Strategy Inc

Current report

The information set forth under the caption “Risk Factor Updates” in the Company’s Current Report on Form 8-K filed with the SEC on October 6, 2025 is incorporated herein by reference.

Current report

Downgrades in our credit ratings could reduce our access to funding sources in the credit and capital markets.

Current report

We are currently assigned a corporate credit rating from Standard & Poor’s based on its evaluation of our creditworthiness. Although our corporate credit rating from Standard & Poor’s is currently below investment grade, there can be no assurance that we will not be further downgraded. Credit rating reductions or other negative actions by one or more rating agencies could adversely affect our access to funding sources, the cost and other terms of obtaining funding as well as our overall financial condition, operating results and cash flow.

Current report

During the three months ended September 30, 2025, certain holders of the 2031 Convertible Notes elected to convert $2,000, in aggregate principal amount of the 2031 Convertible Notes and the Company elected to settle in $1,809.95 of shares of its class A common stock, together with $190.05 of cash in lieu of any fractional shares. The settlement provisions of the 2031 Convertible Notes provided for the settlement of such notes during the three months ended December 31, 2025. No shares of class A common stock were issued in respect of such conversions during the three months ended September 30, 2025.

Current report

On July 11, 2025, Wei-Ming Shao, our Executive Vice President and General Counsel, entered into a Rule 10b5-1 trading arrangement (as defined in Item 408 of Regulation S-K) intended to satisfy the affirmative defense conditionsof Rule 10b5-1(c) of the Exchange Act with respect to the sale of up to 250,000 shares of our Class A common stock underlying employee stock options. This Rule 10b5-1 trading arrangement was entered into in accordance with our insider trading policy. Trading under the arrangement can commence on November 10, 2025, and the plan will expire on March 31, 2026, or such earlier date upon which all transactions are completed or expire without execution. As previously disclosed in the Company’s Current Report on Form 8-K filed with the Commission on July 1, 2025, Mr. Shao informed the Company of his intention to retire effective December 31, 2025.

Current report

On July 6, 2025, our board of directors adopted resolutions authorizing the sale of shares of our STRD Stock under the STRD ATM. Between August 22, 2025 and October 28, 2025, sales of an aggregate 444,634 shares of STRD Stock (the “Applicable STRD Shares”) were made under the STRD ATM outside the offering parameters previously established by our board of directors. Since the sales were not made within such parameters, those shares were not validly authorized and were not duly issued under Section 152 of the Delaware General Corporation Law (the “DGCL”). On November 1, 2025 (the “validation effective time”) the Pricing & Finance Committee of our board of directors, exercising the power duly delegated to them by the board of directors, adopted resolutions ratifying the issuances of the Applicable STRD Shares. Pursuant to Section 204 of the DGCL, from and after the validation effective time, all of the Applicable STRD Shares are duly authorized, validly issued, and non-assessable as of the initial date of issuance.

Previous report

Risks Related to Our Business in General

Previous report

Our quarterly operating results, revenues, and expenses may fluctuate significantly, which could have an adverse effect on the market price of our listed securities

Previous report

For many reasons, including those described below, our operating results, revenues, and expenses have varied in the past and may vary significantly in the future from quarter to quarter. These fluctuations could have an adverse effect on the market price of our listed securities.

Previous report

Fluctuations in Quarterly Operating Results. Our quarterly operating results may fluctuate, in part, as a result of:

Previous report

fluctuations in the price of bitcoin, of which we have significant holdings and with respect to which we expect to continue to make significant future purchases, and potential fair value changes associated therewith;

Previous report

any sales by us of our bitcoin at prices above or below their carrying value, which would result in our recording gains or losses upon sale of our bitcoin;

Previous report

the incurrence of tax liabilities on future unrealized gains on our bitcoin or as result of the net increase of $12.75 billion to the opening balance of our retained earnings as of January 1, 2025 in connection with the adoption of ASU 2023-08;

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regulatory, commercial, and technical developments related to bitcoin or the Bitcoin blockchain, or digital assets more generally;

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the incurrence of additional fixed interest charges or dividend obligations on our outstanding or newly issued Preferred Stock;

Previous report

the impact of war, terrorism, infectious diseases, natural disasters and other global events, and government responses to such events, on the global economy and the market for and price of bitcoin;

Previous report

significant changes to our software business, including significant changes in our software sales or operating expenses, or the timing of announcements of new offerings or research and development projects by us or our competitors; and

Previous report

our profitability and expectations for future profitability and their effect on our deferred tax balances and net income for the period in which any adjustment to our net deferred tax asset valuation allowance may be made, as well as increases or decreases in our unrecognized tax benefits.

