comparing our performance across reporting periods on a consistent basis. We also believe the use of these non-GAAP financial measures can facilitate comparison of our operating results to those of our competitors. These supplemental financial measures are not measurements of financial performance under generally accepted accounting principles in the United States (“GAAP”) and, as a result, these supplemental financial measures may not be comparable to similarly titled measures of other companies.
Non-GAAP financial measures are subject to material limitations as they are not measurements prepared in accordance with GAAP, and are not a substitute for such measurements. For example, we expect that share-based compensation expense, which is excluded from certain of the non-GAAP financial measures below, will continue to be a significant recurring expense over the coming years and is an important part of the compensation provided to certain employees, officers, and directors. Similarly, we expect that interest expense arising from the amortization of debt issuance costs on our long-term debt, which is excluded from certain of the non-GAAP financial measures below, will continue to be a recurring expense over the terms of our long-term debt arrangements. Our non-GAAP financial measures are not meant to be considered in isolation and should be read only in conjunction with our Consolidated Financial Statements, which have been prepared in accordance with GAAP. We rely primarily on such Consolidated Financial Statements to understand, manage, and evaluate our business performance and use the non-GAAP financial measures only supplementally.
Non-GAAP income (loss) from operations
Non-GAAP income (loss) from operations excludes share-based compensation expense, which is a significant non-cash expense that we believe is not reflective of our general business performance, and for which the accounting requires management judgment. Consequently, our accounting for share-based compensation expense could vary significantly in comparison to other companies. The following is a reconciliation of our non-GAAP income (loss) from operations to income (loss) from operations, its most directly comparable GAAP measure, (in thousands) for the periods indicated:
Reconciliation of non-GAAP income (loss) from operations:
14,047,732
(179,653
8,138,139
(365,564
52
Non-GAAP net income (loss) attributable to common stockholders and non-GAAP diluted income (loss) per common share
Non-GAAP net income (loss) attributable to common stockholders and non-GAAP diluted income (loss) per common share each exclude the impact of (i) share-based compensation expense, (ii) interest expense arising from the amortization of debt issuance costs on our long-term debt, and (iii) related income taxes. We believe non-GAAP net income (loss) attributable to common stockholders and non-GAAP diluted income (loss) per common share offer management and investors insight as they exclude significant non-cash expenses, and their related income tax effects. The following are reconciliations of our non-GAAP net income (loss) attributable to common stockholders and non-GAAP diluted income (loss) per common share to net income (loss) attributable to common stockholders and diluted income (loss) per common share, respectively, their most directly comparable GAAP measures (in thousands, except per share data), for the periods indicated.
Reconciliation of non-GAAP net income (loss) attributable to common stockholders of Strategy:
Interest expense arising from amortization of debt issuance costs
3,842
Income tax effects (1)
(40,904
(57,962
(69,137
(167,200
Non-GAAP net income (loss) attributable to common stockholders of Strategy
9,946,587
(136,058
5,703,580
(278,066
Reconciliation of non-GAAP diluted income (loss) per common share (2):
Diluted income (loss) per common share
Share-based compensation expense (per diluted common share)
0.05
0.12
0.09
0.22
Interest expense arising from amortization of debt issuance costs (per diluted common share) (3)
0.00
0.02
0.04
Income tax effects (per diluted common share) (3)
(0.13
(0.33
(0.23
(0.96
Non-GAAP diluted income (loss) per common share
32.52
(0.76
19.29
(1.59
53
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The following discussion about our market risk exposures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements.
We are exposed to the impact of market price changes in bitcoin, foreign currency fluctuations and interest rate risk.
Market Price Risk of Bitcoin. We have used a significant portion of our cash, including cash generated from capital raising transactions, to acquire bitcoin. We account for our bitcoin as indefinite-lived intangible assets. Although we continue to initially record our bitcoin purchases at cost, upon adoption of ASU 2023-08 on January 1, 2025, any subsequent increases or decreases in fair value are recognized as incurred in the Consolidated Statements of Operations, and the fair value of our bitcoin is reflected within the Consolidated Balance Sheets each reporting period-end. As of June 30, 2025, we held approximately 597,325 bitcoins with a carrying value of $64.363 billion on our Consolidated Balance Sheet. Bitcoin is a highly volatile asset that has traded below $50,000 per bitcoin and above $120,000 per bitcoin in our principal market in the 12 months preceding the date of this report. A significant decrease in the price of bitcoin would have a material adverse effect on our earnings.
Foreign Currency Risk. We conduct a significant portion of our business in currencies other than the U.S. dollar, the currency in which we report our Consolidated Financial Statements. International revenues accounted for 43.0% and 42.8% of our total revenues for the three months ended June 30, 2025 and 2024, respectively, and 42.9% and 43.5% of our total revenues for the six months ended June 30, 2025, respectively. We anticipate that international revenues will continue to account for a significant portion of our total revenues. The functional currency of each of our foreign subsidiaries is generally the local currency.
Assets and liabilities of our foreign subsidiaries are translated into U.S. dollars at exchange rates in effect as of the applicable Balance Sheet date and any resulting translation adjustments are included as an adjustment to stockholders’ equity. Revenues and expenses generated from these subsidiaries are translated at average monthly exchange rates during the quarter in which the transactions occur. Transaction gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included in the results of operations.
As a result of transacting in multiple currencies and reporting our Consolidated Financial Statements in U.S. dollars, our operating results may be adversely impacted by currency exchange rate fluctuations in the future.
We cannot predict the effect of exchange rate fluctuations upon our future results. We attempt to minimize our foreign currency risk by converting our excess foreign currency held in foreign jurisdictions to U.S. dollar-denominated cash and investment accounts.
As of June 30, 2025 and December 31, 2024, a 10% adverse change in foreign currency exchange rates versus the U.S. dollar would have decreased our aggregate reported cash and cash equivalents by 5.2% and 5.7%, respectively. If average exchange rates during the six months ended June 30, 2025 had changed unfavorably by 10%, our revenues for the six months ended June 30, 2025 would have decreased by 3.8%. During the six months ended June 30, 2025, our revenues were not significantly impacted by changes in weighted average exchange rates, as compared to the same period in the prior year.
Interest Rate Risk. We are exposed to changes in interest rates primarily via our STRC Stock, which accumulates cumulative dividends, which we refer to in this Item 3 Quantitative and Qualitative Disclosures About Market Risk as “regular dividends”, at a variable dividend rate, which has been initially set at 9.00% per annum. However, we have the right, in our sole and absolute discretion, to adjust the regular dividend rate applicable to subsequent regular dividend periods, subject to certain restrictions, including restrictions on the maximum reduction of the dividend rate and a requirement to declare a dividend equal to at least the monthly SOFR per annum rate. Our current intention (which is subject to change in our sole and absolute discretion) is to adjust the monthly regular dividend rate per annum in such manner as we believe is designed to cause the STRC Stock to trade at prices at or close to its stated amount of $100 per share.
As of July 31, 2025, if we determined to increase the regular dividend rate on our STRC Stock by 0.50%, the STRC Stock’s monthly dividend accrual would increase by approximately $1.2 million. We do not believe our interest rate risk exposure via the STRC Stock is material as of July 31, 2025.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Controls. No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended June 30, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For information regarding material pending legal proceedings in which we are involved, see “Commitments and Contingencies – Shareholder and Derivative Actions” in Note 6 of the Notes to Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
We are involved in various legal proceedings arising in the normal course of business. Although the outcomes of these legal proceedings are inherently difficult to predict, we do not expect the resolution of these legal proceedings to have a material adverse effect on our financial position, results of operations, or cash flows.
Item 1A. Risk Factors
You should carefully consider the risks described below before making an investment decision. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impact us, our business, our bitcoin holdings, or our securities.
If any of the following risks occur, our business, financial condition, or results of operations could be materially adversely affected. In such case, the market price of our class A common stock and our Preferred Stock, which we refer to collectively as our “listed securities,” could decline, and you may lose all or part of your investment.
Risks Related to Our Business in General
Our quarterly operating results, revenues, and expenses may fluctuate significantly, which could have an adverse effect on the market price of our listed securities
For many reasons, including those described below, our operating results, revenues, and expenses have varied in the past and may vary significantly in the future from quarter to quarter. These fluctuations could have an adverse effect on the market price of our listed securities.
Fluctuations in Quarterly Operating Results. Our quarterly operating results may fluctuate, in part, as a result of:
Limited Ability to Adjust Expenses. We base our operating expense budgets on expected revenue trends and strategic objectives. Many of our expenses, such as interest expense on our debt, dividend obligations on our outstanding Preferred Stock, tax liabilities, office leases and certain personnel costs, are relatively fixed. We do not expect the cash generated by our software operations to be sufficient to cover such expenses, and we expect to use proceeds from equity or debt financings to pay our expenses and satisfy our liquidity needs that are in excess of our operating cash flows. If we are unable to secure equity or debt financing in a timely manner, on favorable terms, or at all, we may be required to sell bitcoin to satisfy our financial obligations. Such actions could cause significant variation in our operating results in any quarter.
Based on the above factors, we believe quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. For example, a decline in the price of bitcoin at March 31, 2025 from the price at January 1, 2025 resulted in our experiencing
a $5.91 billion unrealized loss on digital assets for the quarter ended March 31, 2025, while an increase in the price of bitcoin at June 30, 2025 from the price at March 31, 2025 resulted in our experiencing a $14.05 billion unrealized gain on digital assets for the quarter ended June 30, 2025. Additionally, due to the above factors, it is possible that in one or more future quarters, our operating results may be below the expectations of public market analysts and investors. In that event, the market price of our listed securities may fall.
We may not be able to remain profitable in future periods
As of January 1, 2025, we have adopted ASU 2023-08, pursuant to which we are required to recognize increases or decreases in fair value of our digital assets as incurred in our Consolidated Statements of Operations. We generated net income of $10.02 billion for the three months ended June 30, 2025 and $5.80 billion for the six months ended June 30, 2025, primarily due to a $14.05 billion and $8.14 billion, respectively, unrealized gain on digital assets for the respective periods, partially offset by $4.04 billion and $2.34 billion respectively, in deferred tax expenses during the respective periods. We may not be able to remain profitable in future periods, particularly if we incur significant unrealized losses related to our digital assets, which will depend on the price of bitcoin at the end of the applicable period. As a result, our results of operations and financial condition may be materially adversely affected. Additionally, even during periods when we experience significant unrealized gains on digital assets (such as the three- and six-month periods ended June 30, 2025), we may nevertheless continue to experience significant cashflow shortfalls unless we sell our bitcoin or otherwise generate cashflow using our bitcoin.
As of June 30, 2025, we had deferred tax liabilities with respect to the unrealized gain on our bitcoin holdings of approximately $6.31 billion. Our deferred tax liabilities are partially offset by deferred tax assets, such as net operating losses and capitalized research and development costs. If the market value of bitcoin declines in future periods, our deferred tax liability with respect to the unrealized gain on our bitcoin holdings will decrease, and we may be required to establish additional valuation allowances against our deferred tax assets. Such increases in valuation allowances could materially and adversely affect net income in periods in which such charges are incurred.
A significant decrease in the market value of our bitcoin holdings could adversely affect our ability to satisfy our financial obligations or liquidity needs
As of July 31, 2025, our outstanding indebtedness was $8.24 billion, and our annual contractual interest expense was $36.5 million. Additionally, as of July 31, 2025, we had outstanding $6.3 billion aggregate notional value of our outstanding Preferred Stock, with respect to which the aggregate annual regular dividends payable (including in the case of STRD Stock, as and if declared, and in the case of STRC Stock, assuming the initial dividend rate of 9.00% remains unchanged) were $568.03 million.
As part of our bitcoin strategy, we expect to incur or continue to incur additional indebtedness and fixed charges, and we expect to issue additional preferred stock. For the quarter ended June 30, 2025, our enterprise analytics software business did not generate positive cash flow from operations, and we do not expect our enterprise analytics software business to generate sufficient cash flow from operations to satisfy our financial obligations or liquidity needs over the next twelve months. If our enterprise analytics software business does not generate cash flows in future periods sufficient to satisfy our financial obligations and liquidity needs, including repayment of principal and payment of interest on our debt and cash dividends on our Preferred Stock, we intend to fund such payments using cash proceeds from equity or debt financings. Our ability to obtain equity or debt financing may in turn depend on, among other factors, the value of our bitcoin holdings, investor sentiment and the general public perception of bitcoin, our strategy and our value proposition. Accordingly, a significant decline in the market value of our bitcoin holdings or a negative shift in these other factors may create liquidity and credit risks, as such a decline or such shifts may adversely impact our ability to secure sufficient equity or debt financing to satisfy our financial obligations and liquidity needs. These risks could materialize at times when bitcoin is trading below its carrying value on our most recent balance sheet or our cost basis.
As bitcoin constitutes the vast bulk of assets on our balance sheet, if we are unable to secure equity or debt financing in a timely manner, on favorable terms, or at all, we may be required to sell bitcoin to satisfy our financial obligations or liquidity needs, and we may be required to make such sales at prices below our cost basis or on terms that are otherwise unfavorable. Any such sale of bitcoin may have a material adverse effect on our operating results and financial condition, and could impair our ability to secure additional equity or debt financing in the future. Our inability to secure additional equity or debt financing in a timely manner, on favorable terms or at all, or to sell our bitcoin in amounts and at prices sufficient to satisfy our financial obligations or liquidity needs, including our debt service and cash dividend payments on our Preferred Stock, could cause us to default under such obligations. Any default on our current or future indebtedness or any of our outstanding or newly issued preferred stock could have a material adverse effect on our financial condition. See “Risks Related to Our Outstanding and Potential Future Indebtedness” and “Risks Related to Our Preferred Stock” for additional details about the risks which may impact us if we are unable to satisfy our debt service and cash dividend obligations.
Unrealized gains on our bitcoin holdings could cause us to become subject to the corporate alternative minimum tax under the Inflation Reduction Act of 2022
The U.S. enacted the IRA in August 2022. Unless an exemption applies, the IRA imposes a 15% CAMT on a corporation with respect to an initial tax year and subsequent tax years, if the average annual AFSI for any consecutive three-tax-year period preceding the initial tax year exceeds $1 billion. On September 12, 2024, the Department of the Treasury and the IRS issued proposed regulations with respect to
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the application of the CAMT. On June 2, 2025, the IRS published Notice 2025-27, which signaled that the IRS plans to issue additional interim guidance on how unrealized gains and losses on certain investment assets reported for financial statement purposes should be taken into account for purposes of determining AFSI. On July 30, 2025, a White House working group established by President Trump in January 2025 published a report on strengthening American leadership in digital financial technology, which called for the Department of the Treasury and the IRS to publish guidance addressing the determination of AFSI with respect to financial accounting for unrealized gains and losses on investment assets other than stock and partnership interests.
On January 1, 2025, we adopted ASU 2023-08. ASU 2023-08 requires us to measure our bitcoin holdings at fair value in our statement of financial position, with gains and losses from changes in the fair value of our bitcoin recognized in net income each reporting period. As a result of our adoption of ASU 2023-08, as of January 1, 2025, we applied a net increase to the opening balance of our retained earnings of $12.75 billion. For purposes of calculating the AFSI, we will be required to ratably allocate this increase to our retained earnings over a four year period, from 2025 through 2028. When determining whether we are subject to CAMT and when calculating any related tax liability for an applicable tax year, the currently proposed regulations issued in September 2024 provide that, among other adjustments, our AFSI must include this ratable amount in addition to any unrealized gains or losses reported in the applicable tax year.
Accordingly, as a result of the enactment of the IRA and our adoption of ASU 2023-08 on January 1, 2025, unless the IRA is amended or the proposed regulations with respect to CAMT, when finalized, are revised to provide relief (or other interim relief is granted), we expect, given the magnitude of our unrealized gain on digital assets as of June 30, 2025, that we would become subject to the CAMT beginning in the 2026 tax year. Whether we do become subject to the CAMT will depend on numerous factors outside of our control, including the publication of any interim or final guidance with respect to the CAMT or the calculation of AFSI, as well as the magnitude of our unrealized gains or losses on our bitcoin holdings for the year ending December 31, 2025, which in turn will depend on our bitcoin holdings and the market value of bitcoin as of that date. If we become subject to the CAMT, this could result in a significant increase in our total tax obligations, which we would need to satisfy in cash, which in turn could materially affect our financial results, including our financial condition, cash flow and results of operations. Additionally, because unrealized gain on our digital assets does not increase our cash flow, if we become subject to CAMT, we may need to liquidate some of our bitcoin holdings or issue additional debt or equity securities to raise cash sufficient to satisfy our tax obligations.
We may have exposure to greater than anticipated tax liabilities
We are subject to income taxes and non-income taxes in a variety of domestic and foreign jurisdictions. Our future income tax liability could be materially adversely affected by earnings that are lower than anticipated in jurisdictions where we have lower statutory rates, earnings that are higher than anticipated in jurisdictions where we have higher statutory rates, changes in the valuation of our deferred tax assets and liabilities, changes in the amount of our unrecognized tax benefits, or changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, if we sold any of our bitcoin at prices greater than the cost basis of the bitcoin sold, we would incur a tax liability with respect to any gain recognized, and such tax liability could be material. Changes in the tax laws of foreign jurisdictions could arise, including as a result of the project undertaken by the Organisation for Economic Co-operation and Development (“OECD”) to combat base erosion and profit shifting. The OECD, which represents a coalition of member countries, has issued recommendations that, in some cases, make substantial changes to numerous long-standing tax positions and principles. These changes, many of which have been adopted or are under active consideration by OECD members and/or other countries, could increase tax uncertainty and may adversely affect our provision for income taxes.
