Strategy Q1 Financial Report: Booked a loss of $14.4 billion, not ruling out selling tokens to pay interest

Original | Odaily Planet Daily (@OdailyChina)

Author | Wenser (@wenser 2010)

Early this morning, the Strategy 2026 Q1 financial report conference call officially concluded, and the Q1 financial report was released. As a result, the true operation status of this “industry heart” holding 818.3 thousand BTC has once again been exposed to the market. Behind the figure of a net loss of $12.54 billion are a BTC price that once dropped to around $62k, a continuous accumulation of 2B BTC, and the STRC scale increasing to $8.5 billion.

Of course, the most thought-provoking part of the financial report and Michael Saylor’s public statements still relate to the explanation of “Strategy or selling part of BTC to pay dividends.” Possibly influenced by this news, despite Q1 underperforming market expectations, the capital market responded positively, with Strategy’s stock price rising slightly by 3%.

Odaily Planet Daily has summarized the key points and potential follow-up opportunities from the Q1 financial report below.

Q1 Book Net Loss of $12.5 Billion, Possibility of Selling BTC to Pay Dividends Cannot Be Ruled Out

Key Point One: Selling BTC is no longer impossible, but an option

A close look at the Q1 financial report and conference call content reveals that Strategy repeatedly mentioned in its forward-looking statements and KPI explanations—“If convertible bonds mature or are redeemed without conversion into common stock, the company may need to sell common stock or Bitcoin to generate sufficient cash to fulfill these obligations.”

As of the end of Q1, Strategy’s long-term debt net amount was $8.17 billion, with a preferred stock redemption value of $10 billion, and cash of only $2.21 billion. Meanwhile, the company needs to continue paying preferred stock dividends (current STRC annualized rate of 11.5%), and has begun financing dividends by issuing common stock. If BTC prices continue to be under pressure, limiting financing options, selling coins to repay debt could shift from a theoretical hypothesis to a real possibility, which will inevitably have market transmission effects.

Strategy founder Michael Saylor stated, “This move is just to send a message to the market that this model (referring to verifying Bitcoin assets to support shareholder returns in corporate finance) has been realized.”

It is worth noting that, unlike traditional KPI indicators, Strategy has created its own KPI system, including: BPS (Bitcoin per share), BTCYield (9.4%), BTC Gain (8B), BTC$ Gain (Bitcoin USD profit of $4.97 billion) (Odaily Planet Daily note: the above data is as of May 3). However, the disclaimer also points out that these indicators do not consider debt, do not prioritize repayment of preferred stock, do not represent investment return rates, do not reflect fair value gains, and that “BTC USD gains may be positive while the company is recording huge fair value losses.” In fact, Strategy’s Q1 business performance confirms this mechanism: KPI shows $4.97 billion BTC USD gains, but under GAAP accounting, an unrealized loss of $14.46 billion was recorded. The core function of this KPI system is to maintain capital market narratives rather than reflect true financial conditions. Simply put, “bad news is good news” or “reframing to report good news and hide bad” has been Strategy’s usual approach in the capital markets.

As of May 3, 2026, Strategy held 818,334 BTC, an increase of 22% since the beginning of the year. But the Q1 financial report recorded a net loss of $12.54 billion, almost entirely due to unrealized losses on digital assets ($14.46 billion); the total cost basis of the 818,334 BTC is $61.81 billion, with an average purchase price of about $75,537 per BTC. It is worth mentioning that, benefiting from the recent market rebound, the unrealized profit in Q2 is $8.3 billion.

Key Point Two: Spent $7.25 billion to buy BTC in Q1, but BTC’s book value shrank by $7.2 billion by quarter-end

Purely from the buying and selling data, Strategy’s Q1 statement can barely be called “break-even.”

The financial report shows that Strategy purchased 89,599 BTC in Q1, costing $7.25 billion, with an average price of about $80,929. But due to BTC’s decline, 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, in a bear market, continuously leveraging (financing + dividends) to bottom-buy BTC, this result is already quite good.

Key Point Three: The impact of AI on Strategy is objectively present, and software business revenue is completely marginalized

Nominally, Strategy still publicly claims to be an “AI-driven enterprise analysis software company,” which is evident from its revenue structure including software subscription services, licensing revenue, and product support income.

But structurally, Strategy’s total software revenue in Q1 was only $124.3 million, with a gross profit of just $83.35 million; compared to the $64.1 billion BTC holding market value, the over 500-fold quarterly revenue gap clearly tells the market: In the era of rapid AI development, software businesses with even slight AI involvement have been thoroughly marginalized.