Previous report

Limited Ability to Adjust Expenses. We base our operating expense budgets on expected revenue trends and strategic objectives. Many of our expenses, such as interest expense on our debt, dividend obligations on our outstanding Preferred Stock, tax liabilities, office leases and certain personnel costs, are relatively fixed. We do not expect the cash generated by our software operations to be sufficient to cover such expenses, and we expect to use proceeds from equity or debt financings to pay our expenses and satisfy our liquidity needs that are in excess of our operating cash flows. If we are unable to secure equity or debt financing in a timely manner, on favorable terms, or at all, we may be required to sell bitcoin to satisfy our financial obligations. Such actions could cause significant variation in our operating results in any quarter.

Previous report

Based on the above factors, we believe quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. For example, a decline in the price of bitcoin at March 31, 2025 from the price at January 1, 2025 resulted in our experiencing a $5.91 billion unrealized loss on digital assets for the quarter ended March 31, 2025, while an increase in the price of bitcoin at June 30, 2025 from the price at March 31, 2025 resulted in our experiencing a $14.05 billion unrealized gain on digital assets for the quarter ended June 30, 2025. Additionally, due to the above factors, it is possible that in one or more future quarters, our operating results may be below the expectations of public market analysts and investors. In that event, the market price of our listed securities may fall.

Previous report

We may not be able to remain profitable in future periods

Previous report

As of January 1, 2025, we have adopted ASU 2023-08, pursuant to which we are required to recognize increases or decreases in fair value of our digital assets as incurred in our Consolidated Statements of Operations. We generated net income of $10.02 billion for the three months ended June 30, 2025 and $5.80 billion for the six months ended June 30, 2025, primarily due to a $14.05 billion and $8.14 billion, respectively, unrealized gain on digital assets for the respective periods, partially offset by $4.04 billion and $2.34 billion respectively, in deferred tax expenses during the respective periods. We may not be able to remain profitable in future periods, particularly if we incur significant unrealized losses related to our digital assets, which will depend on the price of bitcoin at the end of the applicable period. As a result, our results of operations and financial condition may be materially adversely affected. Additionally, even during periods when we experience significant unrealized gains on digital assets (such as the three- and six-month periods ended June 30, 2025), we may nevertheless continue to experience significant cashflow shortfalls unless we sell our bitcoin or otherwise generate cashflow using our bitcoin.

Previous report

As of June 30, 2025, we had deferred tax liabilities with respect to the unrealized gain on our bitcoin holdings of approximately $6.31 billion. Our deferred tax liabilities are partially offset by deferred tax assets, such as net operating losses and capitalized research and development costs. If the market value of bitcoin declines in future periods, our deferred tax liability with respect to the unrealized gain on our bitcoin holdings will decrease, and we may be required to establish additional valuation allowances against our deferred tax assets. Such increases in valuation allowances could materially and adversely affect net income in periods in which such charges are incurred.

Previous report

A significant decrease in the market value of our bitcoin holdings could adversely affect our ability to satisfy our financial obligations or liquidity needs

Previous report

As of July 31, 2025, our outstanding indebtedness was $8.24 billion, and our annual contractual interest expense was $36.5 million. Additionally, as of July 31, 2025, we had outstanding $6.3 billion aggregate notional value of our outstanding Preferred Stock, with respect to which the aggregate annual regular dividends payable (including in the case of STRD Stock, as and if declared, and in the case of STRC Stock, assuming the initial dividend rate of 9.00% remains unchanged) were $568.03 million.

Previous report

As part of our bitcoin strategy, we expect to incur or continue to incur additional indebtedness and fixed charges, and we expect to issue additional preferred stock. For the quarter ended June 30, 2025, our enterprise analytics software business did not generate positive cash flow from operations, and we do not expect our enterprise analytics software business to generate sufficient cash flow from operations to satisfy our financial obligations or liquidity needs over the next twelve months. If our enterprise analytics software business does not generate cash flows in future periods sufficient to satisfy our financial obligations and liquidity needs, including repayment of principal and payment of interest on our debt and cash dividends on our Preferred Stock, we intend to fund such payments using cash proceeds from equity or debt financings. Our ability to obtain equity or debt financing may in turn depend on, among other factors, the value of our bitcoin holdings, investor sentiment and the general public perception of bitcoin, our strategy and our value proposition. Accordingly, a significant decline in the market value of our bitcoin holdings or a negative shift in these other factors may create liquidity and credit risks, as such a decline or such shifts may adversely impact our ability to secure sufficient equity or debt financing to satisfy our financial obligations and liquidity needs. These risks could materialize at times when bitcoin is trading below its carrying value on our most recent balance sheet or our cost basis.