After enactment of the U.S. Tax Cuts and Jobs Act, most of our income is taxable in the U.S. with a significant portion taxable under the Global Intangible Low-Taxed Income (“GILTI”) regime (or the Net CFC Tested Income regime after enactment of the One Big Beautiful Bill Act of 2025). Beginning in fiscal year 2026, the deduction allowable under the GILTI regime (or the Net CFC Tested Income regime) will decrease from 50% to 40%, which will increase the effective tax rate imposed on our income. The U.S. also enacted the IRA in August 2022. On September 12, 2024, the Department of the Treasury and the IRS issued proposed regulations with respect to the application of the CAMT. Unless an exemption applies, the IRA imposes (i) a 1% excise tax on certain stock repurchases made by publicly traded U.S. corporations, and (ii) a 15% CAMT on a corporation with respect to an initial tax year and subsequent tax years, if the average annual AFSI for any consecutive three-tax-year period preceding the initial tax year exceeds $1 billion. As discussed in greater detail under the risk factor heading “Risks Related to Our Business in General-Unrealized gains on our bitcoin holdings could cause us to become subject to the corporate alternative minimum tax under the Inflation Reduction Act of 2022,” as a result of the enactment of the IRA and our adoption of ASU 2023-08 on January 1, 2025, unless the IRA is amended or the proposed regulations with respect to CAMT, when finalized, are revised to provide relief (or other interim relief is granted), we expect, given the magnitude of our unrealized gain on digital assets as of June 30, 2025, that we would become subject to the CAMT in the 2026 tax year. Whether we do become subject to the CAMT will depend on numerous factors outside of our control, including the publication of any interim or final guidance with respect to the CAMT or the calculation of AFSI, as well as the magnitude of our unrealized gains or losses on our bitcoin holdings for the year ending December 31, 2025, which in turn will depend on our bitcoin holdings and the market value of bitcoin as of that date. If we become subject to these new taxes under the IRA, for these or any other reasons, it could result in a material tax obligation, which we would need to satisfy in cash, which in turn could materially affect our financial condition, cash flow and results of operations. Additionally, because unrealized gain on our digital assets does not increase our cash flow, if we become subject to CAMT, we may need to liquidate some of our bitcoin holdings or issue additional debt or equity securities to raise cash sufficient to satisfy our tax obligations. Further, other existing
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domestic or foreign tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied in a manner that negatively impacts us.
Our determination of our tax liability is subject to review by applicable domestic and foreign tax authorities. Any adverse outcome of such reviews could have an adverse effect on our operating results and financial condition. The determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment and there are many transactions and calculations, including in respect of transactions involving bitcoin, where the ultimate tax determination is uncertain. Moreover, as a multinational business, we have subsidiaries that engage in many intercompany transactions in a variety of tax jurisdictions where the ultimate tax determination is uncertain.
We also have contingent tax liabilities that, in management’s judgment, are not probable of assertion. If such unasserted contingent liabilities were to be asserted, or become probable of assertion, we may be required to record significant expenses and liabilities in the period in which these liabilities are asserted or become probable of assertion. As a result of these and other factors, the ultimate amount of tax obligations owed may differ from the amounts recorded in our financial statements and any such difference may materially affect our financial results in future periods in which we change our estimates of our tax obligations or in which the ultimate tax outcome is determined.
Risks Related to Our Bitcoin Strategy and Holdings
Our bitcoin strategy exposes us to various risks, including risks associated with bitcoin
Our bitcoin strategy exposes us to various risks, including the following:
Bitcoin is a highly volatile asset. Bitcoin is a highly volatile asset that has traded below $50,000 per bitcoin and above $120,000 per bitcoin on the Coinbase exchange (our principal market for bitcoin) in the 12 months preceding the date of this Quarterly Report. The trading price of bitcoin significantly decreased during prior periods, and such declines may occur again in the future.
Bitcoin does not pay interest or dividends. Bitcoin does not pay interest or other returns and we can only generate cash from our bitcoin holdings if we sell our bitcoin or implement strategies to create income streams or otherwise generate cash by using our bitcoin holdings. Even if we pursue any such strategies, we may be unable to create income streams or otherwise generate cash from our bitcoin holdings, and any such strategies may subject us to additional risks.
Our bitcoin holdings significantly impact our financial results and the market price of our listed securities. Our bitcoin holdings have significantly affected our financial results and if we continue to increase our overall holdings of bitcoin in the future, they will have an even greater impact on our financial results and the market price of our listed securities. For further details, see “Risks Related to Our Bitcoin Strategy and Holdings - Our historical financial statements prior to March 31, 2025 do not reflect the potential variability in earnings that we have experienced to date and may experience in the future relating to our bitcoin holdings.”
Our assets are concentrated in bitcoin. The vast bulk of our assets are concentrated in our bitcoin holdings. The concentration of our assets in bitcoin limits our ability to mitigate risk that could otherwise be achieved by holding a more diversified portfolio of assets.
Our bitcoin strategy relies substantially on our ability to complete equity and debt financings. Substantially all of our bitcoin purchases have been made using proceeds from equity and debt financings. Our ability to achieve the objectives of our bitcoin strategy depends in significant part on our ability to obtain equity and debt financing. If we are unable to obtain equity or debt financing on favorable terms or at all, we may not be able to successfully execute on our bitcoin strategy.
Our bitcoin strategy has not been tested over an extended period of time or under all market conditions. We are continually examining the risks and rewards of our strategy to acquire and hold bitcoin. This strategy has not been tested over an extended period of time or under all market conditions. For example, although we believe bitcoin, due to its limited supply, has the potential to serve as a hedge against inflation in the long term, the short-term price of bitcoin declined in recent periods during which the inflation rate increased. If bitcoin prices were to decline or our bitcoin strategy otherwise proves unsuccessful, our financial condition, results of operations, and the market price of our listed securities would be materially adversely impacted.
We are subject to counterparty risks, including in particular risks relating to our custodians. Although we have implemented various measures that are designed to mitigate our counterparty risks, including by storing substantially all of the bitcoin we own in custody accounts at U.S.-based, institutional-grade custodians and negotiating contractual arrangements intended to establish that our property interest in custodially-held bitcoin is not subject to claims of our custodians’ creditors, applicable insolvency law is not fully developed with respect to the holding of digital assets in custodial accounts. If our custodially-held bitcoin were nevertheless considered to be the property of our custodians’ estates in the event that any such custodians were to enter bankruptcy, receivership or similar insolvency proceedings, we could be treated as a general unsecured creditor of such custodians, inhibiting our ability to exercise ownership rights with respect to such bitcoin, or delaying or hindering our access to our bitcoin holdings, and this may ultimately result in the loss of the value related to some or all of such bitcoin, which could have a material adverse effect on our financial condition as well as the market price of our listed securities.
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The broader digital assets industry is subject to counterparty risks, which could adversely impact the adoption rate, price, and use of bitcoin. A series of high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry in recent years have highlighted the counterparty risks applicable to owning and transacting in digital assets. Although these bankruptcies, closures, liquidations and other events have not resulted in any loss or misappropriation of our bitcoin, nor have such events adversely impacted our access to our bitcoin, they have, in the short-term, likely negatively impacted the adoption rate and use of bitcoin. Additional bankruptcies, closures, liquidations, regulatory enforcement actions or other events involving participants in the digital assets industry in the future may further negatively impact the adoption rate, price, and use of bitcoin, limit the availability to us of financing collateralized by bitcoin, or create or expose additional counterparty risks.
Changes in the accounting treatment of our bitcoin holdings could have significant accounting impacts, including increasing the volatility of our results. We have adopted ASU 2023-08 as of January 1, 2025, which requires us to measure our bitcoin holdings at fair value in our statement of financial position, and to recognize gains and losses from changes in the fair value of our bitcoin in net income each reporting period beginning January 1, 2025. ASU 2023-08 also requires us to provide certain interim and annual disclosures with respect to our bitcoin holdings. The standard is now effective, and we have applied a cumulative-effect net increase to the opening balance of retained earnings as of January 1, 2025 of $12.75 billion. Due in particular to the volatility in the price of bitcoin, we expect the adoption of ASU 2023-08 to have a material impact on our financial results, increase the volatility of our financial results, and affect the carrying value of our bitcoin on our balance sheet. For example, we incurred an unrealized loss on digital assets of $5.91 billion for the quarter ended March 31, 2025, and an unrealized gain on digital assets of $14.05 billion for the quarter ended June 30, 2025, and significant variances in gains and losses could occur in future quarters. As described in greater detail under the risk factor heading “Risks Related to Our Business in General-Unrealized gains on our bitcoin holdings could cause us to become subject to the corporate alternative minimum tax under the Inflation Reduction Act of 2022,” ASU 2023-08 could also have adverse tax consequences. These impacts could in turn have a material adverse effect on our financial results and the market price of our listed securities. Additionally, as a result of ASU 2023-08 requiring a cumulative-effect adjustment to our opening balance of retained earnings as of January 1, 2025 and not permitting retrospective restatement of our historical financial statements, our results for the quarter ended June 30, 2025, and for future periods, will not be comparable to results from periods prior to our adoption of the guidance.
The broader digital assets industry, including the technology associated with digital assets, the rate of adoption and development of, and use cases for, digital assets, market perception of digital assets, and the legal, regulatory, and accounting treatment of digital assets are constantly developing and changing, and there may be additional risks in the future that are not possible to predict.
Bitcoin is a highly volatile asset, and fluctuations in the price of bitcoin have in the past influenced and are likely to continue to influence our financial results and the market price of our listed securities
Bitcoin is a highly volatile asset, and fluctuations in the price of bitcoin have in the past influenced and are likely to continue to influence our financial results and the market price of our listed securities. Our financial results and the market price of our listed securities would be adversely affected, and our business and financial condition would be negatively impacted, if the price of bitcoin decreased substantially (as it has in the past, including during 2022), including as a result of:
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Bitcoin and other digital assets are novel assets, and are subject to significant legal, commercial, regulatory and technical uncertainty
Bitcoin and other digital assets are relatively novel and are subject to significant uncertainty, which could adversely impact their price. The application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of bitcoin or the ability of individuals or institutions such as us to own or transfer bitcoin.
The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could impose material additional regulatory burdens and costs for us and /or materially impact the price of bitcoin or the ability of individuals or institutions such as us to own or transfer bitcoin. For example, within the past several years:
While the complaint against Coinbase, Inc. was dismissed in February 2025, the complaint against Payward Inc. and Payward Ventures Inc. was dismissed with prejudice in March 2025, and the complaint against Binance Holdings Ltd. was dismissed in May 2025, the SEC or other regulatory agencies may initiate similar actions in the future, which could materially impact the price of bitcoin and our ability to own or transfer bitcoin.
It is not possible to predict whether or when new laws and regulations will be enacted or adopted that change the legal framework governing digital assets or provide additional authorities to the SEC, the CFTC, or other regulators, or whether or when any other federal, state or foreign legislative or regulatory bodies will take any similar actions. For example, the proposed CLARITY Act discussed above could, if it became law, grant the CFTC additional regulatory and supervisory powers with respect to spot digital assets, including bitcoin, as “digital commodities” and potentially result in the imposition of additional regulatory obligations and burdens to us, which could potentially include registration, disclosure, reporting, and business conduct requirements.
It is also not possible to predict the nature of any such additional laws or authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function, the willingness of financial and other institutions to continue to provide services to the digital assets industry, or how any new laws or regulations, or changes to existing laws or regulations, might impact the value of digital assets generally and bitcoin specifically. The consequences of any new law or regulation relating to digital assets and digital asset activities could adversely affect the market price of bitcoin, as well as our ability to hold or transact in bitcoin, and in turn adversely affect the market price of our listed securities. Furthermore, other companies have begun to adopt strategies similar to ours with respect to bitcoin and other digital assets, and this could result in new laws or regulations, or new interpretations of existing laws or regulations, impacting our bitcoin strategy, particularly if the adoption of digital asset strategies by other companies continues or accelerates.
Moreover, the risks of engaging in a bitcoin strategy are relatively novel and have created, and could continue to create, complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.
The growth of the digital assets industry in general, and the use and acceptance of bitcoin in particular, may also impact the price of bitcoin and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of bitcoin may depend, for instance, on public familiarity with digital assets, ease of buying, accessing or gaining exposure to bitcoin, institutional demand for bitcoin as an investment asset, the participation of traditional financial institutions in the digital assets industry, consumer demand for bitcoin as a store of value or means of payment, and the availability and popularity of alternatives to bitcoin. Even if growth in bitcoin adoption occurs in the near or medium-term, there is no assurance that bitcoin usage will continue to grow over the long-term.
Because bitcoin has no physical existence beyond the record of transactions on the Bitcoin blockchain, a variety of technical factors related to the Bitcoin blockchain could also impact the price of bitcoin. For example, malicious attacks by miners, inadequate mining fees to incentivize validating of bitcoin transactions, hard “forks” of the Bitcoin blockchain into multiple blockchains, and advances in digital computing, algebraic geometry, and quantum computing could undercut the integrity of the Bitcoin blockchain and negatively affect the price of bitcoin. The liquidity of bitcoin may also be reduced and damage to the public perception of bitcoin may occur, if financial institutions were to deny or limit banking services to businesses that hold bitcoin, provide bitcoin-related services or accept bitcoin as payment, which could also decrease the price of bitcoin. Actions by U.S. banking regulators, such as the issuance in February 2023 by federal banking agencies of the “Interagency Liquidity Risk Statement,” which cautioned banks on contagion risks posed by providing services to digital assets customers, and similar actions, have in the past resulted in or contributed to reductions in access to banking services for bitcoin-related customers and service providers, or the willingness of traditional financial institutions to participate in markets for digital assets. The liquidity of bitcoin may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for bitcoin and other digital assets.
Our historical financial statements prior to March 31, 2025 do not reflect the potential variability in earnings that we have experienced to date and may experience in the future relating to our bitcoin holdings
Our historical financial statements prior to March 31, 2025 do not fully reflect the potential variability in earnings that we have experienced to date and may experience in the future from holding or selling significant amounts of bitcoin. The price of bitcoin has historically been subject to dramatic price fluctuations and is highly volatile. In December 2023, the FASB issued ASU 2023-08, which we adopted as of January 1, 2025.
We determine the fair value of our bitcoin based on quoted (unadjusted) prices on the Coinbase exchange (our principal market for bitcoin). Prior to our adoption of ASU 2023-08 on January 1, 2025, we performed an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted (unadjusted) prices on the active exchange, indicated that it was more likely than not that any of our bitcoin assets were impaired. In determining if an impairment had occurred, we considered the lowest price of one bitcoin quoted on the active exchange at any time since acquiring the specific bitcoin held. If the carrying value of a bitcoin exceeded that lowest price at any time during the quarter, an impairment loss was deemed to have occurred with respect to that bitcoin in the amount equal to the difference between its carrying value and such lowest price, and subsequent increases in the price of bitcoin did not affect the carrying value of our bitcoin. Gains (if any) were not recorded until realized upon sale, at which point they would be presented net of any impairment losses. In determining the gain to be recognized upon sale, we calculated the difference between the sale price and carrying value of the specific bitcoin sold immediately prior to sale. Due in part to the volatility of bitcoin, we incurred $4.059 billion of cumulative impairment on our bitcoin holdings through December 31, 2024, which losses were reflected in the financial statements for the respective periods in which the losses were incurred.
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ASU 2023-08 requires us to measure our bitcoin holdings at fair value in our statement of financial position, and to recognize gains and losses from changes in the fair value of our bitcoin in net income each reporting period. ASU 2023-08 also requires us to provide certain interim and annual disclosures with respect to our bitcoin holdings. We have applied a cumulative-effect adjustment to the opening balance of retained earnings as of January 1, 2025 of $12.75 billion. ASU 2023-08 does not permit retrospective restatement of prior periods. For the three and six months ended June 30, 2025, we incurred an unrealized gain on digital assets of $14.05 billion and $8.14 billion, respectively. Due to the application of a different accounting standard for the three and six months ended June 30, 2025 relative to the corresponding periods ended June 30, 2024, and due to ASU 2023-08 not permitting retrospective restatement of prior periods, our results for the three and six months ended June 30, 2025 are not comparable to our results for the corresponding prior periods, and our future results will similarly not be comparable to results from periods prior to our adoption of the guidance. Additionally, any unrealized gain on digital assets reflected in our financial results for a given quarter does not reflect cash actually earned by us during that quarter, and a significant increase in our assets included on our balance sheet is not associated with an actual increase in our liquidity.
As a result of our adoption of ASU 2023-08, we may incur greater losses during periods when we previously would have incurred smaller losses or no losses because we had already impaired the carrying value of our bitcoin to a low price observed during a prior period, and we may also incur gains during periods when the market value of bitcoin rises, as compared to periods prior to January 1, 2025, when we would not have incurred any gains under similar circumstances. Accordingly, due in particular to the volatility in the price of bitcoin, the adoption of ASU 2023-08 has to date increased, and we expect will continue to impact, the volatility of our financial results. For further details see “Risks Related to Our Bitcoin Strategy and Holdings - Our bitcoin strategy exposes us to various risks, including risks associated with bitcoin.” Because we intend to purchase additional bitcoin in future periods and increase our overall holdings of bitcoin, we expect that the proportion of our total assets represented by our bitcoin holdings will increase in the future, and we expect ASU 2023-08 to significantly affect the carrying value of our bitcoin on our balance sheet. As a result, volatility in our earnings may be even greater in future periods than what we have experienced to date.
