Strategy beat market expectations by 35000%. It took into account the profits from crypto assets

Strategy's second-quarter report showed a sharp reversal in financial performance from a year ago. The company reported a record net profit, which beat Wall Street's forecast by more than 35000% - analysts expected a loss. This result Strategy - the largest corporate owner of bitcoin - owes to the rise in cryptocurrency prices, as well as changes in accounting rules, which allowed the company to account for unrealized gains from digital assets. 

Enterprise software company Strategy (formerly MicroStrategy), now better known as the largest corporate holder of bitcoin, reported a huge second-quarter profit on July 31, reports MarketWatch. This was made possible by recent changes in accounting rules and the rise in the price of bitcoin itself.

The company's net income for the quarter slightly exceeded $10 billion and amounted to $32.5 per share, while in the same period a year earlier it recorded a loss of $102.6 million, or 57 cents per share. Analysts, expecting the Strategy report, again predicted a loss of 10 cents (under GAAP - U.S. generally accepted accounting principles). Thus the company's result beat Wall Street estimates by 35,447%, notes TheStreet. 

"These achievements underscore the scale of our bitcoin storage strategy and the strength of our platform in the capital markets," Strategy CEO Fong Lee said in a press release.

Strategy shares rose 1.69% on the post-market after the report was released, 

reflecting investor confidence in the company's financial health and strategic direction, commented Investing. However, in morning trading, the quotes collapsed 3.8% following the bitcoin price's decline to a three-year low amid a sell-off in digital and other risky assets. It began after Donald Trump announced new trade duties.

Since the beginning of this year, the value of Strategy is up about 39%, by comparison the S&P 500 Index has added about 8% in the same time.   

Strategy's operating profit rose 7,000% from a year ago - also due to a revaluation of digital assets that added $14 billion to the report, MarketWatch notes.

Revenue increased 2.73% to $114.49 million, 1.35% better than the consensus forecast.  

Strategy said it now expects full-year operating profit of $34 billion, net income of $24 billion, and earnings per share of $80 - based on a forecast that bitcoin's price will reach $150,000 by the end of the year. Analysts meanwhile are still forecasting a full-year loss of $16.32 per share on a GAAP basis, MarketWatch quotes FactSet as saying.

The company, now called, Strategy was founded in 1989 and started out as a software platform for data mining and business intelligence. From 2010 to 2019, it posted steady but small profits, but its shift to a bitcoin investment strategy has made its financial results much more volatile, TheStreet writes.

In 2020, Strategy began actively buying up bitcoins as a hedge against inflation. Today, according to the report, it has 628,791 coins worth more than $46 billion on its balance sheet, that's about 3% of the total volume of this cryptocurrency on the market. Since the end of 2020, the number of bitcoins in Strategy's reserve has grown nearly ninefold, and their value has increased by more than $70 billion.And Strategy's stock price is now directly tied to the value of its bitcoin holdings, Barron's notes.

Problems with meeting forecasts began in the first quarter of 2024, when earnings per share came in worse than expected: instead of the anticipated $0.05, the loss reached $0.36. And, for example, the second quarter of 2023, on the contrary, recorded a positive surprise of 900% - earnings of $0.15 per share with a forecast loss of $0.02, reminds TheStreet. Such sharp fluctuations indicate that Strategy's performance remains highly sensitive to the fluctuations of the crypto market, making it difficult for traditional investors to forecast earnings and assess the company's financial health, the publication writes.

In early July, Strategy halted purchases of the cryptocurrency for the first time in three months suspended, a move that caused the only analyst negative on the company to reiterate a recommendation to sell its shares, MarketWatch points out. On July 29, Strategy said it used the $2.5 billion in proceeds from its floating-rate preferred stock offering to buy more than 21,000 bitcoins. 

While Strategy's core software business remains unprofitable, its cryptocurrency assets make the company something of an indicator for the entire digital asset industry, which has been growing this year amid support from the White House, Barron's notes.

This article was AI-translated and verified by a human editor