Previous report

As bitcoin constitutes the vast bulk of assets on our balance sheet, if we are unable to secure equity or debt financing in a timely manner, on favorable terms, or at all, we may be required to sell bitcoin to satisfy our financial obligations or liquidity needs, and we may be required to make such sales at prices below our cost basis or on terms that are otherwise unfavorable. Any such sale of bitcoin may have a material adverse effect on our operating results and financial condition, and could impair our ability to secure additional equity or debt financing in the future. Our inability to secure additional equity or debt financing in a timely manner, on favorable terms or at all, or to sell our bitcoin in amounts and at prices sufficient to satisfy our financial obligations or liquidity needs, including our debt service and cash dividend payments on our Preferred Stock, could cause us to default under such obligations. Any default on our current or future indebtedness or any of our outstanding or newly issued preferred stock could have a material adverse effect on our financial condition. See “Risks Related to Our Outstanding and Potential Future Indebtedness” and “Risks Related to Our Preferred Stock” for additional details about the risks which may impact us if we are unable to satisfy our debt service and cash dividend obligations.

Previous report

Unrealized gains on our bitcoin holdings could cause us to become subject to the corporate alternative minimum tax under the Inflation Reduction Act of 2022

Previous report

The U.S. enacted the IRA in August 2022. Unless an exemption applies, the IRA imposes a 15% CAMT on a corporation with respect to an initial tax year and subsequent tax years, if the average annual AFSI for any consecutive three-tax-year period preceding the initial tax year exceeds $1 billion. On September 12, 2024, the Department of the Treasury and the IRS issued proposed regulations with respect to the application of the CAMT. On June 2, 2025, the IRS published Notice 2025-27, which signaled that the IRS plans to issue additional interim guidance on how unrealized gains and losses on certain investment assets reported for financial statement purposes should be taken into account for purposes of determining AFSI. On July 30, 2025, a White House working group established by President Trump in January 2025 published a report on strengthening American leadership in digital financial technology, which called for the Department of the Treasury and the IRS to publish guidance addressing the determination of AFSI with respect to financial accounting for unrealized gains and losses on investment assets other than stock and partnership interests.

Previous report

On January 1, 2025, we adopted ASU 2023-08. ASU 2023-08 requires us to measure our bitcoin holdings at fair value in our statement of financial position, with gains and losses from changes in the fair value of our bitcoin recognized in net income each reporting period. As a result of our adoption of ASU 2023-08, as of January 1, 2025, we applied a net increase to the opening balance of our retained earnings of $12.75 billion. For purposes of calculating the AFSI, we will be required to ratably allocate this increase to our retained earnings over a four year period, from 2025 through 2028. When determining whether we are subject to CAMT and when calculating any related tax liability for an applicable tax year, the currently proposed regulations issued in September 2024 provide that, among other adjustments, our AFSI must include this ratable amount in addition to any unrealized gains or losses reported in the applicable tax year.

Previous report

Accordingly, as a result of the enactment of the IRA and our adoption of ASU 2023-08 on January 1, 2025, unless the IRA is amended or the proposed regulations with respect to CAMT, when finalized, are revised to provide relief (or other interim relief is granted), we expect, given the magnitude of our unrealized gain on digital assets as of June 30, 2025, that we would become subject to the CAMT beginning in the 2026 tax year. Whether we do become subject to the CAMT will depend on numerous factors outside of our control, including the publication of any interim or final guidance with respect to the CAMT or the calculation of AFSI, as well as the magnitude of our unrealized gains or losses on our bitcoin holdings for the year ending December 31, 2025, which in turn will depend on our bitcoin holdings and the market value of bitcoin as of that date. If we become subject to the CAMT, this could result in a significant increase in our total tax obligations, which we would need to satisfy in cash, which in turn could materially affect our financial results, including our financial condition, cash flow and results of operations. Additionally, because unrealized gain on our digital assets does not increase our cash flow, if we become subject to CAMT, we may need to liquidate some of our bitcoin holdings or issue additional debt or equity securities to raise cash sufficient to satisfy our tax obligations.