The availability of spot ETPs for bitcoin and other digital assets may adversely affect the market price of our listed securities
Although bitcoin and other digital assets have experienced a surge of investor attention since bitcoin was invented in 2008, until recently investors in the United States had limited means to gain direct exposure to bitcoin through traditional investment channels, and instead generally were only able to hold bitcoin through “hosted” wallets provided by digital asset service providers or through “unhosted” wallets that expose the investor to risks associated with loss or hacking of their private keys. Given the relative novelty of digital assets, general lack of familiarity with the processes needed to hold bitcoin directly, as well as the potential reluctance of financial planners and advisers to recommend direct bitcoin holdings to their retail customers because of the manner in which such holdings are custodied, some investors have sought exposure to bitcoin through investment vehicles that hold bitcoin and issue shares representing fractional undivided interests in their underlying bitcoin holdings. These vehicles, which were previously offered only to “accredited investors” on a private placement basis, have in the past traded at substantial premiums to net asset value, possibly due to the relative scarcity of traditional investment vehicles providing investment exposure to bitcoin.
On January 10, 2024, the SEC approved the listing and trading of spot bitcoin ETPs, the shares of which can be sold in public offerings and are traded on U.S. national securities exchanges. The approved ETPs commenced trading directly to the public on January 11, 2024, with a trading volume of $4.6 billion on the first trading day. On January 11, 2024, and in the subsequent days following the SEC’s approval of the listing and trading of spot bitcoin ETPs, the trading price of our shares of class A common stock declined significantly relative to the value of our bitcoin. To the extent investors view our class A common stock as providing exposure to bitcoin, it is possible that the value of our class A common stock may also have included a premium over the value of our bitcoin due to the prior scarcity of traditional investment vehicles providing investment exposure to bitcoin, and that the value declined due to investors now having a greater range of options to gain exposure to bitcoin and investors choosing to gain such exposure through ETPs rather than our class A common stock. Additionally, on May 23, 2024, the SEC approved rule changes permitting the listing and trading of spot ETPs that invest in ether, the main crypto asset supporting the Ethereum blockchain. The approved spot ETPs commenced trading directly to the public on July 23, 2024. The listing and trading of spot ETPs for ether offers investors another alternative to gain exposure to digital assets, which could result in a decline in the trading price of bitcoin as well as a decline in the value of our class A common stock relative to the value of our bitcoin, as well as our other listed securities.
Although we are an operating company, and we believe we offer a different value proposition than a bitcoin investment vehicle such as a spot bitcoin ETP, investors may nevertheless view our class A common stock as an alternative to an investment in an ETP, and choose to purchase shares of a spot bitcoin ETP instead of our class A common stock or other listed securities. They may do so for a variety of reasons, including if they believe that ETPs offer a “pure play” exposure to bitcoin that is generally not subject to federal income tax at the entity level as we are, or the other risk factors applicable to an operating business, such as ours. Additionally, unlike spot bitcoin ETPs, we (i) do not seek for our shares of class A common stock to track the value of the underlying bitcoin we hold before payment of expenses and liabilities, (ii) do not benefit from various exemptions and relief under the Securities Exchange Act of 1934, as amended (“the Exchange Act”), including Regulation M, and other securities laws, which enable ETPs to continuously align the value of their shares to the price of the underlying assets they hold through share creation and redemption, (iii) are a Delaware corporation rather than a statutory trust, and do not operate pursuant to a trust agreement that would require us to pursue one or more stated investment objectives, and (iv) are not required to provide daily transparency as to our bitcoin holdings or our daily net asset value. Furthermore, recommendations by
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broker-dealers to buy, hold, or sell complex products and non-traditional ETPs, or an investment strategy involving such products, may be subject to additional or heightened scrutiny that would not be applicable to broker-dealers making recommendations with respect to our securities. Based on how we are viewed in the market relative to ETPs, and other vehicles which offer economic exposure to bitcoin, such as bitcoin futures exchange-traded funds (“ETFs”), leveraged bitcoin futures ETFs, companies that pursue a strategy similar to ours of acquiring digital assets, and similar vehicles offered on international exchanges, any premium or discount in our class A common stock relative to the value of our bitcoin holdings may increase or decrease in different market conditions. Additionally, to the extent that investors are seeking an investment with a dollar-denominated yield return, investors may choose to allocate to certain funds that pursue yield-based strategies based on trading derivatives of our class A common stock rather than purchasing our Preferred Stock, as the former may, from time to time, produce higher yields than our Preferred Stock.
As a result of the foregoing factors, availability of spot ETPs for bitcoin and other digital assets, as well as funds that pursue yield-based strategies based on trading derivatives of our class A common stock, could have a material adverse effect on the market price of our listed securities.
Our bitcoin strategy subjects us to enhanced regulatory oversight
As noted above, several spot bitcoin ETPs have received approval from the SEC to list their shares on a U.S. national securities exchange with continuous share creation and redemption at net asset value. Even though we are not, and do not function in the manner of, a spot bitcoin ETP, it is possible that we nevertheless could face regulatory scrutiny from the SEC or other federal or state agencies due to our bitcoin holdings.
In addition, there has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist activities, or circumvent sanctions regimes, including those sanctions imposed in response to the ongoing conflict between Russia and Ukraine. While we have implemented and maintain policies and procedures reasonably designed to promote compliance with applicable anti-money laundering and sanctions laws and regulations and take care to only acquire our bitcoin through entities subject to anti-money laundering regulation and related compliance rules in the United States, if we are found to have purchased any of our bitcoin from bad actors that have used bitcoin to launder money or persons subject to sanctions, we may be subject to regulatory proceedings and any further transactions or dealings in bitcoin by us may be restricted or prohibited.
Although our bitcoin holdings did not serve as collateral securing any of our outstanding indebtedness as of June 30, 2025, we may incur indebtedness or enter into other financial instruments in the future that may be collateralized by our bitcoin holdings. We may also consider pursuing strategies to create income streams or otherwise generate funds using our bitcoin holdings. These types of bitcoin-related transactions are the subject of enhanced regulatory oversight. These and any other bitcoin-related transactions we may enter into, beyond simply acquiring and holding bitcoin, may subject us to additional regulatory compliance requirements and scrutiny, including under federal and state money services regulations, money transmitter licensing requirements and various commodity and securities laws and regulations.
Additional laws, guidance and policies may be issued by domestic and foreign regulators following the filing for Chapter 11 bankruptcy protection by FTX, one of the world’s largest cryptocurrency exchanges, in November 2022. While the financial and regulatory fallout from FTX’s collapse did not directly impact our business, financial condition or corporate assets, the FTX collapse may have increased regulatory focus on the digital assets industry. Increased enforcement activity and changes in the regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements by the government or any new legislation affecting bitcoin, as well as enforcement actions involving or impacting our trading venues, counterparties and custodians, may impose significant costs or significantly limit our ability to hold and transact in bitcoin.
In addition, private actors that are wary of bitcoin or the regulatory concerns associated with bitcoin have in the past taken and may in the future take further actions that may have an adverse effect on our business or the market price of our listed securities. For example, an affiliate of HSBC Holdings has prohibited customers of its HSBC InvestDirect retail investment platform from buying shares of our class A common stock after determining that the value of our stock is related to the performance of bitcoin, indicating that it did not want to facilitate exposure to virtual currencies.
Due to the unregulated nature and lack of transparency surrounding the operations of many bitcoin trading venues, bitcoin trading venues may experience greater fraud, security failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in bitcoin trading venues and adversely affect the value of our bitcoin
Bitcoin trading venues are relatively new (compared to stock exchanges) and, in many cases, unregulated. Furthermore, there are many bitcoin trading venues which do not provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance. As a result, the marketplace may lose confidence in bitcoin trading venues, including prominent exchanges that handle a significant volume of bitcoin trading and/or are subject to regulatory oversight, in the event one or more bitcoin trading venues cease or pause for a prolonged period the trading of bitcoin or other digital assets, or experience fraud, significant volumes of withdrawal, security failures or operational problems.
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In 2019 there were reports claiming that 80-95% of bitcoin trading volume on trading venues was false or non-economic in nature, with specific focus on unregulated exchanges located outside of the United States. The SEC also alleged as part of its June 5, 2023, complaint against Binance Holdings Ltd. that Binance committed strategic and targeted “wash trading” through its affiliates to artificially inflate the volume of certain digital assets traded on its exchange. The SEC has also brought recent actions against individuals and digital asset market participants alleging that such persons artificially increased trading volumes in certain digital assets through wash trades, or repeated buying and selling of the same assets in fictitious transactions to manipulate their underlying trading price. Such reports and allegations may indicate that the bitcoin market is significantly smaller than expected and that the United States makes up a significantly larger percentage of the bitcoin market than is commonly understood. Any actual or perceived wash trading in the bitcoin market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of our bitcoin.
Negative perception, a lack of stability in the broader bitcoin markets and the closure, temporary shutdown or operational disruption of bitcoin trading venues, lending institutions, institutional investors, institutional miners, custodians, or other major participants in the bitcoin ecosystem, due to fraud, business failure, cybersecurity events, government-mandated regulation, bankruptcy, or for any other reason, may result in a decline in confidence in bitcoin and the broader bitcoin ecosystem and greater volatility in the price of bitcoin. For example, in 2022, each of Celsius Network, Voyager Digital, Three Arrows Capital, FTX, and BlockFi filed for bankruptcy, following which the market prices of bitcoin and other digital assets significantly declined. In addition, in June 2023, the SEC announced enforcement actions against Coinbase, Inc., and Binance Holdings Ltd., two providers of large trading venues for digital assets, which similarly was followed by a decrease in the market price of bitcoin and other digital assets. These were followed in November 2023, by an SEC enforcement action against Payward Inc. and Payward Ventures Inc., together known as Kraken, another large trading venue for digital assets. While the complaint against Coinbase, Inc. was dismissed in February 2025, the complaint against Payward Inc. and Payward Ventures Inc. was dismissed with prejudice in March 2025, and the complaint against Binance Holdings Ltd. was dismissed in May 2025, the SEC or other regulatory agencies may initiate similar actions in the future. As the price of our listed securities is affected by the value of our bitcoin holdings, the failure of a major participant in the bitcoin ecosystem could have a material adverse effect on the market price of our listed securities.
The concentration of our bitcoin holdings enhances the risks inherent in our bitcoin strategy
As of July 31, 2025, we held approximately 628,791 bitcoins that were acquired at an aggregate purchase price of $46.076 billion and we intend to purchase additional bitcoin and increase our overall holdings of bitcoin in the future. The concentration of our bitcoin holdings limits the risk mitigation that we could achieve if we were to purchase a more diversified portfolio of assets, and the absence of diversification enhances the risks inherent in our bitcoin strategy. Any future significant declines in the price of bitcoin would have a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets.
The emergence or growth of other digital assets, including those with significant private or public sector backing, could have a negative impact on the price of bitcoin and adversely affect our business
As a result of our bitcoin strategy, our assets are concentrated in our bitcoin holdings. Accordingly, the emergence or growth of digital assets other than bitcoin may have a material adverse effect on our financial condition. As of June 30, 2025, bitcoin was the largest digital asset by market capitalization. However, there are numerous alternative digital assets and many entities, including consortiums and financial institutions, are researching and investing resources into private or permissioned blockchain platforms or digital assets that do not use proof-of-work mining like the Bitcoin network. For example, in late 2022, the Ethereum network transitioned to a “proof-of-stake” mechanism for validating transactions that requires significantly less computing power than proof-of-work mining. The Ethereum network has completed another major update since then and may undertake additional updates in the future. If the mechanisms for validating transactions in Ethereum and other alternative digital assets are perceived as superior to proof-of-work mining, those digital assets could gain market share relative to bitcoin.
Other alternative digital assets that compete with bitcoin in certain ways include “stablecoins,” which are designed to maintain a constant price related to or based on some other asset or traditional currency because of, for instance, their issuers’ promise to hold high-quality liquid assets (such as U.S. dollar deposits and short-term U.S. treasury securities) equal to the total value of stablecoins in circulation. In July 2025, the GENIUS Act was enacted, which establishes a federal framework for “payment stablecoins,” treating them as payment systems, not securities, and mandating fiat-backed reserves, monthly disclosures, anti-money laundering safeguards, and similar measures. Stablecoins have grown rapidly as an alternative to bitcoin and other digital assets as a medium of exchange and store of value, particularly on digital asset trading platforms, and their use as an alternative to bitcoin could expand further as a result of the GENIUS Act being enacted. As of June 30, 2025, two of the seven largest digital assets by market capitalization were U.S. dollar-pegged stablecoins.
Additionally, central banks in some countries have started to introduce digital forms of legal tender. For example, China’s central bank digital currency (“CBDC”) project was made available to consumers in January 2022, and governments including the United States, the United Kingdom, the European Union, and Israel have been discussing the potential creation of new CBDCs. Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could also compete with, or replace, bitcoin and other digital assets as a medium of exchange or store of value. As a result, the emergence or growth of these or other digital
assets could cause the market price of bitcoin to decrease, which could have a material adverse effect on our business, prospects, financial condition, and operating results.
Our bitcoin holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents
Historically, the bitcoin market has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our bitcoin at favorable prices or at all. For example, a number of bitcoin trading venues temporarily halted deposits and withdrawals in 2022, although the Coinbase exchange (our principal market for bitcoin) has, to date, not done so. As a result, our bitcoin holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.
Further, the bitcoin that we hold with our custodians and transact with our trade execution partners does not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation.
Additionally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered bitcoin or otherwise generate funds using our bitcoin holdings, including in particular during times of market instability or when the price of bitcoin has declined significantly. If we are unable to sell our bitcoin, enter into additional capital raising transactions, including capital raising transactions using bitcoin as collateral, or otherwise generate funds using our bitcoin holdings, or if we are forced to sell our bitcoin at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.
If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our bitcoin, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our bitcoin and our financial condition and results of operations could be materially adversely affected
Substantially all of the bitcoin we own is held in custody accounts at institutional-grade digital asset custodians. Security breaches and cyberattacks are of particular concern with respect to our bitcoin. Bitcoin and other blockchain-based cryptocurrencies and the entities that provide services to participants in the bitcoin ecosystem have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. For example, in October 2021 it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange (our principal market for bitcoin), although the flaw was subsequently fixed and Coinbase reimbursed affected customers. Similarly, in November 2022, hackers exploited weaknesses in the security architecture of the FTX Trading digital asset exchange and reportedly stole over $400 million in digital assets from customers. In 2025, Coinbase reported that criminals bribed certain of its non-U.S. employees to steal customer data to use in social engineering attacks. A successful security breach or cyberattack could result in:
Further, any actual or perceived data security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks, regardless of whether we are directly impacted, could lead to a general loss of confidence in the broader Bitcoin blockchain ecosystem or in the use of the Bitcoin network to conduct financial transactions, which could negatively impact us.
Attacks upon systems across a variety of industries, including industries related to bitcoin, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners. We may experience breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities. In particular, unauthorized parties have attempted, and we expect that they will continue to attempt, to gain access to our systems and facilities, as well as those of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud. In the past, hackers have successfully employed a social engineering attack against one of our service providers and misappropriated our digital assets, although, to date, such events have not been material to our financial condition or operating results. Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, and insiders. In addition, certain types of attacks could harm us even if our systems are left undisturbed. For example, certain threats are designed to remain dormant or undetectable, sometimes for extended periods
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of time, or until launched against a target and we may not be able to implement adequate preventative measures. Further, there has been an increase in such activities due to the increase in work-from-home arrangements since the onset of the COVID-19 pandemic. The risk of cyberattacks could also be increased by cyberwarfare in connection with geopolitical conflicts, such as the ongoing Russia-Ukraine conflict, including potential proliferation of malware into systems unrelated to such conflicts. Any future breach of our operations or those of others in the bitcoin industry, including third-party services on which we rely, could materially and adversely affect our business.
We face risks relating to the custody of our bitcoin, including the loss or destruction of private keys required to access our bitcoin and cyberattacks or other data loss relating to our bitcoin
We hold our bitcoin with regulated custodians that have duties to safeguard our private keys. Our custodial services contracts do not restrict our ability to reallocate our bitcoin among our custodians, and our bitcoin holdings may be concentrated with a single custodian from time to time. In light of the significant amount of bitcoin we hold, we continually seek to engage additional custodians to achieve a greater degree of diversification in the custody of our bitcoin as the extent of potential risk of loss is dependent, in part, on the degree of diversification. If there is a decrease in the availability of digital asset custodians that we believe can safely custody our bitcoin, for example, due to regulatory developments or enforcement actions that cause custodians to discontinue or limit their services in the United States, we may need to enter into agreements that are less favorable than our current agreements or take other measures to custody our bitcoin, and our ability to seek a greater degree of diversification in the use of custodial services would be materially adversely affected.
As of June 30, 2025, the insurance that covers losses of our bitcoin holdings covers only a small fraction of the value of the entirety of our bitcoin holdings, and there can be no guarantee that such insurance will be maintained as part of the custodial services we have or that such coverage will cover losses with respect to our bitcoin. Moreover, our use of custodians exposes us to the risk that the bitcoin our custodians hold on our behalf could be subject to insolvency proceedings and we could be treated as a general unsecured creditor of the custodian, inhibiting our ability to exercise ownership rights with respect to such bitcoin. Any loss associated with such insolvency proceedings is unlikely to be covered by any insurance coverage we maintain related to our bitcoin.
