AI Takeaway
MicroStrategy (MSTR) reported a massive Q1 FY2026 net loss of $12.54B driven by a $14.47B operating loss, primarily reflecting unrealized losses on its Bitcoin holdings, while core software revenue grew a modest 11.9% YoY to $124.3M.
Revenue
$124.3M
++11.92% YoY
EPS (Basic)
$-38.25
-131.96% YoY
Gross Margin
67.1%
-2.35% YoY
Operating Income
$-14.47B
-144.37% YoY
Filed · Analysis updated · Source: SEC EDGAR 10-Q filing
MSTR's software business generated $124.3M in revenue for Q1 FY2026, up 11.9% YoY from $111.1M, with gross profit rising 8.1% to $83.4M. However, gross margin compressed slightly to 67.1% from 69.4%, reflecting a 20.5% increase in cost of revenue.
Source: Source: 10-Q Income Statement Data
Operating loss ballooned to -$14.47B in Q1 FY2026 versus -$5.92B in the prior year period, a deterioration of 144.4% YoY. This is almost entirely attributable to unrealized losses on the company's Bitcoin holdings under fair value accounting rules, not operational deterioration.
Source: Source: 10-Q Income Statement Data
Total assets surged to $54.27B (up 23.6% YoY), overwhelmingly reflecting the company's Bitcoin holdings. Cash and equivalents skyrocketed 3,560.5% YoY to $2.21B, while current assets jumped 1,074.4% to $2.39B, indicating significant capital raising activity.
Source: Source: 10-Q Balance Sheet Data
2 more insights available
Upgrade to unlockMSTR holds the vast majority of its assets in Bitcoin, and under ASC 350 fair value accounting, unrealized price declines flow directly through the income statement. The $12.54B net loss in Q1 FY2026 is a direct consequence of Bitcoin price movements, meaning future losses could be equally severe if BTC prices decline.
Source: Source: 10-Q Income Statement & Balance Sheet Data
Unlock 4 more detailed risk analysis
Upgrade to unlockReported EPS of $-38.25 versus the $-4.39 analyst consensus — a -770.4% miss for Q1 FY2026.
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Revenue | $124.3M | $111.07M | +11.92% |
Cost of Revenue | $40.95M | $33.97M | +20.53% |
Gross Profit | $83.35M | $77.09M | +8.12% |
Operating Income | $-14.47B | $-5.92B | -144.37% |
Net Income | $-12.54B | $-4.22B | -197.41% |
EPS (Basic) | $-38.25 | $-16.49 | -131.96% |
EPS (Diluted) | $-38.25 | $-16.49 | -131.96% |
R&D Expense | $24.66M | $24.42M | +0.99% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Total Assets | $54.27B | $43.92B | +23.56% |
Current Assets | $2.39B | $203.61M | +1074.40% |
Total Liabilities | $8.63B | $10.39B | -16.95% |
Current Liabilities | $395.06M | $308.69M | +27.98% |
Stockholders' Equity | $36.65B | $32.22B | +13.75% |
Cash & Equivalents | $2.21B | $60.3M | +3560.52% |
Long-Term Debt | $8.2B | $8.14B | +0.69% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Operating Cash Flow | $13.99M | $-2.39M | +685.56% |
Investing Cash Flow | $-7.25B | $-7.67B | +5.45% |
Financing Cash Flow | $7.15B | $7.69B | -7.12% |
D&A | $8.79M | $6.58M | +33.61% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Gross Margin | 67.1% | 69.4% | -2.35% |
Operating Margin | -11641.5% | -5331.4% | -6310.09% |
Net Margin | -10090.6% | — | — |
ROE | -34.2% | — | — |
ROA | -23.1% | — | — |
Current Ratio | $6.053 | — | — |
Debt to Equity | $0.236 | — | — |
MSTR's $12.54B net loss in Q1 FY2026 is primarily a non-cash accounting loss resulting from unrealized declines in the fair value of its Bitcoin holdings, which are now marked to market under ASC 350. The company's core software business actually generated positive operating cash flow of $14.0M; the loss does not reflect operational failure but rather Bitcoin price volatility flowing through the income statement.
MSTR's software revenue grew 11.9% YoY to $124.3M in Q1 FY2026, up from $111.1M in the prior year period. Gross profit also increased 8.1% to $83.4M, though gross margin compressed slightly to 67.1% from 69.4% due to cost of revenue growing faster at 20.5%.
MSTR's balance sheet shows total assets of $54.27B (mostly Bitcoin), a strong current ratio of 6.05x, and a relatively low debt-to-equity ratio of 0.24x with $8.2B in long-term debt. However, the company's financial health is highly dependent on Bitcoin prices, and its core software business generates only ~$14M in operating cash flow, making it reliant on continuous capital market activity.
While the exact Bitcoin quantity is not specified in the provided financial data, MSTR deployed approximately $7.25B in investing cash outflows during Q1 FY2026, which is consistent with large-scale Bitcoin purchases. This was funded primarily by $7.15B in financing activities, including equity and debt issuances.
The primary risks include extreme Bitcoin price volatility flowing directly into reported earnings under fair value accounting, ongoing equity dilution from at-the-market share offerings (with EPS worsening to -$38.25), and the obligation to service $8.2B in long-term debt against a core software business generating only $14M in operating cash flow. A sustained Bitcoin bear market could severely impair both the company's asset base and its ability to refinance debt.