Previous report

We are subject to income taxes and non-income taxes in a variety of domestic and foreign jurisdictions. Our future income tax liability could be materially adversely affected by earnings that are lower than anticipated in jurisdictions where we have lower statutory rates, earnings that are higher than anticipated in jurisdictions where we have higher statutory rates, changes in the valuation of our deferred tax assets and liabilities, changes in the amount of our unrecognized tax benefits, or changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, if we sold any of our bitcoin at prices greater than the cost basis of the bitcoin sold, we would incur a tax liability with respect to any gain recognized, and such tax liability could be material. Changes in the tax laws of foreign jurisdictions could arise, including as a result of the project undertaken by the Organisation for Economic Co-operation and Development (“OECD”) to combat base erosion and profit shifting. The OECD, which represents a coalition of member countries, has issued recommendations that, in some cases, make substantial changes to numerous long-standing tax positions and principles. These changes, many of which have been adopted or are under active consideration by OECD members and/or other countries, could increase tax uncertainty and may adversely affect our provision for income taxes.

Previous report

After enactment of the U.S. Tax Cuts and Jobs Act, most of our income is taxable in the U.S. with a significant portion taxable under the Global Intangible Low-Taxed Income (“GILTI”) regime (or the Net CFC Tested Income regime after enactment of the One Big Beautiful Bill Act of 2025). Beginning in fiscal year 2026, the deduction allowable under the GILTI regime (or the Net CFC Tested Income regime) will decrease from 50% to 40%, which will increase the effective tax rate imposed on our income. The U.S. also enacted the IRA in August 2022. On September 12, 2024, the Department of the Treasury and the IRS issued proposed regulations with respect to the application of the CAMT. Unless an exemption applies, the IRA imposes (i) a 1% excise tax on certain stock repurchases made by publicly traded U.S. corporations, and (ii) a 15% CAMT on a corporation with respect to an initial tax year and subsequent tax years, if the average annual AFSI for any consecutive three-tax-year period preceding the initial tax year exceeds $1 billion. As discussed in greater detail under the risk factor heading “Risks Related to Our Business in General-Unrealized gains on our bitcoin holdings could cause us to become subject to the corporate alternative minimum tax under the Inflation Reduction Act of 2022,” as a result of the enactment of the IRA and our adoption of ASU 2023-08 on January 1, 2025, unless the IRA is amended or the proposed regulations with respect to CAMT, when finalized, are revised to provide relief (or other interim relief is granted), we expect, given the magnitude of our unrealized gain on digital assets as of June 30, 2025, that we would become subject to the CAMT in the 2026 tax year. Whether we do become subject to the CAMT will depend on numerous factors outside of our control, including the publication of any interim or final guidance with respect to the CAMT or the calculation of AFSI, as well as the magnitude of our unrealized gains or losses on our bitcoin holdings for the year ending December 31, 2025, which in turn will depend on our bitcoin holdings and the market value of bitcoin as of that date. If we become subject to these new taxes under the IRA, for these or any other reasons, it could result in a material tax obligation, which we would need to satisfy in cash, which in turn could materially affect our financial condition, cash flow and results of operations. Additionally, because unrealized gain on our digital assets does not increase our cash flow, if we become subject to CAMT, we may need to liquidate some of our bitcoin holdings or issue additional debt or equity securities to raise cash sufficient to satisfy our tax obligations. Further, other existing domestic or foreign tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied in a manner that negatively impacts us.

Previous report

Our determination of our tax liability is subject to review by applicable domestic and foreign tax authorities. Any adverse outcome of such reviews could have an adverse effect on our operating results and financial condition. The determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment and there are many transactions and calculations, including in respect of transactions involving bitcoin, where the ultimate tax determination is uncertain. Moreover, as a multinational business, we have subsidiaries that engage in many intercompany transactions in a variety of tax jurisdictions where the ultimate tax determination is uncertain.

Previous report

We also have contingent tax liabilities that, in management’s judgment, are not probable of assertion. If such unasserted contingent liabilities were to be asserted, or become probable of assertion, we may be required to record significant expenses and liabilities in the period in which these liabilities are asserted or become probable of assertion. As a result of these and other factors, the ultimate amount of tax obligations owed may differ from the amounts recorded in our financial statements and any such difference may materially affect our financial results in future periods in which we change our estimates of our tax obligations or in which the ultimate tax outcome is determined.