Bitcoin is controllable only by the possessor of both the unique public key and private key(s) relating to the local or online digital wallet in which the bitcoin is held. While the Bitcoin blockchain ledger requires a public key relating to a digital wallet to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent a third party from accessing the bitcoin held in such wallet. To the extent the private key(s) for a digital wallet are lost, destroyed, or otherwise compromised and no backup of the private key(s) is accessible, neither we nor our custodians will be able to access the bitcoin held in the related digital wallet. Furthermore, we cannot provide assurance that our digital wallets, nor the digital wallets of our custodians held on our behalf, will not be compromised as a result of a cyberattack. The bitcoin and blockchain ledger, as well as other digital assets and blockchain technologies, have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities.
Regulatory change reclassifying bitcoin as a security could lead to our classification as an “investment company” under the Investment Company Act of 1940 and could adversely affect the market price of bitcoin and the market price of our listed securities
Our assets are concentrated in our bitcoin holdings. While senior SEC officials have stated their view that bitcoin is not a “security” for purposes of the federal securities laws, a contrary determination by the SEC could lead to our classification as an “investment company” under the Investment Company Act of 1940, which would subject us to significant additional regulatory controls that could have a material adverse effect on our ability to execute on our bitcoin strategy, and our business and operations and may also require us to substantially change the manner in which we conduct our business.
In addition, if bitcoin is determined to constitute a security for purposes of the federal securities laws, the additional regulatory restrictions imposed by such a determination could adversely affect the market price of bitcoin and in turn adversely affect the market price of our listed securities.
We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.
Mutual funds, ETFs and their directors and management are subject to extensive regulation as “investment companies” and “investment advisers” under U.S. federal and state law; this regulation is intended for the benefit and protection of investors. We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations. This means, among other things, that the execution of or changes to our Treasury Reserve Policy or our bitcoin strategy, our use of leverage, the manner in which our bitcoin is custodied, our ability to engage in transactions with affiliated parties and our operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers. For example, although a significant change to our Treasury Reserve Policy would require the approval of our board of directors, no shareholder or regulatory approval would be necessary. Consequently, our board of directors has broad discretion over the investment, leverage and cash management policies it authorizes, whether in respect of our bitcoin holdings or other activities we may pursue, and has the power to change our current policies, including our strategy of acquiring and holding bitcoin. Additionally, we are not a registered money market fund under the Investment Company Act of 1940, as amended, and we do not operate as a registered money market fund. Holders of our securities, including our STRC Stock, do not benefit from the protections available to holders of securities of a registered money market
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fund. Bitcoin does not have a similar risk profile to the assets required to be held by money market funds because, among other things, it is much more volatile and involves no principal protection. Unlike money market funds, we do not price our securities, including our STRC Stock, based on the net asset value of the pool of assets backing the securities. We are also not subject to any regulation requiring that we maintain any particular pricing or stable value, and we are not subject to the fee restrictions or liquidity requirements applicable to registered money market funds.
Our bitcoin strategy exposes us to risk of non-performance by counterparties
Our bitcoin strategy exposes us to the risk of non-performance by counterparties, whether contractual or otherwise. Risk of non-performance includes inability or refusal of a counterparty to perform because of a deterioration in the counterparty’s financial condition and liquidity or for any other reason. For example, our execution partners, custodians, or other counterparties might fail to perform in accordance with the terms of our agreements with them, which could result in a loss of bitcoin, a loss of the opportunity to generate funds, or other losses. Additionally, with more companies adopting a bitcoin strategy similar to ours, our counterparties and service providers may experience increased demand for their services, which could impact the level or quality of service we receive, or the pricing of these services in the future.
Our primary counterparty risk with respect to our bitcoin is custodian performance obligations under the various custody arrangements we have entered into. A series of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, including the filings for bankruptcy protection by Three Arrows Capital, Celsius Network, Voyager Digital, FTX Trading and Genesis Global Capital, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, including Signature Bank and Silvergate Bank, SEC enforcement actions against Coinbase, Inc., Binance Holdings Ltd., and Kraken, the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by Nevada’s Department of Business and Industry, and the filing and subsequent settlement of a civil fraud lawsuit by the New York Attorney General against Genesis Global Capital, its parent company Digital Currency Group, Inc., and former partner Gemini Trust Company have highlighted the perceived and actual counterparty risk applicable to digital asset ownership and trading. Although these bankruptcies, closures and liquidations have not resulted in any loss or misappropriation of our bitcoin, nor have such events adversely impacted our access to our bitcoin, legal precedent created in these bankruptcy and other proceedings may increase the risk of future rulings adverse to our interests in the event one or more of our custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency or similar proceedings.
While all of our custodians are subject to regulatory regimes intended to protect customers in the event of a custodial bankruptcy, receivership or similar insolvency proceeding, no assurance can be provided that our custodially-held bitcoin will not become part of the custodian’s insolvency estate if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings. Additionally, if we pursue any strategies to create income streams or otherwise generate funds using our bitcoin holdings, we would become subject to additional counterparty risks. Any significant non-performance by counterparties, including in particular the custodians with which we custody substantially all of our bitcoin, could have a material adverse effect on our business, prospects, financial condition, and operating results.
Risks Related to Our Enterprise Analytics Software Business Strategy
We derive revenue from a single software platform and related services as well as revenue from our installed customer base
We derive revenue from sales of our analytics software platform and related services. We also depend on our installed customer base for a substantial portion of our software revenue. As a result, if our software business experiences a significant decline in demand for, or in the adoption or prices of, our platform and related services as a result of, among other factors, a significant decline in our installed customer base, any change in our pricing or packaging model, increased competition, maturation in the markets for our platform, or other risks described herein, we may not be able to generate revenue from other sources in excess of the expenses relating to our analytics software platform and related services.
As our customers increasingly shift from a product license model to a cloud subscription model, we could face higher future rates of attrition, and such a shift could continue to affect the timing of revenue recognition or reduce product licenses and product support revenues
We offer our analytics platform in the form of a product license or a cloud subscription. Given that it is relatively easy for customers to migrate on and off our cloud subscription platform, as we continue to shift our customers toward our cloud platform, we could face higher future rates of attrition among our customers. In addition, the payment streams and revenue recognition timing for our product licenses are different from those for our cloud subscriptions. For product licenses, customers typically pay us a lump sum soon after entering into a license agreement, and we typically recognize product licenses revenue when control of the license is transferred to the customer. For cloud subscriptions, customers typically make periodic payments over the subscription period and we recognize subscription services revenues ratably over the subscription period. As a result, as our customers increasingly shift to, or new customers purchase, cloud subscriptions instead of product licenses, the resulting change in payment terms and revenue recognition may result in our recognizing
less revenue in the reporting period in which the sale transactions are consummated than has been the case in prior periods, with more revenue being recognized in future periods.
Our recognition of deferred revenue and advance payments is subject to future performance obligations and may not be representative of revenues for succeeding periods
Our deferred revenue and advance payments totaled $218.4 million as of June 30, 2025. The timing and ultimate recognition of our deferred revenue and advance payments depend on various factors, including our performance of various service obligations.
Because of the possibility of customer changes or delays in customer development or implementation schedules or budgets, and the need for us to satisfactorily perform product support and other services, deferred revenue and advance payments at any particular date may not be representative of actual revenue for any succeeding period.
In addition, we had $252.1 million of other remaining performance obligations as of June 30, 2025, consisting of the portions of multi-year contracts that will be invoiced in the future that are not reflected on our balance sheet. As with deferred revenue and advance payments, these other remaining performance obligations at any particular date may not be representative of actual revenue for any succeeding period.
Integration of artificial intelligence into our enterprise analytics product offerings and our use of artificial intelligence in our operations could result in reputational or competitive harm, legal liability, and other adverse effects on our business
We have integrated, and plan to further integrate, AI capabilities into certain components of our enterprise analytics product offerings and we expect to use AI in our operations. Such integration and use of AI may become more important in our product offerings and operations over time. These AI-related initiatives, whether successful or not, could cause us to incur substantial costs and could result in delays in our software release cadence. Our competitors or other third parties may incorporate AI into their products or operations more quickly or more successfully than we do, which could impair our ability to compete effectively. Additionally, AI algorithms may be flawed and datasets underlying AI algorithms may be insufficient or contain biased information. If the AI tools integrated into our products or that we use in our operations produce analyses or recommendations that are or are alleged to be deficient, inaccurate, or biased, our reputation, business, financial condition, and results of operations may be adversely affected.
Other companies have experienced cybersecurity incidents that implicate confidential and proprietary company data and/or the personal data of end users of AI applications integrated into their software offerings or used in their operations. If we were to experience a cybersecurity incident, whether related to the integration of AI capabilities into our product offerings or our use of AI applications in our operations, our business and results of operations could be adversely affected. AI also presents various emerging legal, regulatory and ethical issues, and the incorporation of AI into our product offerings and our use of AI applications in our operations could require us to expend significant resources in developing, testing and maintaining our product offerings and may cause us to experience brand, reputational, or competitive harm, or incur legal liability. Additionally, in March 2024, the European Commission passed the Artificial Intelligence Act. Other jurisdictions, including certain U.S. states, have adopted or may decide to adopt similar or more restrictive legislation that may render the use of such technologies challenging. These restrictions may make it harder for us to conduct our business using AI, lead to regulatory fines or penalties, require us to change our product offerings or business practices, or prevent or limit our use of AI.
Risks Related to Our Technology and Intellectual Property
Third parties may claim we infringe their intellectual property rights
We periodically receive notices from third parties claiming we are infringing their intellectual property rights. The frequency of such claims may increase as we expand our offerings and branding, the number of offerings and level of competition in our industry grow, the functionality of offerings overlaps, and the volume of issued patents, patent applications, and copyright and trademark registrations continues to increase. Responding to any infringement claim, regardless of its validity, could:
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Additionally, while we monitor our use of third-party software, including open-source software, our processes for controlling such use in our offerings may not be effective. If we fail to comply with the terms or conditions associated with third-party software that we use, if we inadvertently embed certain types of third-party software into one or more of our offerings, or if third-party software that we license is found to infringe the intellectual property rights of others, we could become subject to infringement liability and be required to re-engineer our offerings, discontinue the sale of our offerings, or make available to certain third parties or generally available, in source code form, our proprietary code, any of which could materially adversely affect our business, operating results, and financial condition.
If a successful infringement claim is made against us and we fail to develop or license a substitute technology or brand name, as applicable, our business, results of operations, financial condition, or cash flows could be materially adversely affected.
Changes in third-party software or systems or the emergence of new industry standards could materially adversely affect the operation of and demand for our existing software
The functionalities of our software depend in part on the ability of our software to interface with our customers’ information technology (“IT”) infrastructure and cloud environments, including software applications, network infrastructure, and end user devices, which are supplied to our customers by various other vendors. When new or updated versions of these third-party software or systems are introduced, or new industry standards in related fields emerge, we may be required to develop updated versions of or enhancements to our software to help ensure that it continues to effectively interoperate with our customers’ IT infrastructure and cloud environments. If new or modified operating systems are introduced or new web standards and technologies or new standards in the field of database access technology emerge that are incompatible with our software, development efforts to maintain the interoperability of our software with our customers’ IT infrastructure and cloud environments could require substantial capital investment and employee resources. If we are unable to update our software in a timely manner, cost-effectively, or at all, the ability of our software to perform key functions could be impaired, which may impact our customers’ satisfaction with our software, potentially result in breach of warranty or other claims, and materially adversely affect demand for our software.
The nature of our software makes it particularly susceptible to undetected errors, bugs, or security vulnerabilities, which could cause problems with how the software performs and, in turn, reduce demand for our software, reduce our revenue, and lead to litigation claims against us
Despite extensive testing by us and our current and potential customers, we have in the past discovered software errors, bugs, or security vulnerabilities (including the log4j and SpringShell vulnerabilities which surfaced in December 2021 and March 2022, respectively, and affected companies worldwide) in our offerings after commercial shipments began and they may be found in future offerings or releases. This could result in lost revenue, damage to our reputation, or delays in market acceptance, which could have a material adverse effect on our business, operating results, and financial condition. We may also need to expend resources and capital to correct these defects if they occur.
Our customer agreements typically contain provisions designed to limit our exposure to product liability, warranty, and other claims. It is possible these provisions are unenforceable in certain domestic or international jurisdictions, and we may be exposed to such claims. A successful claim against us could have a material adverse effect on our business, operating results, and financial condition.
Our intellectual property is valuable, and any inability to protect it could reduce the value of our offerings and brand
Unauthorized third parties may try to copy or reverse engineer portions of our software or otherwise obtain and use our intellectual property. Copyrights, patents, trademarks, trade secrets, confidentiality procedures, and contractual commitments can only provide limited protection. Any intellectual property owned by us may be invalidated, circumvented, or challenged. Any of our pending or future intellectual property applications, whether or not currently being challenged, may not be issued with the scope we seek, if at all. Moreover, amendments to and developing jurisprudence regarding U.S. and international law may affect our ability to protect our intellectual property and defend against claims of infringement. In addition, although we generally enter into confidentiality agreements with our employees and contractors, the confidential nature of our intellectual property may not be maintained. Furthermore, the laws of some countries do not provide the same level of protection of our intellectual property as do the laws of the United States. If we cannot protect our intellectual property against unauthorized copying or use, we may not remain competitive.
We may be obligated to disclose our proprietary source code to our customers, which may limit our ability to protect our intellectual property and could reduce the renewals of our support services
Certain of our customer agreements contain provisions permitting the customer to become a party to, or a beneficiary of, a source code escrow agreement under which we place the proprietary source code for our applicable services and products in escrow with a third party. Under these escrow agreements, the source code to the applicable product may be released to the customer, typically for its use to maintain,
modify, and enhance the product, upon the occurrence of specified events, such as our filing for bankruptcy, discontinuance of our support services, and/or ceasing our business operations generally.
Disclosing the content of our source code may limit the intellectual property protection we can obtain or maintain for that source code or the services and products containing that source code. It also could permit a customer to which a product’s source code is disclosed to support and maintain that software product without being required to purchase our support services.
We may be unable to develop and release new software product offerings or enhancements to our existing offerings in a timely and cost-effective manner
Analytics applications, and applications that leverage the Bitcoin blockchain, can be complex, and research and development for these types of applications can be costly and time consuming. In the case of new or contemplated offerings, we may not be able to identify business use cases for such offerings, and we have in the past and may in the future cease, delay or reallocate resources away from further development of or marketing efforts for such offerings. We cannot be sure that we will succeed in developing, marketing, and delivering, on a timely and cost-effective basis, new or enhanced offerings that will achieve market acceptance.
Risks Related to Our Operations
Business disruptions, including interruptions, delays, or failures of our systems, third-party data center hosting facility, or other third-party services, as a result of geopolitical tensions, acts of terrorism, natural disasters, pandemics, and similar events, could materially adversely affect our operating results or result in a material weakness in our internal controls that could adversely affect the market price of our listed securities
A significant portion of our research and development activities or certain other critical business operations are concentrated in facilities in Northern Virginia, China, Argentina, and Poland. In addition, we serve our customers and manage certain critical internal processes using a third-party data center hosting facility located in the United States and other third-party services, including AWS, Azure, Google, and other cloud services. Any disruptions or failures of our systems or the third-party hosting facility or other services that we use, including as a result of a natural disaster, fire, cyberattack, act of terrorism, geopolitical conflict, pandemic, the effects of climate change, or other catastrophic event, as well as power outages, telecommunications infrastructure outages, a decision by one of our third-party service providers to close facilities that we use without adequate notice or to materially change the pricing or terms of their services, host country restrictions on the conduct of our business operations or the availability of our offerings, or other unanticipated problems with our systems or the third-party services that we use, such as a failure to meet service standards, could severely impact our ability to conduct our business operations or to attract new customers or maintain existing customers, or result in a material weakness in our internal control over financial reporting, any of which could materially adversely affect our future operating results.
We face a variety of risks in doing business with U.S. and foreign federal, state, and local governments and government agencies, including risks related to the procurement process, budget constraints and cycles, termination of contracts, and compliance with government contracting requirements
Our customers include the U.S. government, state and local governments and government agencies. There are a variety of risks in doing business with government entities, including:
Procurement. Contracting with public sector customers is highly competitive and can be time-consuming and expensive, requiring us to incur significant up-front time and expense without any assurance that we will win a contract. Further, even if we win a contract, it may be placed on hold, or reversed, due to a post-award protest.
Budgetary Constraints and Cycles. Public sector funding reductions or delays adversely impact demand and payment for our offerings.
Termination of Contracts. Public sector customers often have contractual or other legal rights to terminate contracts for convenience or due to a default. If a contract is terminated for the customer’s convenience, we may only be able to collect fees for software or services delivered prior to termination and settlement expenses. If a contract is terminated due to our default, we may not recover even those amounts, and we may be liable for excess costs incurred by the customer for procuring alternative software or services.
Compliance with Government Contracting Requirements. Government contractors are required to comply with a variety of complex laws, regulations, and contractual provisions relating to the formation, administration, or performance of government contracts that give public sector customers substantial rights and remedies, many of which are not typical for commercial contracts. These may include rights regarding price protection, the accuracy of information provided to the government, contractor compliance with socio-economic policies, and other terms unique to government contracts. Governments and government agencies routinely investigate and audit contractors for compliance with these requirements. If, as a result of an audit or review, it is determined that we have failed to comply with these requirements, we may be subject to civil and criminal penalties or administrative sanctions, including contract termination, forfeiture of profits, fines, treble damages, and suspensions or debarment from future government business and we may suffer harm to our reputation.
Our customers also include foreign governments and government agencies. Similar procurement, budgetary, contract, and audit risks also apply to these entities. In addition, compliance with complex regulations and contracting provisions in a variety of jurisdictions can be
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expensive and consume significant management resources. In certain jurisdictions, our ability to win business may be constrained by political and other factors unrelated to our competitive position in the market.
