Executive Summary / Key Takeaways

• Strategy Inc. has fundamentally transformed into the world's leading Bitcoin Treasury Company, strategically accumulating over 640,000 Bitcoins and leveraging this digital capital to pioneer innovative "digital credit" instruments.
• The company reported transformative financial performance in 2025, with Q3 operating income of $3.9 billion and net income of $2.8 billion, driven by Bitcoin's fair value accounting and disciplined capital raising.
• A sophisticated capital markets strategy, including perpetual preferred stocks like STRC (the largest U.S. IPO of 2025), is designed to amplify Bitcoin exposure for common shareholders while offering diverse, high-yield, and often tax-deferred "Return of Capital" (ROC) dividends to a broader investor base.
• Strategy Inc. maintains a robust balance sheet, aiming to reduce traditional convertible debt and increase preferred equity, supported by a recent B- credit rating from S&P Global Ratings , which opens access to larger capital pools.
• The company projects continued strong growth, targeting a 30% BTC yield and $20 billion in BTC dollar gain for 2025, alongside GAAP operating income of $34 billion and EPS of $80, assuming a Bitcoin price of $150,000 at year-end.

The Dawn of Digital Capital and Strategy's Vision

Strategy Inc., formerly MicroStrategy Incorporated, has undergone a profound transformation, evolving from a pioneer in business intelligence software to the world's first and largest Bitcoin Treasury Company. This strategic pivot, initiated in August 2020, established Bitcoin as the company's primary treasury reserve asset, fundamentally reshaping its business model and investment thesis. The recent rebranding to Strategy Inc. in August 2025 underscores this evolved focus and ambition, aligning its identity more closely with the burgeoning digital asset ecosystem.

At its core, Strategy's vision is to leverage Bitcoin as "digital capital" to create "digital credit," offering a diverse range of securities that provide investors with varying degrees of economic exposure to Bitcoin. This innovative approach positions the company at the intersection of the crypto economy and traditional finance, aiming to harness Bitcoin's power and refine it into structured financial products. The broader industry landscape is increasingly supportive, with Bitcoin gaining traction as digital gold, evidenced by the explosive growth of spot Bitcoin ETFs, the increasing number of public companies holding Bitcoin, and a growing wave of government and institutional acceptance.

Technological Foundation: Intelligence Everywhere and Digital Innovation

While Strategy Inc. is widely recognized for its Bitcoin treasury, its foundational software business remains a critical component, advancing a vision of "Intelligence Everywhere" through AI-powered enterprise analytics. The company's core technology offerings include Strategy One, a cloud-native analytics platform that powers large business intelligence deployments across diverse sectors. Complementing this is Strategy Mosaic, a groundbreaking AI-powered Universal Intelligence Layer.

Strategy Mosaic is designed to address the challenges of complex, fragmented data environments by creating unified, reliable information ecosystems. It provides enterprises with consistent definitions and governance across data sources, regardless of location or access tools. A key differentiator is its integration of generative AI capabilities, which automate and accelerate the deployment of AI-enabled applications. This allows non-technical users to access timely, actionable insights through conversational AI, significantly enhancing decision-making. For investors, this technological differentiation contributes to Strategy's competitive moat in the enterprise analytics sector. It drives customer growth and retention, supports the dual-engine growth model of software and Bitcoin appreciation, and provides a stable revenue stream that indirectly supports the Bitcoin acquisition strategy. The continuous innovation in AI and cloud solutions ensures the software business remains relevant and competitive, even as the company's primary focus shifts to digital assets.

The Bitcoin Treasury: A Fortress of Digital Capital

Strategy's Bitcoin treasury is the cornerstone of its investment thesis, representing a substantial and growing asset base. As of September 30, 2025, the company held 640,031 Bitcoins, increasing to approximately 641,167 Bitcoins by October 30, 2025. This impressive accumulation accounts for over 3% of all Bitcoin ever to exist, solidifying Strategy's dominance as a corporate Bitcoin holder. These Bitcoins were acquired at a total cost of $47 billion, averaging approximately $74,000 per Bitcoin, and notably, 100% of these holdings remain unencumbered.