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Risks Related to Our Bitcoin Strategy and Holdings

Previous report

Our bitcoin strategy exposes us to various risks, including risks associated with bitcoin

Previous report

Our bitcoin strategy exposes us to various risks, including the following:

Previous report

Bitcoin is a highly volatile asset. Bitcoin is a highly volatile asset that has traded below $50,000 per bitcoin and above $120,000 per bitcoin on the Coinbase exchange (our principal market for bitcoin) in the 12 months preceding the date of this Quarterly Report. The trading price of bitcoin significantly decreased during prior periods, and such declines may occur again in the future.

Previous report

Bitcoin does not pay interest or dividends. Bitcoin does not pay interest or other returns and we can only generate cash from our bitcoin holdings if we sell our bitcoin or implement strategies to create income streams or otherwise generate cash by using our bitcoin holdings. Even if we pursue any such strategies, we may be unable to create income streams or otherwise generate cash from our bitcoin holdings, and any such strategies may subject us to additional risks.

Previous report

Our bitcoin holdings significantly impact our financial results and the market price of our listed securities. Our bitcoin holdings have significantly affected our financial results and if we continue to increase our overall holdings of bitcoin in the future, they will have an even greater impact on our financial results and the market price of our listed securities. For further details, see “Risks Related to Our Bitcoin Strategy and Holdings - Our historical financial statements prior to March 31, 2025 do not reflect the potential variability in earnings that we have experienced to date and may experience in the future relating to our bitcoin holdings.”

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Our assets are concentrated in bitcoin. The vast bulk of our assets are concentrated in our bitcoin holdings. The concentration of our assets in bitcoin limits our ability to mitigate risk that could otherwise be achieved by holding a more diversified portfolio of assets.

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Our bitcoin strategy relies substantially on our ability to complete equity and debt financings. Substantially all of our bitcoin purchases have been made using proceeds from equity and debt financings. Our ability to achieve the objectives of our bitcoin strategy depends in significant part on our ability to obtain equity and debt financing. If we are unable to obtain equity or debt financing on favorable terms or at all, we may not be able to successfully execute on our bitcoin strategy.

Previous report

Our bitcoin strategy has not been tested over an extended period of time or under all market conditions. We are continually examining the risks and rewards of our strategy to acquire and hold bitcoin. This strategy has not been tested over an extended period of time or under all market conditions. For example, although we believe bitcoin, due to its limited supply, has the potential to serve as a hedge against inflation in the long term, the short-term price of bitcoin declined in recent periods during which the inflation rate increased. If bitcoin prices were to decline or our bitcoin strategy otherwise proves unsuccessful, our financial condition, results of operations, and the market price of our listed securities would be materially adversely impacted.

Previous report

We are subject to counterparty risks, including in particular risks relating to our custodians. Although we have implemented various measures that are designed to mitigate our counterparty risks, including by storing substantially all of the bitcoin we own in custody accounts at U.S.-based, institutional-grade custodians and negotiating contractual arrangements intended to establish that our property interest in custodially-held bitcoin is not subject to claims of our custodians’ creditors, applicable insolvency law is not fully developed with respect to the holding of digital assets in custodial accounts. If our custodially-held bitcoin were nevertheless considered to be the property of our custodians’ estates in the event that any such custodians were to enter bankruptcy, receivership or similar insolvency proceedings, we could be treated as a general unsecured creditor of such custodians, inhibiting our ability to exercise ownership rights with respect to such bitcoin, or delaying or hindering our access to our bitcoin holdings, and this may ultimately result in the loss of the value related to some or all of such bitcoin, which could have a material adverse effect on our financial condition as well as the market price of our listed securities.

Previous report

The broader digital assets industry is subject to counterparty risks, which could adversely impact the adoption rate, price, and use of bitcoin. A series of high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry in recent years have highlighted the counterparty risks applicable to owning and transacting in digital assets. Although these bankruptcies, closures, liquidations and other events have not resulted in any loss or misappropriation of our bitcoin, nor have such events adversely impacted our access to our bitcoin, they have, in the short-term, likely negatively impacted the adoption rate and use of bitcoin. Additional bankruptcies, closures, liquidations, regulatory enforcement actions or other events involving participants in the digital assets industry in the future may further negatively impact the adoption rate, price, and use of bitcoin, limit the availability to us of financing collateralized by bitcoin, or create or expose additional counterparty risks.