If we are unable to recruit or retain skilled personnel, or if we lose the services of Michael J. Saylor, our business, operating results, and financial condition could be materially adversely affected
Our future success depends on our continuing ability to attract, train, assimilate, and retain highly skilled personnel. There has historically been significant competition for qualified employees across technology and other industries, and such competition may be further amplified by evolving restrictions on immigration, travel, or availability of visas for skilled workers. We may not be able to retain our current key employees or attract, train, assimilate, and retain other highly skilled personnel in the future, particularly at times when we undergo significant headcount reductions. Our future success also depends in large part on the continued service of Michael J. Saylor, our Chairman of the Board of Directors and Executive Chairman. If we were unable to attract, train, assimilate, and retain the highly skilled personnel we need, or we were to lose the services of Mr. Saylor, our business, operating results, and financial condition could be materially adversely affected. These risks may be exacerbated if a shareholder or a group of affiliated shareholders (other than or not including Mr. Saylor) were to exercise majority voting control of the Company.
Changes in laws or regulations relating to privacy or the collection, processing, disclosure, storage, localization, or transmission of personal data, or any actual or perceived failure by us or our third-party service providers to comply with such laws and regulations, contractual obligations, or applicable privacy policies, could materially adversely affect our business
Certain aspects of our business involve collecting, processing, disclosing, storing, and transmitting personal data, which are subject to certain privacy policies, contractual obligations, and U.S. and foreign laws, regulations, and directives relating to privacy and data protection. In addition, the types of data subject to protection as personal data in the European Union, China, the United States, and elsewhere have been expanding. In recent years, the collection and use of personal data by companies have come under increased regulatory and public scrutiny, especially in relation to the collection and processing of sensitive data, such as healthcare, biometric, genetic, financial services, and children’s data, precise location data, and data regarding a person’s race or ethnic origins, political opinions, or religious beliefs.
There are various enforcement agencies at both the state and federal level that review compliance with these requirements, including the United States Department of Health and Human Services for potential violations of the Health Insurance Portability and Accountability Act of 1996 and the Federal Trade Commission (“FTC”). If we are subject to a potential FTC enforcement action, we may be subject to a settlement order that requires us to adhere to very specific privacy and data security practices, which may impact our business. We may also be required to pay fines as part of a settlement (depending on the nature of the alleged violations). If we violate any consent order that we reach with the FTC, we may be subject to additional fines and compliance requirements. We face risks of similar enforcement from State Attorneys General and, potentially, other regulatory agencies.
Similar laws exist in other foreign jurisdictions, including the European Union, that may impact our business activities. In addition, various U.S. federal and state government agencies and foreign government bodies may enact new or additional laws or regulations, or issue rulings that invalidate prior laws or regulations, concerning privacy, data storage, data protection, and cross-border transfer of data that could materially adversely impact our business.
In addition to the provisions in certain international laws restricting the transfer of personal information to the United States, a new U.S. law also restricts the transfer of certain kinds of personal data in certain situations outside of the United States to “countries of concern,” including but not limited to China. On April 8, 2025, the U.S. Department of Justice’s National Security Division implemented the Data Security Program Rule under Executive Order 14117 and the International Emergency Economic Powers Act. This rule establishes restrictions on certain data-related transactions involving U.S. persons and entities, particularly those that may result in access to U.S. government-related data or bulk sensitive personal data of U.S. persons by foreign adversaries or entities under their control. The rule effectively imposes export control-like restrictions on the transfer, sale, or sharing of sensitive data—including genomic, geolocation, biometric, health, financial, and other personal data—to or with entities in countries of concern, as well as entities and persons associated with those countries. It also imposes additional due diligence obligations on U.S. companies concerning personal data they collect, store, or transmit. Failure to comply with the Data Security Program Rule could result in civil or criminal penalties, reputational harm, and restrictions on our ability to engage in certain business activities. Compliance may require us to modify our data handling practices, implement new controls, or terminate existing relationships with certain foreign vendors, customers, or partners. These changes could increase our operational costs, limit our market opportunities, and adversely affect our financial performance. Additionally, the scope and interpretation of the rule may evolve, and future guidance or enforcement actions could impose further obligations or restrictions.
Any systems failure or security breach that results in the release of, or unauthorized access to, personal data, or any failure or perceived failure by us or our third-party service providers to comply with applicable privacy policies, contractual obligations, or any applicable laws or regulations relating to privacy or data protection, could result in proceedings against us by domestic or foreign government entities or others, including private plaintiffs in litigation. Such proceedings could result in the imposition of sanctions, fines, penalties, liabilities, government orders, and/or orders requiring that we change our data practices, any of which could have a material adverse effect on our business, operating results, reputation, and financial condition.
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Furthermore, the U.S. Congress is considering comprehensive privacy legislation. At this time, it is unclear whether Congress will pass such a law and if so, when and what it will require and prohibit. Moreover, it is not clear whether any such legislation would give the FTC any new authority to impose civil penalties for violations of the Federal Trade Commission Act in the first instance, whether Congress will grant the FTC rulemaking authority over privacy and information security, or whether Congress will vest some or all privacy and data security regulatory authority and enforcement power in a new agency, akin to EU data protection authorities.
Complying with these and other changing requirements could cause us or our customers to incur substantial costs or pay substantial fines or penalties, require us to change our business practices, require us to take on more onerous obligations in our contracts, or limit our ability to provide certain offerings in certain jurisdictions, any of which could materially adversely affect our business and operating results. New laws or regulations restricting or limiting the collection or use of mobile data could also reduce demand for certain of our offerings or require changes to our business practices, which could materially adversely affect our business and operating results.
If we or our third-party service providers experience a disruption due to a cybersecurity attack or security breach and unauthorized parties obtain access to our customers’, prospects’, vendors’, or channel partners’ data, our data, our networks or other systems, or the cloud environments we manage, our offerings may be perceived as not being secure, our reputation may be harmed, demand for our offerings may be reduced, our operations may be disrupted, we may incur significant legal and financial liabilities, and our business could be materially adversely affected
As part of our business, we process, store, and transmit our customers’, prospects’, vendors’, and channel partners’ data as well as our own, including in our networks and other systems and the cloud environments we manage. Security breaches may occur due to technological error, computer viruses, or third-party action, including intentional misconduct by computer hackers or state actors, physical break-ins, industrial espionage, fraudulent inducement of employees, customers, or channel partners to disclose sensitive information such as usernames or passwords, and employee, customer, or channel partner error or malfeasance. A security breach could result in unauthorized access to or disclosure, modification, misuse, loss, or destruction of our customers’, prospects’, vendors’, or channel partners’ data, our data (including our proprietary information, intellectual property, or trade secrets), our networks or other systems, or the cloud environments we manage. Third parties may also conduct attacks designed to prevent access to critical data or systems through ransomware or temporarily deny customers access to our cloud environments.
We, and our service providers, have experienced and may in the future experience attempts by third parties to identify and exploit software and service vulnerabilities, penetrate or bypass our security measures, and gain unauthorized access to our or our customers’ or service providers’ cloud environments, networks, and other systems. Security measures that we or our third-party service providers have implemented may not be effective against all current or future security threats. Because there are many different security breach techniques and such techniques continue to evolve, we may be unable to anticipate, detect, or mitigate attempted security breaches and implement adequate preventative measures.
Any security breach, ransomware attack, or successful denial of service attack could result in a loss of customer confidence in the security of our offerings and damage to our brand, reduce the demand for our offerings, disrupt our normal business operations, require us to spend material resources to investigate or correct the breach, require us to notify affected customers or individuals and/or applicable regulators and others, provide identity theft protection services to individuals, expose us to legal liabilities, including litigation, regulatory enforcement actions, and indemnity obligations, and materially adversely affect our revenues and operating results. Our software operates in conjunction with and is dependent on third-party products and components across a broad ecosystem. If there is a security vulnerability in one of these products or components, and if there is a security exploit targeting it, we could face increased costs, liability claims, customer dissatisfaction, reduced revenue, or harm to our reputation or competitive position. Our insurance policies may not be adequate to compensate us for the potential losses arising from any cybersecurity breach or incident. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and could have high deductibles in any event, and defending a suit, regardless of its merit, could be costly and divert management attention.
These risks will increase as we continue to grow the number and scale of our cloud subscriptions and process, store, and transmit increasingly large amounts of our customers’, prospects’, vendors’, channel partners’, and our own data. In particular, as remote working conditions have led businesses to increasingly rely on virtual environments and communication systems, there has been an increase in cyberattacks and other malicious activities.
Risks Related to Our Listed Securities Generally
The market price of our class A common stock has been and may continue to be volatile
The market price of our class A common stock has historically been volatile and this volatility has been significant in recent periods. Since August 11, 2020, the date on which we announced our initial purchase of bitcoin, the closing price of our class A common stock has increased from $12.36 as of August 10, 2020, the last trading day before our announcement, to $366.63 as of July 31, 2025. The market price of our class A common stock may fluctuate widely in response to various factors, some of which are beyond our control. These factors include, but are not limited to:
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In addition, the stock market and the markets for both bitcoin-influenced and technology companies have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies in those markets. In particular, recent trading prices of our class A common stock may reflect market dynamics that are not connected to traditional software and business intelligence industry fundamentals, or to valuation methods commonly associated with operating companies in these industries or with companies engaged predominantly in passive investments in bitcoin or other commodities, such as exchange-traded funds. Our equity market capitalization as of June 30, 2025 is well in excess of our stockholders’ equity calculated in accordance with U.S. GAAP, and in excess of valuations that might traditionally be expected based on our operating performance, cash flows and net assets. Investors may therefore be unable to assess the value our class A common stock or evaluate the risks of an investment in us using traditional or commonly used enterprise valuation methods. We cannot predict how these dynamics may evolve over time, or whether or how long they may last. These market and industry factors may significantly harm the market price of our listed securities, regardless of our actual operating performance.
We are currently subject to legal actions and proceedings and may be subject to additional proceedings in the future, which could distract our management and could result in substantial costs or judgments against us
We are subject to shareholder litigation, including a putative securities class action in which we are a defendant, and certain of our directors and officers are defendants, shareholder derivative lawsuits in which we are a nominal defendant and certain of our current and former directors and officers are defendants, and a class action related to the STRK Amendment in which we are a defendant and our board of directors are defendants. See “Commitments and Contingencies – Shareholder and Derivative Actions” in Note 6 of the Notes to Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q. If these matters were concluded in a manner adverse to us and for which we incur substantial costs or damages not covered by our directors’ and officers’ liability insurance, such a conclusion could have a material adverse effect on our financial condition and business. In addition, these matters could adversely impact our reputation and divert management’s attention and resources from other priorities, including the execution of our bitcoin strategy, which could have a material adverse effect on our business. Because of the volatility in the price of bitcoin and the related significant fluctuations in the price of our listed securities, we may become subject to similar or other actions and proceedings in the future even if these matters are resolved favorably.
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Because of the rights of our two classes of common stock and because Michael J. Saylor, who beneficially owns the majority of our class B common stock, controls a significant portion of our total voting power, Mr. Saylor has significant influence over matters that require approval of our stockholders and as a result could impede a third party from acquiring us, or limit the ability of our other stockholders to influence corporate matters
We have two classes of common stock: class A common stock and class B common stock. Holders of our class A common stock generally have the same rights as holders of our class B common stock, except that holders of class A common stock have one vote per share while holders of class B common stock have ten votes per share. As of July 31, 2025, there were 19,640,250 shares of class B common stock outstanding, which accounted for approximately 42.67% of the total voting power of our outstanding common stock. As of July 31, 2025, Mr. Saylor, our Chairman of the Board of Directors and Executive Chairman, beneficially owned 19,616,680 shares of class B common stock, or 42.62% of the total voting power. Accordingly, Mr. Saylor has significant influence over matters that require approval of our stockholders, including mergers, going-private transactions, and other extraordinary transactions and their terms, elections of our directors, and amendments to our certificate of incorporation and by-laws.
Provisions of our charter, by-laws and Delaware law may have anti-takeover effects that could prevent a change in control even if the change in control would be beneficial to our stockholders
Provisions of our charter, by-laws and Delaware law could make it more difficult for a third party to control or acquire us, even if doing so would be beneficial to our stockholders, including our board of directors having the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director and the ability of our board of directors to issue, without stockholder approval, shares of undesignated preferred stock.
Further, as a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Our board of directors could rely on Delaware law to prevent or delay an acquisition of us.
Future sales, or the perception of future sales, of our class A common stock, convertible debt instruments, convertible or non-convertible preferred stock, or other securities could depress the price of our listed securities
We may issue and sell additional shares of class A common stock, convertible debt instruments, convertible or non-convertible preferred stock, or other securities in subsequent offerings to raise capital or issue shares for other purposes, including in connection with the acquisition of additional bitcoin. For example, between January 1, 2024 and July 31, 2025, we have issued and sold:
On March 10, 2025, we entered into the STRK Sales Agreement, pursuant to which we may issue and sell shares of our STRK Stock having an aggregate offering price of up to $21.0 billion. As of July 31, 2025, we may issue and sell additional shares of STRK Stock having an aggregate offering price of up to $20.45 billion from time to time under the STRK Sales Agreement.
On May 1, 2025, we entered into the May 2025 Sales Agreement, pursuant to which we may issue and sell shares of our class A common stock having an aggregate offering price of up to $21.0 billion. As of July 31, 2025, we may issue and sell additional shares of class A common stock having an aggregate offering price of up to $17.04 billion from time to time under the May 2025 Sales Agreement.
On May 22, 2025, we entered into the Original STRF Sales Agreement, pursuant to which we may issue and sell shares of our STRF Stock having an aggregate offering price of up to $2.1 billion. On July 7, 2025, we amended the Original STRF Sales Agreement to add Morgan Stanley as a sales agent. As of July 31, 2025, we may issue and sell additional shares of STRF Stock having an aggregate offering
price of up to $1.88 billion from time to time under the STRF Sales Agreement.
On July 7, 2025, we entered into the STRD Sales Agreement, pursuant to which we may issue and sell shares of our STRD Stock having an aggregate offering price of up to $4.2 billion. As of July 31, 2025, we may issue and sell additional shares of STRD Stock having an aggregate offering price of up to $4.18 billion from time to time under the STRD Sales Agreement.
On July 31, 2025, we entered into the STRC Sales Agreement, pursuant to which we may issue and sell shares of our STRC Stock having an aggregate offering price of up to $4.2 billion. As of July 31, 2025, we may issue and sell additional shares of STRC Stock having an aggregate offering price of up to $4.2 billion from time to time under the STRC Sales Agreement.
We cannot predict:
Transactions involving newly issued class A common stock, convertible debt instruments, STRK Stock and other series of convertible preferred stock, or other convertible securities could result in possibly substantial dilution to holders of our class A common stock and securities convertible into our class A common stock, such as our STRK Stock.
Our amended and restated by-laws provide that the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, then any other state court located in the State of Delaware, or if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) is the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for such disputes with us or our directors, officers or employees
Our amended and restated by-laws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, then any other state court located in the State of Delaware, or if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware or the Company’s certificate of incorporation or by-laws (in each case, as they may be amended from time to time), or (iv) any action asserting a claim governed by the internal affairs doctrine. This exclusive forum provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act, which provides for exclusive jurisdiction of the federal courts. It could apply, however, to a suit that falls within one or more of the categories enumerated in the choice of forum provision and asserts claims under the Securities Act, inasmuch as Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. There is uncertainty as to whether a court would enforce such provision with respect to claims under the Securities Act, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated by-laws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.
Risks Related to Our Preferred Stock
With respect to seniority, our listed securities rank, from highest to lowest, STRF Stock, STRC Stock, STRK Stock, STRD Stock, and class A common stock. Further, our Preferred Stock is junior to our existing and future indebtedness, structurally junior to the liabilities of our subsidiaries and subject to the rights and preferences of any other class or series of preferred stock that we may issue in the future
If we liquidate, dissolve or wind up, whether voluntarily or involuntarily, then our assets will be available to distribute to our equity holders, including holders of our class A common stock and our Preferred Stock, only if all of our then outstanding indebtedness is first paid in full. The remaining assets, if any, would then be allocated among the holders of our equity securities in accordance with their respective liquidation rights.
With respect to payments upon our liquidation, dissolution, or winding up, our series of Preferred Stock rank, from highest to lowest, as follows: STRF Stock, STRC Stock, STRK Stock, and STRD Stock. If we issue any other class or series of preferred stock senior to our existing series of Preferred Stock, which we refer to as “liquidation senior stock,” in the future, then the amounts due upon that liquidation senior stock must be paid in full before any payments can be made on the Preferred Stock or common stock. If any assets remain after
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any liquidation senior stock is paid in full, those assets will be distributed as follows (in each case, pro rata among holders of such series of Preferred Stock and together with any series of liquidation parity stock to such series of Preferred Stock): first, among our holders of STRF Stock, then among holders of our STRC Stock, then among holders of our STRK Stock, and then among holders of our STRD Stock, with any remaining assets distributed to holders of our common stock. If there are insufficient remaining assets available to pay the liquidation preference and unpaid accumulated dividends on any series of liquidation senior stock, holders of each series of stock that rank junior to that series of liquidation senior stock would not receive any value for their shares.
If we issue any dividend senior stock in the future, such dividend senior stock could contain provisions that prohibit us from paying accumulated dividends on our Preferred Stock, or from purchasing, redeeming or acquiring our Preferred Stock until and unless we first pay accumulated dividends in full on such dividend senior stock.
As of June 30, 2025, excluding intercompany indebtedness, we had approximately $8.24 billion in aggregate principal amount of consolidated indebtedness outstanding, all of which ranks senior to our Preferred Stock and our common stock.
