Strategy Q1 Earnings Report: Book Loss of $14.4 Billion, Sale of Bitcoin to Pay Interest Not Ruled Out

Original｜Odaily Planet Daily (@OdailyChina)

Author｜Wenser (@wenser 2010 )

Early this morning, Strategy's Q1 2026 earnings call officially concluded, and its Q1 financial report was released. Thus, the true operational status of this "industry heart," holding 818,300 BTC, was once again exposed to the market. Behind the net loss figure of $12.54 billion lies the BTC price dipping to around $62,000, the continuous accumulation of 63,400 BTC, and the growth of STRC to an $8.5 billion scale.

Of course, the most intriguing part of the report and Michael Saylor's public statements concerns the indication that "Strategy may sell some BTC to pay dividends." Possibly influenced by this news, despite Q1 performance falling short of market expectations, capital markets viewed it favorably, with Strategy's stock price edging up 3%.

Odaily Planet Daily summarizes the key points and future potential highlights from the Q1 report as follows.

Q1 Book Net Loss of $12.5 Billion; Selling BTC for Dividends Not Ruled Out

Key Point 1: Selling BTC is No Longer Impossible, but an Option

A closer look at the Q1 report and earnings call reveals that Strategy repeatedly mentions in its forward-looking statements and KPI explanations: "If convertible notes mature or are redeemed without conversion into common stock, the company may need to sell common stock or Bitcoin to generate sufficient cash to meet these obligations."

As of the end of Q1, Strategy had a net long-term debt of $8.17 billion, a preferred stock redemption value of $10 billion, and only $2.21 billion in cash. Additionally, the company must continuously pay preferred stock dividends (currently an annualized STRC rate of 11.5%) and has already begun issuing common stock to finance these dividends. If the BTC price continues to face downward pressure, limiting financing windows, selling coins for debt repayment will transition from a theoretical assumption to a practical possibility, inevitably having a knock-on effect on the market.

Strategy founder Michael Saylor stated, "This move simply aims to send a message to the market that this model (referring to verifying that Bitcoin assets can support shareholder returns within a corporate treasury framework) has been realized."

Notably, unlike traditional companies' "KPI metrics," Strategy created its own KPI system, including BPS (Bitcoin Per Share), BTC Yield (9.4%), BTC Gain (63,410 BTC), and BTC$ Gain ($4.97 billion) (Odaily Planet Daily Note: Data as of May 3). However, in the disclaimer, it also points out that these metrics do not consider debt, the preferential rights of preferred stock, do not represent return on investment or fair value gains, and that "BTC dollar gains can be positive while the company records significant fair value losses." Strategy's Q1 business performance indeed supports this mechanism: KPIs showed $4.97 billion in BTC dollar gains, but under GAAP, it recorded a $14.46 billion unrealized loss. The core function of this KPI system is to maintain the capital market narrative, not to reflect the true financial condition. Simply put, "putting a positive spin on bad news" or "reporting good news and omitting the bad" is Strategy's common practice in capital markets.

As of May 3, 2026, Strategy held 818,334 Bitcoins, a 22% increase year-to-date. However, the Q1 report recorded a net loss of $12.54 billion, almost entirely from unrealized losses on digital assets ($14.46 billion). The total cost basis for the 818,334 BTC was $61.81 billion, corresponding to an average purchase price of approximately $75,537 per coin. Notably, thanks to the recent market rebound, the unrealized gain for Q2 stands at $8.3 billion.

Key Point 2: Spent $7.25 Billion on BTC in Q1, but Book Value Shrank by $7.2 Billion at Quarter End

Purely looking at the buying and selling figures, Strategy's Q1 tab barely qualifies as "breaking even."

Financial data shows Strategy purchased 89,599 BTC in Q1, spending $7.25 billion at an average price of approximately $80,929. However, due to the decline in BTC, the book value of digital assets dropped from $58.85 billion at the start of the year to $51.65 billion, a net decrease of about $7.2 billion.

It must be said that continuously leveraging up (via financing + dividends) to bottom-fish BTC in a bear market and achieving this result is already quite commendable.

Key Point 3: The Impact of AI on Strategy is Objectively Real; Software Business is Fully Marginalized

Nominally, Strategy still publicly insists it is an "AI-driven enterprise analytics software company," evident from its revenue structure including software subscription service revenue, license revenue, and product support revenue.

However, from a structural comparison, Strategy's Q1 total software revenue was merely $124.3 million, with a gross profit of only $83.35 million. Compared to its BTC holdings market value of $64.1 billion, the quarterly revenue difference of over 500 times clearly tells the market: In the era of rapid AI development, a software business only marginally related to AI has been completely marginalized.

