Business analytics software company MicroStrategy (NASDAQ: MSTR) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 2.7% year on year to $114.5 million. Its GAAP profit of $32.51 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

MicroStrategy’s second quarter saw headline results that exceeded Wall Street’s expectations, yet the market responded negatively. Management attributed the quarter’s performance primarily to two factors: a significant rise in the price of Bitcoin, which benefited from broader institutional adoption and government support, and the adoption of new fair value accounting for digital assets. CFO Andrew Kang highlighted that the company’s ongoing issuance of Bitcoin-backed credit instruments and continued accumulation of unencumbered Bitcoin holdings were key contributors to growth, emphasizing the company’s role as a leader in the Bitcoin Treasury space.

Looking ahead, MicroStrategy’s guidance is centered on expanding its Bitcoin-backed capital markets strategy and leveraging its new suite of preferred equity products. CEO Michael Saylor outlined plans to increase the company’s use of preferred equity, aiming to amplify returns while carefully managing credit risk. Management cautioned that future performance is highly sensitive to Bitcoin price dynamics and market acceptance of its credit products, stating, “As the world’s view of Bitcoin as collateral evolves, that makes our strategy easier.” The company also plans to reduce reliance on convertible debt over time, with the expectation that retail and institutional demand for preferreds will drive capital formation.

Key Insights from Management’s Remarks

Management credited quarterly outperformance to both Bitcoin price appreciation and the successful launch of new Bitcoin-backed financial products, while recognizing that broader capital market trends and accounting changes played a significant role.

• Bitcoin appreciation impact: The substantial increase in Bitcoin’s value during the quarter, combined with the shift to fair value accounting, created large gains in both operating and net income, overshadowing operational metrics from the company’s software business.
• Preferred equity expansion: MicroStrategy launched four new preferred equity offerings, including STRC, which management described as the largest IPO in the U.S. this year. These instruments targeted a range of investor profiles by varying yield, duration, and seniority.
• Capital raise momentum: The company raised $18.3 billion year-to-date, mainly from Bitcoin-backed securities, surpassing the pace of prior years. Management indicated this capital formation is central to its ability to continue accumulating Bitcoin and funding obligations.
• Leverage and risk management: Management stressed the transition from convertible debt to perpetual preferred equity as a way to increase leverage responsibly while lowering default risk, emphasizing that preferreds never mature and thus don’t impose refinancing pressure.
• Regulatory and market tailwinds: Saylor highlighted increasing U.S. government and international support for Bitcoin, as well as growing institutional adoption, suggesting a more favorable environment for both the company’s treasury operations and the broader crypto ecosystem.

Drivers of Future Performance

MicroStrategy’s forward outlook is shaped by the evolution of its capital structure, retail and institutional demand for preferred products, and the trajectory of Bitcoin prices.

• Preferred equity as capital engine: Management plans to prioritize perpetual preferred equity over convertible debt, seeing greater market depth, lower refinancing risk, and broader investor access. The company expects continued innovation in product design to drive fresh capital inflows for Bitcoin acquisition.
• Bitcoin price sensitivity: Future results and guidance are closely tied to Bitcoin’s price, with management openly stating that substantial gains or setbacks in earnings and asset value will be driven by Bitcoin market dynamics rather than core software operations.
• Education and market acceptance: Management identified education of institutional and retail investors as a key challenge, noting that wider understanding of Bitcoin-backed credit products could lower required yields and increase demand, thereby amplifying the company’s access to capital and leverage.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the pace at which MicroStrategy transitions its capital structure from convertible debt to perpetual preferreds, (2) the market’s acceptance and seasoning of new products such as STRC and Stretch, and (3) the evolution of Bitcoin’s price and volatility, which will directly impact reported earnings and capital-raising ability. Execution on investor education and regulatory clarity will also serve as important milestones.

MicroStrategy currently trades at $395.71, down from $401.72 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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