In addition, our subsidiaries have no obligation to pay any amounts on the Preferred Stock. If any of our subsidiaries liquidates, dissolves or winds up, whether voluntarily or involuntarily, then we, as a direct or indirect common equity owner of that subsidiary, will be subject to the prior claims of that subsidiary’s creditors, including trade creditors and preferred equity holders, if any. We may never receive any amounts from that subsidiary, and, accordingly, the assets of that subsidiary may never be available to make payments on the Preferred Stock.
We may not have sufficient funds to pay dividends in cash on our Preferred Stock, or we may choose not to pay dividends on our Preferred Stock, and regulatory and contractual restrictions may prevent us from declaring or paying dividends on our Preferred Stock
We expect to fund any dividends paid in cash on our Preferred Stock primarily through additional capital raising activities, including, but not limited to, at-the-market offerings of our class A common stock, STRC Stock, or STRD Stock, as applicable. However, our ability to declare and pay cash dividends on our Preferred Stock will depend on many factors, including the following:
In addition, subject to a limited exception for each of our STRF Stock and STRK Stock, our board of directors or any duly authorized committee thereof may choose not to pay accumulated dividends on our STRK Stock, STRF Stock or STRD Stock for any reason. Further, our board of directors or any duly authorized committee thereof may choose not to declare or pay accrued dividends, or to declare and pay less than the full amount of dividends, on the STRD Stock for any reason, even if we have sufficient funds to declare and pay accrued dividends on the STRD Stock in full. Accordingly, we may pay less than the full amount of dividends on our Preferred Stock. If we fail to declare and pay dividends on any series of our Preferred Stock in full, then the value of that series or our other series of Preferred Stock, as well as our class A common stock, will likely decline.
Provisions contained in the instruments governing our future indebtedness may restrict or prohibit us from paying cash dividends on our Preferred Stock. If the terms of our indebtedness restrict or prohibit us from paying dividends, then we may seek to refinance that indebtedness or seek a waiver that would permit the payment of dividends. However, we may be unable or may choose not to refinance the indebtedness or obtain a waiver.
Under the DGCL, we may declare dividends on our Preferred Stock only out of our “surplus” (which generally means our total assets less total liabilities, each measured at their fair market values, less statutory capital), or, if there is no surplus, out of our net profits for the current or the immediately preceding fiscal year. We may not have sufficient surplus or net profits to declare and pay dividends on our Preferred Stock in cash.
If we are unable or, if permitted, decide not to pay accumulated dividends on our STRK Stock in cash, then we may, but are not obligated, subject to a limited exception, to elect to pay dividends on our STRK Stock in shares of our class A common stock. However, the payment of dividends in shares of our class A common stock will cause dilution to holders of our class A common stock and exposes holders of
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our STRK Stock to dilution and the risk of fluctuations in the price of our class A common stock. Additionally, even if we choose to pay dividends on our STRK Stock in shares of class A common stock, the number of shares of class A common stock that we are permitted to deliver may be limited.
If we fail to declare and pay full dividends on our Preferred Stock, then we will be prohibited from paying dividends on our class A common stock and any other junior securities, subject to limited exceptions. Although we do not currently pay dividends on our class A common stock, if we decide to do so in the future, a reduction or elimination of dividends on our class A common stock may cause the trading price of our class A common stock to decline, which, in turn, will likely depress the value of our Preferred Stock.
Our Preferred Stock has only limited voting rights
Our Preferred Stock confers no voting rights except with respect to certain dividend arrearages, certain amendments to the terms of our Preferred Stock, and certain other limited circumstances, and except as required by the DGCL. For example, holders of our Preferred Stock, as such, do not have the right to vote in the general election of our directors, although holders of our STRK Stock and STRF Stock, as applicable, will have a limited right, voting together with holders of any voting parity stock, if any, with similar voting rights regarding the election of directors upon a failure to pay dividends on each of our STRK Stock and STRF Stock, as applicable, which similar voting rights are then exercisable, to elect one director upon the occurrence of each of the following events: (i) if less than the full amount of accumulated and unpaid regular dividends on the outstanding STRK Stock and STRF Stock, as applicable, have been declared and paid in respect of each of four or more consecutive regular dividend payment dates; and (ii) if less than the full amount of accumulated and unpaid regular dividends on the outstanding STRK Stock and STRF Stock, as applicable, have been declared and paid in respect of eight or more consecutive regular dividend payment dates. Our STRD Stock and STRC Stock do not have any additional voting rights upon non-payment of dividends, such as the right to elect any directors. Accordingly, the voting provisions of our Preferred Stock may not afford meaningful protections. Additionally, holding STRK Stock does not confer the right to vote on an as-converted basis with holders of our class A common stock on matters on which our class A common stockholders are entitled to vote.
Without the consent of any holder of our Preferred Stock or class A common stock, we may issue preferred stock in the future that ranks equally with our STRF Stock and equally with or senior to our STRC Stock, STRK Stock or STRD Stock with respect to dividends and liquidation rights, which may adversely affect the rights of holders of our existing series of Preferred Stock and our class A common stock
Without the consent of any holder of Preferred Stock or class A common stock, we may authorize and issue preferred stock (including additional STRF Stock) that ranks equally with the STRF Stock with respect to the payment of dividends or the distribution of assets upon our liquidation, dissolution or winding up. In addition, without the consent of any holder of our STRC Stock, STRK Stock, STRD Stock or class A common stock, we may authorize and issue preferred stock (including additional shares of our existing Preferred Stock) that ranks equally with or senior to our STRC Stock, STRK Stock and STRD Stock with respect to the payment of dividends or the distribution of assets upon our liquidation, dissolution or winding up. If we issue any such preferred stock in the future, the rights of holders of our Preferred Stock and our class A common stock will be diluted and the value of our Preferred Stock and class A common stock may decline. For example, if we issue any preferred stock that is senior to STRC Stock, STRK Stock or STRD Stock in the future, such preferred stock could contain provisions that prohibit us from paying dividends on our STRC Stock, STRK Stock or STRD Stock or purchasing, redeeming or acquiring our STRC Stock, STRK Stock or STRD Stock until and unless we first pay accumulated dividends in full on such preferred stock. The issuance of any preferred stock in the future would also have the effect of further subordinating our class A common stock.
Holders of our Preferred Stock may be treated as receiving deemed distributions and holders of STRK Stock may receive distributions paid in class A common stock, and consequently may be subject to tax with respect to our Preferred Stock under certain circumstances even though no corresponding distribution of cash has been made
Under Section 305 of the Internal Revenue Code of 1986, as amended (the “Code”), holders of our Preferred Stock may be treated as receiving a deemed distribution on our Preferred Stock under certain circumstances, including (i) an increase in the liquidation preference of our Preferred Stock, (ii) if our Preferred Stock is issued at a discount or (iii) in the case of STRC Stock, if we can call STRC Stock at a price above its issue price. The liquidation preference of the Preferred Stock is subject to adjustment in the manner described in the applicable certificate of designations, which adjustments may give rise to a deemed distribution to holders of Preferred Stock. See “Commitments and Contingencies—Shareholder and Derivative Actions” in Note 6, and “Subsequent Events—Amendment to STRK Stock” in Note 14, of the Notes to Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q. In addition, if our board of directors does not declare a dividend on our STRF Stock, STRC Stock or STRK Stock in respect of any dividend period before the related dividend payment date, the deferred dividend may be treated as an increase in the liquidation preference of our STRF Stock, STRC Stock or STRK Stock that could give rise to a deemed dividend to holders of our STRF Stock, STRC Stock or STRK Stock. Although the matter is not entirely clear, we believe any deferred dividend on our STRK Stock, STRF Stock or STRC Stock, any discount on our Preferred Stock, any adjustment of the liquidation preference of the Preferred Stock in accordance with their applicable terms and, in the case of STRC Stock, any call premium, should not be treated as giving rise to a deemed distribution on our Preferred Stock. However, there is no assurance that the IRS or an applicable withholding agent will not take a contrary position.
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In addition, the conversion rate of our STRK Stock is subject to adjustment in certain circumstances. If and to the extent that certain adjustments in the conversion rate (or failures to adjust the conversion rate) increase the proportionate interest of a holder of our STRK Stock in our assets or earnings and profits, the holder of our STRK Stock may be deemed to have received for U.S. federal income tax purposes a deemed distribution without the receipt of any cash or property.
Furthermore, upon a conversion of our STRK Stock into shares of our class A common stock, depending on the circumstances, any class A common stock received in respect of any deferred and unpaid dividend (and any dividend that has been declared and not yet paid as well as any accrued but unpaid dividend in the then-current dividend period) could be treated as a deemed distribution for U.S. federal income tax purposes.
Any deemed distribution on our Preferred Stock or any distribution to holders of our STRK Stock that is paid in shares of our class A common stock will generally be taxable to the same extent as a cash distribution. In addition, for any holder of our Preferred Stock that is a non-U.S. holder, any deemed distribution or non-cash distribution could be subject to U.S. federal withholding tax at a 30% rate, or such lower rate as may be specified by an applicable treaty. Because deemed distributions or non-cash distributions received by a holder of our Preferred Stock would not give rise to any cash from which any applicable withholding tax could be satisfied, if we (or an applicable withholding agent) pay withholding (including backup withholding) on behalf of a holder of our Preferred Stock, we (or an applicable withholding agent) may set off any such payment against, or withhold such taxes from, payments of cash or, in the case of our STRK Stock, delivery of shares of our class A common stock to such holder of our Preferred Stock (or, in some circumstances, any payments on our class A common stock) or sales proceeds received by, or other funds or assets of, such holder of our Preferred Stock, or require alternative arrangements with respect to such withholding taxes (e.g., in the case of our STRK Stock, deposit for taxes prior to delivery of any dividend in the form of class A common stock or of conversion consideration).
The application of the rules under Section 305 of the Code to our Preferred Stock is uncertain, and holders of our Preferred Stock should consult their tax advisors about the impact of these rules in their particular situations.
Holders of our Preferred Stock may not be entitled to the dividends-received deduction or preferential tax rates applicable to qualified dividend income
Distributions paid to corporate U.S. holders of our Preferred Stock may be eligible for the dividends-received deduction and distributions paid to non-corporate U.S. holders of our Preferred Stock may be subject to tax at the preferential tax rates applicable to “qualified dividend income” if we have current or accumulated earnings and profits, as determined for U.S. federal income tax purposes and certain holding period and other requirements are met. We may not have sufficient current or accumulated earnings and profits during any fiscal year for the distributions on our Preferred Stock to qualify as dividends for U.S. federal income tax purposes. If any distributions on our Preferred Stock with respect to any fiscal year are not eligible for the dividends-received deduction or for the preferential tax rates applicable to “qualified dividend income” because of insufficient current or accumulated earnings and profits, the trading price of our Preferred Stock may decline.
The tax rules applicable to “fast-pay stock” could result in adverse consequences to holders of our Preferred Stock
Under Treasury Regulations promulgated under Section 7701(l) of the Code (the “Fast-Pay Stock Regulations”), if stock of a corporation is structured such that dividends paid with respect to the stock are economically (in whole or in part) a return of the stockholder’s investment (rather than a return on the stockholder’s investment), then the stock is characterized as “fast-pay stock” and is subject to adverse tax reporting requirements and potentially penalties, as described below. In addition, under the Fast-Pay Stock Regulations, unless clearly demonstrated otherwise, stock is presumed to be fast-pay stock if it is structured to have a dividend that is reasonably expected to decline (as opposed to a dividend rate that is reasonably expected to fluctuate or remain constant) (for such purpose, the dividend rate may be viewed as reasonably expected to decline if we are reasonably expected to stop paying regular dividends on our Preferred Stock or if the maximum Compounded STRF Dividend Rate (as defined in the certificate of designations for the STRF Stock) is in effect with respect to the STRF Stock or if we are reasonably expected to reduce the monthly regular dividend rate over a meaningful time period with respect to the STRC Stock) or is issued for an amount that exceeds (by more than a de minimis amount, as determined under applicable Treasury Regulations) the amount at which the stockholder can be compelled to dispose of the stock. It is not clear what amount would constitute “de minimis” in the case of stock with a perpetual term.
The determination of whether stock is fast-pay stock is based on all the facts and circumstances. To determine if it is fast-pay stock, stock is examined when issued, and, for stock that is not fast-pay stock when issued, when there is a significant modification in the terms of the stock or the related agreements or a significant change in the relevant facts and circumstances. The relevant tax regulations do not indicate the types of significant changes in facts and circumstances that are intended to give rise to such a determination, and therefore it is possible that such a change could arise when, for example, a Compounded STRF Dividend Rate becomes in effect with respect to the STRF Stock or there is a change to the terms of our optional redemption right with respect to the STRC Stock.
We do not believe that our previously issued Preferred Stock is fast-pay stock.
We may issue additional shares of our Preferred Stock (or resell any shares that we or any of our subsidiaries have purchased or otherwise acquired) (such additional or resold shares, the “Additional Shares”). We do not intend to issue any Additional Shares that would be
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treated as fast-pay stock. Moreover, we intend to obtain advice of counsel in connection with future offerings of Additional Shares for the purpose of analyzing the consequences of issuing such Additional Shares in light of any legal developments regarding the definition of fast-pay stock. It is possible, however, that Additional Shares may be issued at a premium above their liquidation preference. As the liquidation preference of the Preferred Stock is subject to adjustment in the manner described in the applicable certificate of designations, and based on the expected overall circumstances of an offering of Additional Shares of STRK Stock, it is generally not expected that the Additional Shares of Preferred Stock would be issued at such a level of premium above their liquidation preference at the time of sale of such Additional Shares so as to implicate the fast-pay stock rules. See “Subsequent Events—Amendment to STRK Stock” in Note 14, and “Commitments and Contingencies – Shareholder and Derivative Actions” in Note 6 of the Notes to Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q. In addition, with respect to the STRC Stock, we do not intend to adjust its regular dividend rate in a manner that would cause the STRC Stock to be treated as fast-pay stock. Any adjustment to STRC Stock’s regular dividend rate is expected to be consistent with our current intention to maintain the STRC Stock’s trading price at or close to its stated amount of $100 per share, and therefore the STRC Stock’s dividend rate is generally expected to fluctuate over time. Nonetheless, there may be increased risk that the IRS could assert that such Additional Shares constitute fast-pay stock.
Transactions involving fast-pay stock arrangements are treated as “listed transactions” for U.S. federal income tax purposes. Issuers and holders of any shares of fast-pay stock would be required to report their participation in the transaction on IRS Form 8886 on an annual basis with their U.S. federal income tax returns and would also be required to mail a copy of that form to the IRS Office of Tax Shelter Analysis. Failure to comply with those disclosure requirements could result in the assessment by the IRS of interest, additions to tax and onerous penalties. In addition, an accuracy-related penalty applies under the Code to any reportable transaction understatement attributable to a listed transaction if a significant purpose of the transaction is the avoidance or evasion of U.S. federal income tax. Furthermore, certain material advisors would also be required to file a disclosure statement with the IRS. If we determine that we are required to file an IRS Form 8886 (including a protective filing) in connection with the potential issuance of fast-pay stock with respect to our previously issued Preferred Stock or Additional Shares, we intend to provide public notice to the holders of our previously issued Preferred Stock or Additional Shares, as applicable, which notice may be by a press release, by publication on our investor relations website, or by filing a current report on Form 8-K with the Securities and Exchange Commission.
Notwithstanding our intent not to issue Additional Shares that would be fast-pay stock, the rules regarding the definition of fast-pay stock are unclear in certain respects and, therefore, the IRS could disagree with our determination and treat such Additional Shares as fast-pay stock. In addition, even though we believe that our previously issued Preferred Stock is not fast-pay stock, treatment of the Additional Shares as fast-pay stock could result in adverse consequences to holders of our previously issued Preferred Stock because such Additional Shares may be indistinguishable from our previously issued Preferred Stock. See “—A future issuance of Additional Shares could have an adverse tax profile, which could subject holders of our previously issued Preferred Stock to adverse consequences” below.
Accordingly, holders of our Preferred Stock are strongly urged to consult their tax advisors regarding the Fast-Pay Stock Regulations and their potential consequences to an investment in our Preferred Stock.
A future issuance of Additional Shares could have an adverse tax profile, which could subject holders of our previously issued Preferred Stock to adverse consequences
If we issue Additional Shares that have a different, and potentially adverse, tax profile or treatment for U.S. federal income tax purposes from our previously issued Preferred Stock, since such Additional Shares would trade under the same CUSIP or other identifying number as that of our previously issued STRF Stock, STRC Stock, STRK Stock or STRD Stock, as applicable, our previously issued Preferred Stock may be treated by subsequent purchasers, withholding agents and potentially the IRS as having the same profile or treatment as such Additional Shares if our previously issued Preferred Stock is not otherwise distinguishable from the Additional Shares.
For example, notwithstanding our intent not to issue any Additional Shares that are fast-pay stock, the IRS could assert that such Additional Shares constitute fast-pay stock, particularly, with respect to Additional Shares of STRK Stock, if they are issued at a premium to their liquidation preference. See “—The tax rules applicable to “fast-pay stock” could result in adverse consequences to holders of our Preferred Stock” above.
Furthermore, if any Additional Shares are issued at a price that exceeds their liquidation preference, such Additional Shares would constitute “disqualified preferred stock” within the meaning of Section 1059(f)(2) of the Code and any corporate U.S. holder generally will be required to reduce its tax basis (but not below zero) in our Preferred Stock by the amount of any dividends-received deduction it receives. The liquidation preference of our Preferred Stock is subject to adjustment in the manner described in the applicable certificate of designations, which adjustment may be taken into account for purposes of disqualified preferred stock determination. See “Subsequent Events—Amendment to STRK Stock” in Note 14, and “Commitments and Contingencies – Shareholder and Derivative Actions” in Note 6, of the Notes to Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q. If Additional Shares issued are considered disqualified preferred stock, our previously issued Preferred Stock could also be subject to the same treatment as a practical matter due to fungible trading.