A significant development in 2025 was the adoption of FASB's Fair Value Accounting Standard (ASU 2023-8) for Bitcoin holdings, effective January 1. This change, advocated by Strategy, mandates that digital assets be measured at fair value on the balance sheet, with gains and losses recognized in net income. This has dramatically improved financial transparency for investors and led to a positive cumulative-effect adjustment of approximately $12.7 billion to retained earnings at the time of adoption. The company's Bitcoin holdings are held with regulated custodians, including Coinbase Custody Trust Company, LLC (COIN) (51.60%), Anchorage Digital Bank N.A. (34.80%), and Fidelity Digital Asset Services, LLC (13.60%), with ongoing efforts to diversify custody further.

Financial Performance: A Transformative Year

The adoption of fair value accounting for Bitcoin has profoundly impacted Strategy's financial reporting, leading to a "transformative improvement year-over-year." For the three months ended September 30, 2025, the company reported $3.9 billion in operating income, $2.8 million in net income, and $8.43 in basic earnings per common share. The nine months ended September 30, 2025, saw even more significant figures, with $12 billion in GAAP operating income, $8.6 billion in net income, and $30.83 in basic earnings per common share. These results mark the company's second consecutive quarter of substantial positive GAAP earnings, driven by Bitcoin's performance and disciplined capital raising.

The Bitcoin strategy's impact is evident in the $3.89 billion and $12.03 billion in unrealized gains on digital assets recognized for the three and nine months ended September 30, 2025, respectively. This contrasts sharply with the digital asset impairment losses reported in 2024 under the previous accounting standard. The software business, while smaller in scale, continues its strategic transition. Subscription services revenues surged by 65.4% year-over-year in Q3 2025 and 65.5% for the nine months, fueled by customer migrations to cloud-based subscriptions and new contracts. Conversely, product license revenues, despite a one-time settlement boosting Q3 figures, are expected to continue declining as the company no longer markets new perpetual licenses. Product support revenues also decreased due to cloud conversions.

Operating expenses saw shifts, with sales and marketing and R&D decreasing due to personnel adjustments, while general and administrative expenses increased, primarily due to higher Bitcoin custody and advocacy fees.

From a liquidity perspective, Strategy's cash and cash equivalents alone are not sufficient to meet its short-term or long-term needs. However, the company's substantial Bitcoin holdings serve as a significant potential source of liquidity, though management does not anticipate needing to sell Bitcoin for liquidity in the next 12 months. The balance sheet reflects this strength, with digital assets growing from under $7 billion in Q3 2024 to $73.21 million in Q3 2025, and total equity reaching $58.1 million. The company's enterprise value stood at $98 billion as of October 24, 2025, with a market capitalization of $83 billion, underpinned by a Bitcoin net asset value of $71 billion, representing 72% of its total enterprise value.

Capital Markets Innovation: The Digital Credit Factory

Strategy's capital markets strategy is a sophisticated engine designed to amplify Bitcoin exposure for common shareholders while attracting diverse pools of capital through innovative "digital credit" instruments. The company's "42-42 capital plan," announced in May 2025, targets raising an ambitious $84 billion ($42 billion in equity and $42 billion in fixed-income) by the end of 2027. This plan reflects a significant acceleration from previous targets, driven by favorable market dynamics and strong investor demand.

A key element of this strategy is the shift from traditional convertible debt to perpetual preferred equity. Strategy has introduced four distinct series of preferred stock: 10% Series A Perpetual Strife Preferred Stock (STRF), Variable Rate Series A Perpetual Stretch Preferred Stock (STRC), 8% Series A Perpetual Strike Preferred Stock (STRK), and 10% Series A Perpetual Stride Preferred Stock (STRD). STRC, notably, was the largest U.S. IPO of 2025, highlighting the market's appetite for these innovative products. These preferred instruments are structured to appeal to different investor profiles, from income-focused investors seeking lower risk (STRF) or short duration (STRC) to those desiring yield with price appreciation potential (STRK) or higher yields (STRD).

A significant differentiator for Strategy's preferreds is the "Return of Capital" (ROC) dividend treatment, which is tax-deferred and expected to continue for "10 years or more." This offers a compelling advantage over taxable traditional credit instruments. The company's annual interest and dividend obligations total $689 million, a modest sum representing less than 1% of its total Bitcoin holdings and a small fraction of its capital-raising capacity. Strategy's commitment to a "bulletproof balance sheet" is further evidenced by its B- issuer credit rating from S&P Global Ratings (SPGI), a "big milestone" that, despite Bitcoin not yet being fully credited as capital by traditional agencies, significantly expands access to larger capital pools. The company aims to achieve an investment-grade rating as Bitcoin gains broader acceptance as a capital asset. Furthermore, Strategy is exploring international expansion, planning to launch native digital credit instruments denominated in local currencies like CAD and EUR to tap global capital markets.