Key Point 4: STRC Becomes the Star Business, Reaching $8.5 Billion Market Cap in 9 Months

As Strategy's "financing tool," STRC's market performance during the persistently declining bear market can be described as a "lifeline."

Currently, STRC (Variable Rate Series A Perpetual Preferred Stock) has grown to a scale of $8.5 billion in just 9 months, becoming the world's largest preferred stock by market cap. Year-to-date, Strategy has raised $5.58 billion through STRC, a growth rate of 189%.

Additionally, Strategy stated that STRC's Sharpe ratio reached 2.53, volatility was only 3%, and average daily trading volume was $375 million. This means that through STRC, a low-volatility, high-yield, high-liquidity fixed-income product, a new type of asset backed by BTC reserves has emerged in traditional financial markets.

Key Point 5: Major Financing Structure Shift in Q1 and Q2; STRC Becomes the Main Financing Engine

According to the report, of the $7.37 billion in financing completed by Strategy in Q1, MSTR common stock ATM contributed $5.3 billion, and STRC contributed $2.07 billion, a ratio of approximately 72% to 28%. However, after entering Q2 (April 1 to May 3), this structure reversed – STRC contributed $3.51 billion in financing, while MSTR contributed only $810 million.

This indicates that the financing gap for common stock is narrowing, and Strategy is increasingly relying on preferred stock offering fixed income to maintain its capital reserves, thereby continuing to drive BTC accumulation.

Furthermore, perhaps considering STRC's strong performance and powerful capital attraction, Strategy is also promoting this "wealth management fixed-income product" in traditional financial markets. The company has initiated a proposal for semi-monthly STRC dividend payments, aiming to shorten the dividend payment cycle to attract more capital participation.

Key Point 6: Strategy Records First Accumulated Deficit in Retained Earnings

In traditional financial markets, retained earnings are an important indicator of a company's financial health, representing the cumulative result of all net profit minus all dividends since the company's inception. In other words, it's a company's "money bag."

From its founding in 1989 to the end of 2025, over more than three decades of operations, Strategy had accumulated profits of $6.32 billion on its books. However, by the end of the first quarter of this year, this figure turned negative, leaving an accumulated deficit of $6.47 billion.

This is a direct consequence of the ASU 2023-08 rule (Odaily Planet Daily Note: This rule requires publicly traded companies to measure BTC at fair value starting in 2025, with price changes directly impacting the income statement). But from the traditional GAAP perspective commonly used in financial markets, Strategy's accumulated historical profits over more than three decades have been completely erased by one quarter's decline in BTC.

Of course, what goes down can come up. If the BTC price recovers later, this figure can turn positive again. This indicator once again highlights the high risk and high volatility of crypto assets compared to traditional financial assets.

Key Point 7: STRC-centric DeFi Ecosystem is Under Construction

Strategy's Q1 report mentioned that DeFi protocols like Apyx and Saturn have absorbed over $270 million in STRC assets, while $150 million in STRC assets have been added to the corporate treasury reserves of listed companies like Prevalon, Strive, and Anchorage.

In other words, STRC is evolving from a single preferred stock financing tool into a foundational collateral asset for the on-chain ecosystem of the cryptocurrency market. If STRC's appeal to capital markets and the crypto ecosystem continues to grow (Odaily Planet Daily Note: Fixed income is quite attractive in the wealth management track, whether in traditional financial markets or the crypto market), STRC will gradually surpass MSTR (traditional preferred stock).

Of course, there are trade-offs. As the share of STRC increases, the requirements for Strategy's dividend payment capacity become higher, and the potential scope of risk transmission to the market widens.

Key Point 8: Tax Credit Exists, but Useless for the Next Decade

Beyond business data, Strategy's Q1 report also mentioned a drastic change in deferred tax liabilities.

According to the table data, Strategy's deferred tax liabilities plummeted from nearly $1.93 billion at the beginning of the year to just $1.38 million at the end of Q1, nearly zeroed out.

In other words, Strategy previously had a "provision tax bill" of nearly $1.93 billion due to unrealized business profits. However, due to business losses triggered by the BTC decline, the company's income statement recorded this unpaid tax as "income tax benefit." Additionally, Strategy's $14.46 billion unrealized loss in Q1 theoretically allows for some tax deduction. That is, the business losses led to a reduction in taxes payable, creating a "tax shield."

But the problem is this tax shield is only effective if Strategy has taxable profits in the future. Yet, the company stated it expects no taxable profits for over ten years. In other words, Strategy secured a $1.9 billion "tax credit benefit" from the BTC decline, but because future taxable profits are unlikely, this benefit will probably not be realized.

Finally, aside from buying Strategy-related stocks, a prediction market event on whether "Strategy will sell Bitcoin before the end of the year" is live, currently showing a 44% probability for "Yes."