If any Additional Shares are sold at a discount (or at a discount that exceeds the discount that applies to our previously issued Preferred Stock), such Additional Shares may be subject to U.S. tax rules (which are similar to the rules governing original issue discount for debt
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instruments) that require the accrual of such discount (or such greater discount) over the deemed term of the Additional Shares. In that event, the IRS or a withholding agent may treat any such discount as resulting in deemed distributions, which may be taxable before receipt of any cash payments attributable to such discount with respect to our previously issued Preferred Stock and such Additional Shares.
Because the IRS or other parties (such as withholding agents) may not be able to distinguish our Preferred Stock offered or resold from time to time, a holder of our Preferred Stock might be subject to adverse tax consequences or might be required to demonstrate to the IRS (or such other parties) that the holder purchased our Preferred Stock in a specific offering to which those adverse tax consequences did not apply. Moreover, any adverse tax consequences as described above in connection with the future issuance of Additional Shares may adversely affect the trading price of our Preferred Stock.
Provisions of our Preferred Stock could delay or prevent an otherwise beneficial takeover of us
Certain provisions in our Preferred Stock could make a third-party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a fundamental change, then, subject to certain exceptions, holders of our Preferred Stock will have the right to require us to repurchase their Preferred Stock for cash. These fundamental change provisions could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that holders of our Preferred Stock or holders of our class A common stock may view as favorable.
The accounting method for our Preferred Stock may result in lower reported net earnings attributable to common stockholders and lower reported diluted earnings per share
The accounting method for reflecting the conversion and other provisions of our Preferred Stock in our financial statements may adversely affect our reported earnings. Applicable accounting standards require us to separately account for certain redemption features associated with our Preferred Stock as embedded derivatives. Under this treatment, any embedded derivatives are measured at its fair value and accounted for separately as liabilities that are marked to market at the end of each reporting period. For each financial statement period after the issuance of the preferred stock, a gain or loss would be reported in our statement of operations to the extent the valuation of any of the embedded derivatives changes from the previous period. This accounting treatment may subject our reported net income (loss) to significant non-cash volatility. In addition, the if-converted method applies to reflect our STRK Stock in the calculation of our diluted earnings per share. Under this method, diluted earnings per share is calculated assuming that our STRK Stock is converted at the beginning of the reporting period (or, if later, the time our STRK Stock is issued). However, this calculation is not made if reflecting our STRK Stock in diluted earnings per share in this manner is anti-dilutive. Accordingly, the application of the if-converted method to our STRK Stock may result in lower reported diluted earnings per share.
In addition, accounting standards may change in the future. Accordingly, we may account for our Preferred Stock in a manner that is
significantly different than described above
Our right to unilaterally reduce the regular dividend rate of the STRC Stock could cause the STRC Stock to accumulate dividends at rates that are below those of otherwise comparable instruments, could cause the trading price or value of the STRC Stock to decrease, and could otherwise significantly harm investors
The STRC Stock will accumulate cumulative regular dividends on the stated amount thereof at a variable rate per annum equal to the monthly regular dividend rate per annum. The monthly regular dividend rate per annum has been initially set at 9.00%. However, we will have the right, in our sole and absolute discretion, to adjust the monthly regular dividend rate per annum that applies to each regular dividend period that begins after the first regular dividend period. Our right to adjust the monthly regular dividend rate per annum will be subject to certain restrictions. For example, we will not be permitted to reduce the monthly regular dividend rate per annum that will apply to any regular dividend period (i) by more than the following amount from the monthly regular dividend rate per annum applicable to the prior regular dividend period: the sum of (1) 25 basis points; and (2) the excess, if any, of (x) the monthly SOFR per annum on the first business day of such prior regular dividend period, over (y) the minimum of the monthly SOFR per annum rates that occur on the business days during the period from, and including, the first business day of such prior regular dividend period to, and including, the last business day of such prior regular dividend period; or (ii) to a rate per annum that is less than the monthly SOFR per annum in effect on the business day before we provide notice of the next regular dividend rate. In addition, we will not be entitled to reduce the monthly regular dividend rate per annum of the STRC Stock unless, at the time we provide the related notice of the adjustment, all accumulated regular dividends, if any, on the STRC Stock then outstanding for all prior completed regular dividend periods, if any, have been paid in full (or have been declared in full and consideration in kind and amount that is sufficient, in accordance with the certificate of designations, to pay such accumulated regular dividends, is set aside for the benefit of the preferred stockholders entitled thereto).
Our current intention, which is subject to change in our sole and absolute discretion, is to adjust the monthly regular dividend rate per annum in such a manner as we believe will maintain STRC Stock’s trading price at or close to its stated amount of $100 per share. We may, at any time in our sole and absolute discretion, and without the consent of any holder of STRC Stock, choose to reduce the monthly regular dividend rate per annum to the maximum extent permitted by the terms of the STRC Stock, without regard to the impact that
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reduction may have on the trading price or value of the STRC Stock. If we reduce the monthly regular dividend rate per annum, then the trading price or value of the STRC Stock could decrease significantly. If you hold STRC Stock at the time of such a decrease, the value of your investment could materially depreciate, and you may not be able to resell your STRC Stock at favorable prices, if at all. Moreover, the mere existence of our right to unilaterally reduce the monthly regular dividend rate per annum could, in itself and without any actual reduction in the monthly regular dividend rate per annum, cause the STRC Stock to trade at prices below those that may otherwise be expected.
Notwithstanding the limitations on our ability to reduce the monthly regular dividend rate per annum, the trading price of STRC Stock could decline significantly if, for example, we reduce the dividend rate in successive regular dividend periods, or there is a market expectation that we do so. Further, consecutive monthly reductions of the regular dividends rate on the STRC Stock may cause the regular dividend rate on STRC Stock to be viewed as reasonably expected to decline, which could result in adverse consequences to holders of STRC Stock. See “—The tax rules applicable to “fast-pay stock” could result in adverse consequences to holders of our Preferred Stock” above. If we reduce the monthly regular dividend rate per annum to the minimum dividend rate of the monthly SOFR per annum, and the monthly SOFR per annum thereafter increases, we will have no obligation to increase the monthly regular dividend rate per annum to the new monthly SOFR per annum. Moreover, SOFR has a limited history, and its future performance cannot be predicted.
Despite our current intention, which is to adjust the monthly regular dividend rate per annum in such a manner as we believe will maintain STRC Stock’s trading price at or close to its stated amount of $100 per share, since we are permitted to exercise our right to adjust the monthly regular dividend rate per annum for any reason, the trading price of the STRC Stock could be significantly volatile. For example, we could choose to adjust the monthly regular dividend rate per annum for reasons not directly related to the market value of our bitcoin holdings, the credit spreads on our other debt and preferred stock instruments, or the interest rate environment. Accordingly, the trading profile of our STRC Stock could be significantly different than that of our other securities. Increased volatility could harm investors by, for example, causing wide fluctuations in the implied yield of the STRC Stock and otherwise increasing the uncertainty regarding the price at which investors may resell their STRC Stock, if at all.
Certain provisions of the STRC Stock are intended to protect investors in the event we fail to declare and pay regular dividends on the STRC Stock. These provisions include restrictions on our ability to make payments on, or engage in certain other transactions relating to, other classes of our capital stock that rank junior to, or on parity with, the STRC Stock. Our ability to reduce the monthly regular dividend rate per annum could cause these provisions to be inadequate to protect investors. For example, we could reduce the monthly regular dividend rate per annum to a sufficiently low rate that permits us to pay all accumulated regular dividends and avoid invoking the protective measures of these provisions.
We may be unsuccessful in achieving, or may abandon, our current intention of adjusting the regular dividend rate on our STRC Stock in such a manner as we believe (in our sole and absolute judgment) would be designed to cause the STRC Stock to trade at prices, or otherwise have a value, near its stated amount of $100 per share
Our current intention, which is subject to change in our sole and absolute discretion, is to adjust the monthly regular dividend rate per annum on our STRC Stock in such a manner as we believe will maintain STRC Stock’s trading price at or close to its stated amount of $100 per share. However, we have no obligation to do so, and even if we attempt to achieve our current stated intent, any adjustments we make to the monthly regular dividend rate per annum, or any other actions we take, may fail to achieve or maintain the trading price or value of the STRC Stock near $100 per share. For example, if the STRC Stock is trading at a price per share above $100 and we reduce the monthly regular dividend rate per annum with the goal of decreasing the trading price per share of the STRC Stock to $100, such reduction may cause the trading price of the STRC Stock to decrease by a greater amount than we anticipate, such that the trading price per share of STRC Stock may decrease below $100. Similarity, if the STRC Stock is trading at a price per share below $100 and we increase the monthly regular dividend rate per annum with the goal of increasing the trading price per share of the STRC Stock to $100, such increase may cause the trading price of the STRC Stock to increase by a lesser amount than we anticipate, such that the trading price per share of STRC Stock may remain below $100.
Further, for any additional shares of STRC Stock that we issue (whether in an “at-the-market” or similar offering or otherwise following the listing of STRC Stock on The Nasdaq Global Select Market), our current intention (which is subject to change in our sole and absolute discretion) is to issue any such shares of STRC Stock at a price per share not less than $99 or more than $101. However, we may issue any additional shares of STRC Stock (whether in an “at-the-market” or similar offering or otherwise following the listing of STRC Stock on The Nasdaq Global Select Market) at any price we choose.
Like any other security, the trading price or value of the STRC Stock will depend on a wide range of factors, including those described elsewhere in this “Risk Factors” section, many of which are beyond our control. While we expect that the dividend rate on the STRC Stock will directly impact its trading price or value, there are many other factors that could have equal or more significant impacts. Any adjustment we make to the monthly regular dividend rate per annum of the STRC Stock that is designed to achieve a specified trading price or value will, necessarily, be based on assumptions regarding those other factors. These assumptions will always be inaccurate or incomplete to some degree, and potentially to a material extent. Moreover, even if such an adjustment initially achieves a specified trading price or value, the trading price or value may fluctuate significantly throughout the relevant regular dividend period before we have an opportunity to adjust the monthly regular dividend rate per annum for the next regular dividend period.
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Importantly, the mere existence of our right to unilaterally adjust the monthly regular dividend rate per annum will impact the trading price and value of the STRC Stock. Specifically, we expect the trading price of the STRC Stock at any time to reflect the market’s expectations at that time regarding how we will exercise this right in the foreseeable future. Comments we make regarding our intentions regarding the adjustment of the monthly regular dividend rate per annum could also impact the trading price and value of the STRC Stock. Modeling the impact of market expectations on the trading price of the STRC Stock may be impossible. For example, if we increase, or announce an intention to increase, the monthly regular dividend rate per annum, then the trading price of the STRC Stock may in fact decrease if the market expected us to make a larger increase.
From time to time, we may publicly disclose our expected policies regarding adjustments to the monthly regular dividend rate per annum of the STRC Stock. These disclosures may include specific numerical frameworks setting forth the amount of any change to the monthly regular dividend rate per annum that we intend to make based on the trading price of the STRC Stock or other metrics. In all cases, these disclosures refer only to our current intent as of the time of the applicable disclosure; they are neither a guarantee that the STRC Stock will trade at a specified price in response to any changes to the monthly regular dividend rate per annum, nor a guarantee that we will make any specific adjustment to the monthly regular dividend rate per annum. Moreover, we are free to abandon our stated intent, as described above, or any policies or frameworks that we may subsequently disclose publicly, at any time in our sole and, at any time in our sole and absolute discretion and without the consent of any preferred stockholder. See “—Our right to unilaterally reduce the regular dividend rate of the STRC Stock could cause the STRC Stock to accumulate dividends at rates that are below those of otherwise comparable instruments, could cause the trading price or value of the STRC Stock to decrease, and could otherwise significantly harm investors” above.
Future sales or other dilution of our class A common stock, including other equity-related securities, could dilute our existing stockholders or otherwise depress the market price of our class A common stock and the value of our STRK Stock
Future sales of our class A common stock in the public market, or the perception that such sales could occur, or the issuance of class A common stock upon the conversion of our STRK Stock could negatively impact the market price of our class A common stock, and, accordingly, the value of our STRK Stock. The terms of our STRK Stock, STRF Stock, and STRD Stock do not restrict our ability to issue additional STRK Stock, class A common stock or other equity-related securities in the future. Future sales or issuances of class A common stock, STRK Stock or other equity-related securities could be dilutive to holders of our class A common stock and STRK Stock and could adversely affect their voting and other rights and economic interests. If we issue additional shares of our STRK Stock, shares of class A common stock (including as payment for regular dividends on our STRK Stock), or other equity-related securities, the price of our class A common stock and the value of our STRK Stock may decline. We cannot predict the size of future issuances of our class A common stock or other securities or the effect, if any, that the issuance of our STRK Stock, and future sales and issuances of our class A common stock and other securities would have on the market price of our class A common stock and the value of our STRK Stock.
In addition, the existence of our STRK Stock may encourage short selling by market participants because the conversion of our STRK Stock could be used to satisfy short positions, or anticipated conversion of our STRK Stock into shares of class A common stock could depress the price of our class A common stock. The sale or the availability for sale of a large number of shares of class A common stock in the public market could cause the market price of our class A common stock to decline.
Not all events that may adversely affect the value of our STRK Stock and our class A common stock will result in an adjustment to the conversion rate of our STRK Stock
The conversion rate of our STRK Stock is subject to adjustment for certain events, including:
We are not required to adjust the conversion rate for other events, such as third-party tender offers or an issuance of class A common stock (or securities exercisable for, or convertible into, class A common stock) for cash, that may adversely affect the value of our STRK Stock and the trading price of our class A common stock. An event may occur that adversely affects the value of our STRK Stock and the trading price of the underlying shares of our class A common stock but that does not result in an adjustment to the conversion rate.
Certain events that can significantly reduce, or eliminate entirely, the option value of the conversion right of our STRK Stock will not require an adjustment to the conversion rate. For example, if we are party to a business combination transaction pursuant to which our class A common stock is acquired solely for cash, then, our STRK Stock will become convertible solely into cash, which will eliminate the time value, and may harm the option value, of the conversion right of our STRK Stock. Similarly, a de-listing of our class A common stock will likely severely reduce the liquidity of the market for our class A common stock and the volatility of the trading price of our
class A common stock, which, in turn, will likely reduce the option value of the conversion right of our STRK Stock significantly. None of these, or certain other, events will, in themselves, require an adjustment to the conversion rate to compensate holders of STRK Stock for their lost option value.
Many convertible instruments contain “make-whole” provisions that adjust the conversion rate in a manner that is designed to compensate investors for lost option value upon the occurrence of specified events. Our STRK Stock does not contain such a provision. Accordingly, we may engage in transactions that significantly reduce the option value of the conversion right of our STRK Stock without a corresponding adjustment to the conversion rate.
Recent and future regulatory actions, changes in market conditions and other events may adversely affect the trading price and liquidity of our STRK Stock and the ability of investors to implement a convertible arbitrage trading strategy
We expect that holders of our STRK Stock may seek to employ a convertible arbitrage strategy. Under this strategy, investors typically sell short a certain number of shares of our class A common stock and adjust their short position over time while they continue to hold our STRK Stock. Investors may also implement this type of strategy by entering into swaps on our class A common stock in lieu of, or in addition to, short selling shares of our class A common stock.
The SEC and other regulatory authorities have implemented various rules and taken certain actions, and may in the future adopt additional rules and take other actions, that may impact those engaging in short selling activity involving equity securities (including our class A common stock). These rules and actions include Rule 201 of SEC Regulation SHO, the adoption by the Financial Industry Regulatory Authority, Inc., and the national securities exchanges of a “limit up-limit down” program, the imposition of market-wide circuit breakers that halt trading of securities for certain periods following specific market declines, and the implementation of certain regulatory reforms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Any governmental or regulatory action that restricts investors’ ability to effect short sales of our class A common stock or enter into equity swaps on our class A common stock could depress the trading price of, and the liquidity of the market for, our STRK Stock.
In addition, the liquidity of the market for our class A common stock and other market conditions could deteriorate, which could reduce, or eliminate entirely, the number of shares available for lending in connection with short sale transactions and the number of counterparties willing to enter into an equity swap on our class A common stock with an investor of our STRK Stock. These and other market events could make implementing a convertible arbitrage strategy prohibitively expensive or infeasible. If investors seeking to employ a convertible arbitrage strategy are unable to do so on commercial terms, or at all, then the trading price of, and the liquidity of the market for, our STRK Stock may significantly decline.
Holding STRK Stock does not, in itself, confer any rights with respect to our class A common stock
Holding STRK Stock does not confer any rights with respect to our class A common stock (including the voting rights of, and rights to receive any dividends or other distributions on, our class A common stock). However, holders of our STRK Stock are subject to all changes affecting our class A common stock to the extent the value of our STRK Stock depends on the market price of our class A common stock and to the extent they receive shares of our class A common stock upon conversion of our STRK Stock. For example, if we propose an amendment to our charter documents that requires the approval of our class A common stockholders but not the approval of the holders of our Preferred Stock, then holders of any STRK Stock will not, as such, be entitled to vote on the amendment, although those holders will be subject to any changes implemented by that amendment in the powers, preferences or special rights of our class A common stock.
