Strategy Q1 Earnings Report: Book Loss of $14.4 Billion, Possibility of Selling Bitcoin to Pay Interest Not Excluded

Original｜Odaily Planet Daily (@OdailyChina)

Author｜Wenser (@wenser2010)

Early this morning, Strategy's 2026 Q1 earnings call officially concluded, and the Q1 financial report was officially released. Thus, the real operating condition of this "heart of the industry," holding 818,300 BTC, was once again exposed to the market. Behind the net loss of $12.54 billion lies BTC prices briefly dropping to around $62,000, the continuous accumulation of 63,400 BTC, and the expansion of STRC to $8.5 billion.

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

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

Strategy's Q1 Digital Ledger: Book Net Loss of $12.5 Billion, Selling BTC to Pay Dividends Not Ruled Out

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

Scrutinizing the Q1 financial report and the earnings call, Strategy repeatedly mentioned in its forward-looking business statements and KPI explanations—"If convertible notes mature or are redeemed without being converted 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 net long-term debt of $8.17 billion, preferred stock redemption value of $10 billion, and cash of only $2.21 billion. Meanwhile, the company needs to 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 BTC prices continue to face pressure, leading to constrained financing windows, selling BTC to repay debt could transition from a theoretical assumption to a practical reality, inevitably transmitting impacts to the market.

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

Notably, unlike traditional companies' "KPI metrics," Strategy has created its own KPI system, including: BPS (Bitcoin per share), BTC Yield (9.4%), BTC Gain (63,410 units), BTC$ Gain (BTC dollar gain of $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, do not consider the priority claim of preferred stock, do not represent investment returns, do not represent fair value gains, and that "BTC dollar gains can be positive while the company records significant fair value losses." In fact, Strategy's Q1 business performance corroborates this mechanism: KPIs show $4.97 billion in BTC dollar gains, but under GAAP, unrealized losses of $14.46 billion were recorded. The core function of this KPI system is to sustain the capital market narrative, not to reflect true financial health. To put it bluntly, 'putting a positive spin on bad news' or 'reporting good news while concealing bad news' is a common tactic for Strategy in the capital market.

As of May 3, 2026, Strategy held 818,334 Bitcoins, a year-to-date increase of 22%. However, the Q1 financial 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 BTC. Notably, thanks to the recent market rebound, unrealized gains in Q2 amount to $8.3 billion.

Key Point 2: Spent $7.25 Billion Buying BTC in Q1, but BTC Book Value Declined by $7.2 Billion

Purely in terms of buying and selling figures, Strategy's Q1 report can barely be considered "break-even."

Financial data shows that 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 fell 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 continuing to leverage up (financing + dividends) to bottom-fish BTC during a bear market, achieving this result, is already quite commendable.

Key Point 3: AI's Impact on Strategy is Real, Software Business Revenue Completely Marginalized

Nominally, Strategy still publicly insists it is an "AI-driven enterprise analytics software company," as evidenced by 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 only $124.3 million, with gross profit of just $83.35 million. Compared to its BTC holdings market value of $64.1 billion, a quarterly revenue gap of over 500 times clearly tells the market: In the era of rapid AI development, the software business, only tangentially related to AI, has been completely marginalized.

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

As Strategy's "financing tool," STRC's market performance has been a "lifeline" during the persistently declining bear market.

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

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

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

In the financial report, of the $7.37 billion in financing Strategy completed in Q1, MSTR common stock ATM contributed $5.3 billion, and STRC contributed $2.07 billion, a ratio of approximately 72% to 28%. However, entering Q2 (April 1 to May 3), this structure underwent a reversal—STRC contributed $3.51 billion in financing, while MSTR contributed only $0.81 billion.

This means the financing gap via common stock is shrinking, and Strategy is increasingly relying on preferred stocks offering fixed income to maintain its capital base, thereby continuing to drive BTC accumulation.

Furthermore, perhaps considering STRC's outstanding performance and strong capital appeal, Strategy is actively 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 and attract more capital to purchase it.

Key Point 6: Strategy Records First Cumulative Historical Earnings Deficit

In traditional financial markets, retained earnings are a key indicator of a company's financial health, representing the cumulative result of all net profits minus all dividends since its inception. In other words, it's the company's "money pouch."

From its founding in 1989 to the end of 2025, after over thirty years of operation, Strategy had accumulated profits of $6.32 billion on its books. But by the end of the first quarter of this year, this figure had turned negative, leaving a cumulative deficit of $6.47 billion.

This is a direct consequence of ASU 2023-08 (Odaily Planet Daily Note: This standard requires public companies to measure BTC at fair value starting in 2025, with price changes directly impacting the income statement). From the traditional GAAP perspective commonly used in financial markets, Strategy's historical cumulative profits over thirty-plus years have been completely erased by a single quarter's BTC decline.

Of course, what goes down can come up. If BTC prices recover subsequently, this figure could turn positive again. This metric once again highlights the high risk and high volatility of crypto assets compared to traditional financial assets.

Key Point 7: STRC-Centered DeFi Ecosystem Under Construction

Strategy's Q1 financial report mentioned that DeFi protocols like Apyx and Saturn have absorbed over $270 million in STRC assets; $150 million in STRC assets have been included in corporate asset reserves by public companies such as 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 the capital market and the crypto ecosystem continues to grow (Odaily Planet Daily Note: Fixed income is highly attractive in the wealth management sector, whether in traditional financial or crypto markets), STRC will gradually surpass MSTR (traditional preferred stock).

Of course, with gains come losses. An increased proportion of STRC imposes higher dividend-paying capacity requirements on Strategy and will broaden the scope of risk transmission to the market.

Key Point 8: Tax Deduction Credits Exist, but Won't Be Usable for the Next 10 Years

Away from operational data, Strategy's Q1 financial report also mentioned a sharp 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, almost completely eliminated.

In other words, Strategy previously had a "prepaid tax bill" of nearly $1.93 billion due to paper profits from its business. However, due to business losses caused by the BTC decline, the company's asset income statement recorded this unpaid tax amount as "income tax benefit." Additionally, Strategy's $14.46 billion in unrealized Q1 losses could theoretically offset some taxes, meaning the company's business losses reduce its tax payable, creating a "tax shield."

The problem, however, is that this tax shield, which can offset taxes, is only effective if Strategy actually has taxable profits in the future. But the company also stated it does not expect to have taxable profits for at least the next ten years. In other words, Strategy obtained a $1.9 billion "tax deduction benefit" due to the BTC decline, but since future taxable profits likely won't exist, this benefit will probably not be realized.

Finally, aside from purchasing Strategy-related stocks, a prediction market event regarding "Whether Strategy will sell Bitcoin before the end of the year" has gone live, with the probability of "Yes" currently at 44%.