Key Point Four: STRC becomes the most eye-catching business, with a market value of $8.5 billion in 9 months

As Strategy’s “financing tool,” STRC’s market performance in the bear market can be called a “lifesaver.”

Currently, STRC (variable rate Series A perpetual preferred stock) has grown to a market value of $8.5 billion in just 9 months, becoming the largest preferred stock globally. Since the beginning of the year, Strategy has raised $5.58 billion through STRC, with a growth rate of 189%.

Additionally, Strategy states that STRC’s Sharpe ratio has reached 2.53, with a volatility of only 3%, and an average daily trading volume of $375 million. This means that, leveraging STRC—a low-volatility, high-yield, highly liquid fixed-income product—there is a new BTC reserve-backed asset emerging in traditional financial markets.

Key Point Five: Major transformation in financing structure in Q1 and Q2, STRC becomes the main financing force

In the financial report, Strategy’s Q1 completed $7.37 billion in financing, with MSTR common stock ATM contributing $5.3 billion, and STRC contributing $2.07 billion, roughly a 72% to 28% split; but after entering Q2 (April 1 to May 3), this structure reversed—STRC contributed $3.51 billion, while MSTR only contributed $810 million.

This indicates that the financing gap for common stock is narrowing, and Strategy is increasingly relying on fixed-income preferred stocks to maintain capital, thereby continuously increasing BTC holdings.

Moreover, perhaps due to the impressive performance and strong capital attraction of STRC, Strategy is also actively promoting this “wealth management fixed-income product” in traditional financial markets. Currently, the company has initiated a semi-monthly dividend payment voting proposal for STRC, aiming to shorten dividend payment cycles and attract more funds to participate.

Key Point Six: Strategy’s first-ever accumulated deficit in profits

In traditional financial markets, retained earnings are an important indicator of a company’s financial health, representing the net profit minus all dividends since inception. In other words, it’s the company’s “wallet.”

From its founding in 1989 to the end of 2025, Strategy had accumulated profits of $6.32 billion. But by the end of Q1 this year, this figure had turned negative, leaving an accumulated deficit of $6.47 billion.

This is a direct consequence of the ASU 2023-08 standard (Odaily Planet Daily note: this standard requires listed companies from 2025 onward to measure BTC at fair value, with price changes directly recorded in the profit and loss statement). From the perspective of GAAP, a commonly used accounting standard in traditional finance, Strategy’s thirty-plus years of accumulated profits have been completely wiped out by a single quarter’s BTC decline.

Of course, declines can be offset by rises; if BTC prices rebound later, this figure can turn positive again. This indicator again highlights the high risk and volatility of crypto assets compared to traditional financial assets.

Key Point Seven: DeFi ecosystem centered on STRC is under construction

Strategy’s Q1 financial report mentions that DeFi protocols like Apyx and Saturn have absorbed over $270 million in STRC assets; $150 million of STRC assets have been incorporated into corporate asset reserves by listed 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 on-chain crypto market ecosystems. If the attractiveness of STRC to capital markets and the crypto ecosystem continues to grow (Odaily Planet Daily note: whether in traditional finance or crypto markets, fixed income is quite attractive in wealth management), STRC will gradually surpass MSTR (traditional preferred stock).

Of course, with gains come risks. As STRC’s proportion increases, the requirements for Strategy’s dividend-paying capacity will be higher, and the scope of market risk transmission will expand.

Key Point Eight: Tax deduction limits exist but are unlikely to be used in the next 10 years

Apart from operational data, Strategy’s Q1 financial report also mentions significant changes in deferred tax liabilities.

According to the data, Strategy’s deferred tax liabilities plummeted from nearly $1.93 billion at the start of the year to only $1,380 at the end of Q1, almost zero.

In other words, Strategy previously had a “prepaid tax bill” of nearly $1.93 billion due to unrealized profits, but due to BTC’s decline causing business losses, the company’s asset income statement recorded this unpaid tax as “income tax benefit.” Additionally, Strategy’s $14.46 billion unrealized loss in Q1 could theoretically be used to offset some taxes, reducing the tax payable and creating a “tax shield.”

However, the issue is that this tax shield can only be effective if Strategy actually has taxable profits in the future, but it states that it does not expect taxable profits for more than ten years. In other words, Strategy gained a $1.9 billion “tax deduction benefit” from BTC’s decline, but due to the absence of future taxable profits, this benefit is unlikely to be realized.

Finally, aside from purchasing Strategy-related stocks, betting events on whether Strategy will sell Bitcoin before the end of the year are now online, with the current probability of “yes” being approximately 44%.