Holders of STRD Stock may not receive dividends on the STRD Stock, which are discretionary and non-cumulative
Dividends on the STRD Stock are discretionary and not cumulative. If our board of directors or any duly authorized committee thereof does not declare a dividend on the STRD Stock in respect of a dividend period, then no dividend will be deemed to have accrued for such dividend period, be payable on the applicable dividend payment date or be cumulative, and we will have no obligation to pay any dividend for that dividend period, whether or not our board of directors or any duly authorized committee thereof declares a dividend on the STRD Stock, any other series of our Preferred Stock or our common stock for any future dividend period. Accordingly, holders of STRD Stock may not receive dividends on the STRD Stock.
Risks Related to Our Outstanding and Potential Future Indebtedness
Our level and terms of indebtedness could adversely affect our ability to raise additional capital to further execute on our bitcoin strategy, fund our enterprise analytics software operations, and take advantage of new business opportunities
As of June 30, 2025, we had $8.24 billion aggregate indebtedness, consisting of $1.01 billion aggregate principal amount of 2028 Convertible Notes, $3.00 billion in aggregate principal amount of 2029 Convertible Notes, $800.0 million aggregate principal amount of 2030A Convertible Notes, $2.00 billion aggregate principal amount of 2030B Convertible Notes, $603.7 million aggregate principal amount of 2031 Convertible Notes, $800.0 million aggregate principal amount of 2032 Convertible Notes, and $25.6 million of other long-term indebtedness. We refer in these risk factors to the 2028 Convertible Notes, 2029 Convertible Notes, 2030A Convertible Notes,
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2030B Convertible Notes, 2031 Convertible Notes, and 2032 Convertible Notes, collectively, as the “Outstanding Convertible Notes.” As of June 30, 2025, our annual contractual interest expense relating to our Outstanding Convertible Notes was $36.5 million.
Our substantial indebtedness and interest expense could have important consequences to us, including:
We may be unable to service our indebtedness, which could cause us to default on our debt obligations and could force us into bankruptcy or liquidation
Our ability to make scheduled payments on and to refinance our indebtedness depends on and is subject to our financial and operating performance, which is influenced, in part, by general economic, financial, competitive, legislative, regulatory, counterparty business, and other risks that are beyond our control, including the availability of financing in the U.S. banking and capital markets. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital, or restructure or refinance our indebtedness. We cannot assure you that future borrowings will be available to us in an amount sufficient to enable us to service our indebtedness, to refinance our indebtedness, or to fund our other liquidity needs. Even if refinancing indebtedness is available, any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants that could further restrict our business operations. In addition, our bitcoin strategy anticipates that we may issue additional debt in future periods to finance additional purchases of bitcoin, but if we are unable to generate sufficient cash flow to service our debt and make necessary capital expenditures, we may be required to sell bitcoin. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations or our financial covenants, which could cause us to default on our debt obligations. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness.
Upon the occurrence of an event of default under any of our indebtedness, the holders of the defaulted indebtedness could elect to declare all the funds borrowed to be due and payable, together with accrued and unpaid interest. Any of these events could in turn result in cross-defaults under our other indebtedness. We may not have sufficient funds available to pay the amounts due upon any such default, particularly in the event that there has been a decrease in the market value of our bitcoin holdings, and we may not be able to raise additional funds to pay such amounts on a timely basis, on terms we find acceptable, or at all. Any financing that we may undertake under such circumstances could result in substantial dilution of our existing stockholders, and in the absence of being able to obtain such financing, we could be forced into bankruptcy or liquidation.
We may not have the ability to raise the funds necessary to settle conversions of the Outstanding Convertible Notes in cash or to repurchase the Outstanding Convertible Notes for cash upon a fundamental change or to repurchase the 2028 Convertible Notes on September 15, 2027, the 2029 Convertible Notes on June 1, 2028, the 2030A Convertible Notes or the 2031 Convertible Notes on September 15, 2028, the 2030B Convertible Notes on March 1, 2028, or the 2032 Convertible Notes on June 15, 2029, and any future debt may contain, limitations on our ability to engage in cash-settled conversions or repurchases of Outstanding Convertible Notes
In connection with any conversion of the Outstanding Convertible Notes, unless we elect (or have previously irrevocably elected) to deliver solely shares of our class A common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Outstanding Convertible Notes being converted. However, any future debt may contain limitations on our ability to (i) pay cash upon conversion or redemption of the Outstanding Convertible Notes, which may require us to elect to deliver solely shares of our class A common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), or (ii) sell certain bitcoin to generate cash that can be used to make such cash payments.
Upon a fundamental change as defined in the indentures governing the Outstanding Convertible Notes, the holders of such notes will have the right to require us to offer to purchase all of the applicable notes then outstanding at a price equal to 100% of the principal amount of the Outstanding Convertible Notes, plus, in each case, accrued and unpaid interest, if any, to, but excluding, the repurchase date. Moreover, the exercise by holders of the Outstanding Convertible Notes of their right to require us to repurchase such Outstanding Convertible Notes
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could cause a default under future debt agreements, even if the change of control or fundamental change itself does not, due to the financial effect of such repurchase on us. In order to obtain sufficient funds to pay the purchase price of such notes, we expect that we would have to refinance the Outstanding Convertible Notes or obtain a waiver from the applicable holders of Outstanding Convertible Notes and we may not be able to refinance the Outstanding Convertible Notes on reasonable terms, if at all. Absent a waiver from the applicable holders of Outstanding Convertible Notes, our failure to offer to purchase all applicable Outstanding Convertible Notes or to purchase all validly tendered Outstanding Convertible Notes would be an event of default under the indentures governing the Outstanding Convertible Notes.
In addition, holders of Outstanding Convertible Notes have the right to require us to repurchase all or a portion of their notes on the following dates with respect to the following Outstanding Convertible Notes: September 15, 2027 (2028 Convertible Notes), June 1, 2028 (2029 Convertible Notes), September 15, 2028 (2030A Convertible Notes and 2031 Convertible Notes), March 1, 2028 (2030B Convertible Notes), and June 15, 2029 (2032 Convertible Notes), in each case, at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any.
The conditional conversion feature of the Outstanding Convertible Notes, if triggered, may adversely affect our financial condition and operating results
In the event the conditional conversion feature of the Outstanding Convertible Notes is triggered, holders of the applicable Outstanding Convertible Notes will be entitled to convert such notes at any time during specified periods at their option. If one or more holders elect to convert their Outstanding Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. Furthermore, even if holders do not elect to convert their Outstanding Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the applicable Outstanding Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
We use funds from our subsidiaries in order to meet our cash needs and service our indebtedness, including the Outstanding Convertible Notes and our other long-term indebtedness, and certain of our subsidiaries holding digital assets may not provide any dividends, distributions, or other payments to us to fund our obligations and meet our cash needs
We receive dividends, distributions, and other payments from our subsidiaries to fund our obligations, including those arising under the Outstanding Convertible Notes, and our other long-term indebtedness, and meet our cash needs. The operating results of our subsidiaries at any given time may not be sufficient to make dividends, distributions, or other payments to us in order to allow us to make payments on the Outstanding Convertible Notes, and our other long-term indebtedness. In addition, dividends, distributions, or other payments, as well as other transfers of assets, between our subsidiaries and from our subsidiaries to us may be subject to legal, regulatory, or contractual restrictions, which may materially adversely affect our ability to transfer cash within our consolidated companies and our ability to meet our cash needs and service our indebtedness.
Despite our current level of indebtedness, we may incur substantially more indebtedness and enter into other transactions in the future which could further exacerbate the risks related to our indebtedness
Our bitcoin strategy includes acquiring bitcoin using proceeds from equity and debt financings, if available and cash flows from operations. As such, despite our current level of indebtedness, we may incur substantially more indebtedness, and we may enter into other transactions in the future. Even if we were to enter into debt or other arrangements that contain restrictions on our ability to incur additional indebtedness, these restrictions may be subject to a number of qualifications and exceptions that would allow us to incur significant additional indebtedness. To the extent we incur additional indebtedness or other obligations, the risks described herein with respect to our indebtedness may increase significantly.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
During the three months ended June 30, 2025, the Company settled $89,000 in aggregate principal amount of the 2031 Convertible Notes as a result of certain holders electing to convert such notes by issuing class A common stock. 382 shares of class A common stock were issued in respect of all such conversions during the three months ended June 30, 2025. The shares of class A common stock issued upon conversion of each of the 2031 Convertible Notes were issued pursuant to the exemption from registration provided by Section 3(a)(9) of the Securities Act.
Item 5. Other Information
Rule 10b5-1 Information
None of our directors or officers (as defined in Rule 16a-1(f) promulgated under the Exchange Act) adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408 of Regulation S-K) during the quarterly period covered by this report.
DGCL Section 204
To comply with certain technical requirements under the DGCL, on July 25, 2025, we filed with the Secretary of State of the State of Delaware (the “Delaware Secretary of State”) Certificates of Increase for our STRK Stock, STRF Stock, and STRD Stock. These Certificates of Increase memorialize the authorization previously granted by our board of directors to increase the number of shares of STRK Stock, STRF Stock and STRD Stock available to be issued under each of the at-the-market offering programs for such preferred stock.
On July 29, 2025, our board of directors adopted resolutions to comply with the technical requirements of Section 204 of the DGCL ratifying the issuance of shares under the at-the-market offering programs for STRK Stock, STRF Stock and STRD Stock and authorizing us to file, with the Delaware Secretary of State, a Certificate of Validation for each of the STRK Stock, the STRF Stock and the STRD Stock (collectively, the “Certificates of Validation”) that have the effect of causing the Certificates of Increase to become effective as of March 10, 2025 (with respect to the Certificate of Increase for the STRK Stock), May 22, 2025 (with respect to the Certificate of Increase for the STRF Stock) and July 7, 2025 (with respect to the Certificate of Increase for the STRD Stock), as applicable. We filed the Certificates of Validation with the Delaware Secretary of State on August 1, 2025 (the “validation effective time”). From and after the validation effective time, all such shares issued and sold under the at-the-market offering programs for each series of preferred stock are duly authorized, validly issued, and non-assessable as of the initial date of issuance.
Please refer to Exhibit 99.1 in this Quarterly Report on Form 10-Q for a notice to our shareholders under Section 204 of the DGCL.
Item 6. Exhibits
INDEX TO EXHIBITS
Exhibit
Number
Description
3.1
Second Restated Certificate of Incorporation of the registrant (incorporated herein by reference to Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2003 (File No. 000-24435)).
3.2
Certificate of Amendment to the MicroStrategy Incorporated Second Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on January 23, 2025 (File No. 000-24435)).
3.3
Amended and Restated By-Laws of the registrant (incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on January 30, 2015 (File No. 000-24435)).
3.4
Certificate of Designations of 8.00% Series A Perpetual Strike Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on February 5, 2025 (File No. 000-24435)).
3.5
Certificate of Designations of 10.00% Series A Perpetual Strife Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on March 25, 2025 (File No. 001-42509)).
3.6
Certificate of Amendment to Certificate of Designations of 8.00% Series A Perpetual Strike Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2025 (File No. 001-42509)).
3.7
Certificate of Designations of 10.00% Series A Perpetual Stride Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on June 10, 2025 (File No. 001-42509)).
3.8
Certificate of Designations of Variable Rate Series A Perpetual Stretch Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2025 (File No. 001-42509)).
Certificate of Increase for 8.00% Series A Perpetual Strike Preferred Stock (incorporated herein by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2025 (File No. 001-42509)).
3.10
Certificate of Validation for 8.00% Series A Perpetual Strike Preferred Stock.
3.11
Certificate of Increase for 10.00% Series A Perpetual Strife Preferred Stock (incorporated herein by reference to Exhibit 3.3 to the registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2025 (File No. 001-42509)).
3.12
Certificate of Validation for 10.00% Series A Perpetual Strife Preferred Stock.
3.13
Certificate of Increase for 10.00% Series A Perpetual Stride Preferred Stock (incorporated herein by reference to Exhibit 3.4 to the registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2025 (File No. 001-42509)).
3.14
Certificate of Validation for 10.00% Series A Perpetual Stride Preferred Stock.
3.15
Certificate of Increase for Variable Rate Series A Perpetual Stretch Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 31, 2025 (File No. 001-42509)).
4.1
Form of Certificate of Class A Common Stock of the registrant (incorporated herein by reference to Exhibit 4.1 to the registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024 (File No. 000-24435)).
4.2
Indenture, dated as of March 8, 2024, by and between the registrant and U.S. Bank Trust Company, National Association, as trustee (incorporated herein by reference to Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed with the SEC on March 11, 2024 (File No. 000-24435)).
4.3
Form of 0.625% Convertible Senior Note due 2030 (incorporated herein by reference to Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed with the SEC on March 11, 2024 (File No. 000-24435)).
Indenture, dated as of March 18, 2024, by and between the registrant and U.S. Bank Trust Company, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on March 19, 2024 (File No. 000-24435)).
Form of 0.875% Convertible Senior Note due 2031 (incorporated herein by reference to Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed with the SEC on March 19, 2024 (File No. 000-24435)).
4.6
Indenture, dated as of June 17, 2024, by and between MicroStrategy Incorporated and U.S. Bank Trust Company, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on June 20, 2024 (File No. 000-24435)).
4.7
Form of 2.25% Convertible Senior Note due 2032 (incorporated herein by reference to Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed with the SEC on June 20, 2024 (File No. 000-24435)).
4.8
Indenture, dated as of September 19, 2024, by and between MicroStrategy Incorporated and U.S. Bank Trust Company, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on September 20, 2024 (File No. 000-24435)).
4.9
Form of 0.625% Convertible Senior Note due 2028 (incorporated herein by reference to Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed with the SEC on September 20, 2024 (File No. 000-24435)).
4.10
Indenture, dated as of November 21, 2024, by and between the registrant and U.S. Bank Trust Company, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on November 21, 2024 (File No. 000-24435)).
4.11
Form of 0% Convertible Senior Note due 2029 (incorporated herein by reference to Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed with the SEC on November 21, 2024 (File No. 000-24435)).
4.12
Indenture, dated as of February 21, 2025, by and between MicroStrategy Incorporated and U.S. Bank Trust Company, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on February 24, 2025 (File No. 001-42509)).
4.13
Form of 0% Convertible Senior Notes due 2030 (incorporated herein by reference to Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed with the SEC on February 24, 2025 (File No. 001-42509)).
4.14
Form of Certificate of 8.00% Series A Perpetual Strike Preferred Stock of the registrant (incorporated herein by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on February 5, 2025 (File No. 000-24435)).
4.15
Form of Certificate of 10.00% Series A Perpetual Strife Preferred Stock (incorporated herein by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on March 25, 2025 (File No. 001-42509)).
4.16
Form of Certificate of 10.00% Series A Perpetual Stride Preferred Stock (incorporated herein by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on June 10, 2025 (File No. 001-42509)).
4.17
Form of Certificate of Variable Rate Series A Perpetual Stretch Preferred Stock (incorporated herein by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2025 (File No. 001-42509)).
10.1
Sales Agreement, dated as of March 10, 2025, by and among Strategy and TD Securities (USA) LLC, Barclays Capital Inc., The Benchmark Company, LLC, BTIG, LLC, Canaccord Genuity LLC, Cantor Fitzgerald & Co., Compass Point Research & Trading, LLC, H.C. Wainwright & Co., LLC, Keefe, Bruyette & Woods, Inc., Mizuho Securities USA LLC, Santander US Capital Markets LLC and SG Americas Securities, LLC (incorporated herein by reference to Exhibit 1.1 to the registrant’s Current Report on Form 8-K filed with the SEC on March 10, 2025 (File No. 001-42509)).
10.2
Sales Agreement, dated as of May 1, 2025, by and among Strategy and TD Securities (USA) LLC, The Benchmark Company, LLC, BTIG, LLC, Canaccord Genuity LLC, Cantor Fitzgerald & Co., Mizuho Securities USA LLC, Santander US Capital Markets LLC, and SG Americas Securities, LLC (incorporated herein by reference to Exhibit 1.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 1, 2025 (File No. 001-42509)).
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10.3
First Amendment to the Sales Agreement, dated as of July 7, 2025, by and among Strategy and TD Securities (USA) LLC, Barclays Capital Inc., The Benchmark Company, LLC and Morgan Stanley & Co. LLC (incorporated herein by reference to Exhibit 1.2 to the registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2025 (File No. 001-42509)).
10.4
Sales Agreement, dated as of May 22, 2025, by and among Strategy and TD Securities (USA) LLC, Barclays Capital Inc., and The Benchmark Company, LLC (incorporated herein by reference to Exhibit 1.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 22, 2025 (File No. 001-42509)).
10.5
Sales Agreement, dated as of July 7, 2025, by and among Strategy and TD Securities (USA) LLC, Barclays Capital Inc., The Benchmark Company, LLC, Clear Street LLC and Morgan Stanley & Co. LLC (incorporated herein by reference to Exhibit 1.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2025 (File No. 001-42509).
10.6
Sales Agreement, dated as of July 31, 2025, by and among Strategy and TD Securities (USA) LLC, Barclays Capital Inc., The Benchmark Company, LLC, Clear Street LLC and Morgan Stanley & Co. LLC (incorporated herein by reference to Exhibit 1.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 31, 2025 (File No. 001-42509)).
31.1
Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Principal Executive Officer.
31.2
Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Principal Financial Officer.
32.1
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1
Notice to Stockholders under Section 204 of the Delaware General Corporation Law.
101.INS
Inline XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Document.
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
By:
/s/ Andrew Kang
Andrew Kang
Executive Vice President & Chief Financial Officer
/s/ Jeanine Montgomery
Jeanine Montgomery
Vice President & Chief Accounting Officer
Date: August 4, 2025
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