Competitive Positioning: Outperforming in a New Paradigm

Strategy Inc. operates in a dual competitive landscape: the mature enterprise analytics software market and the nascent, rapidly evolving Bitcoin treasury industry. In software, Strategy competes with tech giants like Microsoft (MSFT) (Power BI), Salesforce (CRM) (Tableau), Oracle (ORCL) (analytics tools), and SAP (SAP) (S/4HANA). While these larger competitors offer broader ecosystems and often stronger overall financial health, Strategy differentiates itself through specialized analytics, its proprietary semantic graph technology, and dedicated customer support for custom applications. This focused approach provides a qualitative edge in niche customization and data governance, potentially leading to stronger customer loyalty. However, Strategy's smaller scale and ecosystem breadth mean it may lag in overall market share and growth rates compared to its more diversified rivals.

In the Bitcoin treasury space, Strategy is the undisputed leader, holding significantly more Bitcoin than any other publicly traded company. This scale, combined with its innovative "digital credit" strategy, positions it as a "Bitcoin's Central Bank" for its own reserves. The company's stock has "outperformed every major asset class in every S&P 500 company" since adopting Bitcoin in 2020, appreciating 2,887% compared to Bitcoin's 692% and the S&P 500's 65%. This outperformance is attributed to its "intelligent leverage" and "quad reflexive strategy." Strategy's equity is also the "most volatile stock out of the S&P 500 universe," which, coupled with its liquidity, drives the largest open options interest in the Bitcoin ecosystem. Its credit instruments are "overcollateralized by 5:1 or more," a level of collateralization superior to most traditional investment-grade companies, yet they trade with substantial credit spreads due to the market's nascent understanding of Bitcoin as collateral. This "credit advantage," along with MSTR's compliance advantage for institutional investors and its inclusion in indices like the NASDAQ 100, further differentiates it from direct Bitcoin commodity investments and ETFs.

Risks and Outlook: Navigating the Digital Frontier

Strategy's outlook for 2025 is ambitious, underpinned by a projected Bitcoin price of $150,000 at year-end. The company targets a 30% BTC yield and $20 billion in BTC dollar gain, alongside GAAP operating income of $34 billion, net income of $24 billion, and EPS of $80. The software business is expected to continue its cloud transition, with subscription services growth offsetting declines in product licenses and support. The "Return of Capital" (ROC) dividend treatment for preferreds is anticipated to persist for "10 years or more," offering a unique tax advantage to investors.

However, this forward-looking vision is accompanied by inherent risks. Bitcoin's price volatility remains a primary concern, as significant fluctuations can materially impact financial results, particularly under fair value accounting. The company's reliance on equity and debt capital markets for funding its Bitcoin acquisitions and dividend obligations exposes it to market conditions. While Strategy's perpetual preferred stock aims to mitigate refinancing risk, the recurring and potentially variable cash obligations for dividends, particularly for STRC, introduce financial commitments. Other risks include the novel nature of digital assets, cybersecurity threats, the potential loss of private keys, and ongoing legal proceedings such as the Dodge Class Action. While the recent IRS guidance on CAMT has mitigated the risk of unrealized gains being taxed, regulatory clarity around digital asset taxonomy remains an area for further development. The company's B- credit rating, while a step forward, still reflects traditional finance's cautious view of Bitcoin as collateral, potentially impacting the cost and availability of future capital.

Conclusion

Strategy Inc. stands at a pivotal juncture, having successfully transformed into a pioneering Bitcoin Treasury Company that is actively shaping the future of digital finance. Its core investment thesis revolves around leveraging Bitcoin as "digital capital" to create a "digital credit factory," a scalable and tax-efficient model designed to amplify shareholder value. The company's strategic shift towards perpetual preferred equity, exemplified by the success of STRC, demonstrates its innovative approach to capital formation, attracting a diverse investor base with unique, high-yield, and tax-deferred offerings.

Despite inherent risks associated with Bitcoin's volatility and the nascent stage of digital credit markets, Strategy's robust balance sheet, disciplined capital allocation, and commitment to transparency position it for continued outperformance. The company's technological foundation in AI-powered enterprise analytics further supports its dual-engine growth model. As Strategy continues to educate traditional financial institutions and expand its global reach, its leadership in forging a new era of digital capital and credit innovation presents a compelling long-term opportunity for discerning investors.