Original Title: “Strategy Q1 Financial Report: Book Loss of $14.4 Billion, Not Ruling Out Selling Coins to Pay Interest”
Original Author: Wenser, Odaily Planet Daily
In the early hours of this morning, Strategy’s Q1 2026 earnings call officially wrapped up, and the Q1 financial report was formally released. As a result, the real operating status of this “industry heartbeat” holding 818,300 BTC has once again been exposed to the market. Behind the figure of a net loss of $12.54 billion are, at various points, BTC’s price falling to around $62,000, the ongoing accumulation of 633,400 BTC, and the STRC scale rising to $8.5 billion.
Of course, the most thought-provoking part of the financial report and Michael Saylor’s remarks is the related explanation about “Strategy selling, or selling some BTC, to pay dividends.” Possibly influenced by this news, although Q1 performance fell short of market expectations, the capital market responded positively instead, and Strategy’s stock price edged up by 3%.
Odaily Planet Daily has summarized the key points and potential follow-up opportunities in the Q1 financial report as follows.
Q1 book net loss of $12.5 billion; possibility of selling BTC to pay dividends not ruled out
Key Point 1: Selling BTC is no longer impossible—it is an option
Looking closely at the Q1 financial report and the earnings call content, Strategy repeatedly mentioned in its business outlook 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 net long-term debt was $8.17 billion, the redemption value of preferred stock was $10 billion, and cash was only $2.21 billion. At the same time, the company needs to continue paying preferred stock dividends (current STRC annualized rate of 11.5%), and it has started financing dividends by issuing common stock. If, going forward, the BTC price continues to face downward pressure—thereby limiting the financing window—selling coins to service debt would shift from a theoretical assumption to a real possibility, and that would inevitably transmit effects to the market.
Strategy founder Michael Saylor said, “This move is only to send a message to the market that this model (i.e., verifying that Bitcoin assets can support shareholder returns within a company’s financial framework) has already been achieved.”
Worth noting is that, unlike the “KPI indicators” of traditional companies, Strategy has created its own KPI system, which includes: BPS (Bitcoin per share), BTCYield (9.4%), BTC Gain (63,410 BTC), BTC$ Gain (Bitcoin dollar earnings of $4.97 billion) (Odaily Planet Daily note: the above data is as of May 3).
However, the disclaimer also states, that these indicators do not consider debt, do not consider preferred stock’s priority repayment rights, do not represent investment return rates, do not represent fair value gains, and “while BTC dollar earnings may be positive, the company is recording massive fair value losses.” In fact, Strategy’s Q1 business performance proves this mechanism. The KPIs show $4.97 billion in BTC dollar earnings, but under GAAP accounting, the company recorded $14.46 billion in unrealized losses.
The core function of this KPI set is to maintain the narrative in the capital markets, not to reflect the company’s true financial condition. Put plainly, “hold a celebration for a funeral,” or “report good news while hiding worries,” is Strategy’s usual playbook in the capital markets.
As of May 3, 2026, Strategy holds 818,334 BTC, up 22% year to date. But 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 of the 818,334 BTC is $61.81 billion, corresponding to an average buy price of about $75,537 per coin. It is worth noting that, thanks to the recent market rebound, the Q2 mark-to-market unrealized gain is $8.3 billion.
Key Point 2: Spent $7.25 billion to buy BTC in Q1, but BTC’s book value at quarter-end shrank by $7.2 billion
Judging purely by the buying and selling numbers, Strategy’s Q1 bill can barely be called “break-even.”
The financial report shows that in Q1, Strategy bought 89,599 BTC, spending $7.25 billion, with an average price of about $80,929. But due to BTC’s decline, 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 has to be said that in a bear market, continuously levering up (financing + dividends) to bottom-fish BTC and achieve results like this is already quite something.
Key Point 3: The impact of AI on Strategy is objectively real; software business revenue is fully sidelined
On paper, Strategy still insists that it is an “AI-driven enterprise analytics software company.” This can be seen from its revenue structure, including software subscription services revenue, licensing revenue, and product support revenue.
But in terms of structural comparison, Strategy’s total software revenue in Q1 was only $124.3 million, and its gross profit was just $83.35 million. Compared with the BTC holdings market value of $64.1 billion—more than 500x—the clear gap in quarterly revenue tells the market: In an era where AI is surging, software businesses with even a slight connection to AI have already been completely marginalized.
Key Point 4: STRC is the standout business; market value reaches $8.5 billion in 9 months
As Strategy’s “financing weapon,” STRC’s market performance in this ongoing bear market can be described as a “lifeline.”
Currently, STRC (variable-rate Series A perpetual preferred stock) has grown to $8.5 billion in just 9 months, becoming the largest preferred stock by market value in the world. Year to date, Strategy has raised $5.58 billion through STRC, for a growth rate of 189%.
In addition, Strategy states that STRC’s Sharpe ratio is 2.53, with volatility of only 3%, and average daily trading volume of $375 million. This means that, with STRC as a fixed-income-type product characterized by low volatility, high yield, and high liquidity, a new BTC reserve-backed endorsement asset has emerged in traditional financial markets.
Key Point 5: Financing structure undergoes a major shift from Q1 to Q2; STRC becomes the main financing engine
In the financial report, of the $7.37 billion financing Strategy completed in Q1, $5.3 billion came from MSTR common stock via ATM, and $2.07 billion came from STRC—together accounting for roughly 72% to 28%. But after entering Q2 (from April 1 to May 3), this structure reversed: STRC contributed financing of $3.51 billion, while MSTR contributed only $810 million.
This means the funding gap for common stock is getting smaller, and Strategy is increasingly relying on preferred stocks providing fixed income to maintain its cash and capital holdings, thereby continuing to drive BTC accumulation.
Additionally, perhaps considering STRC’s impressive performance and strong ability to attract capital, Strategy is also pushing this “wealth-management-style fixed-income product” in traditional financial markets. Currently, the company has initiated a voting proposal for STRC semi-monthly dividend payments, aiming to shorten the dividend payment cycle and attract more capital to participate in buying.
Key Point 6: Strategy first shows an accumulated deficit in earnings
In traditional financial markets, retained earnings are an important indicator for assessing a company’s financial health: the cumulative result of all net profits minus all dividends since the company’s founding. In other words, it is the company’s “money bag.”
From its founding in 1989 to the end of 2025, Strategy had accumulated profits of $6.32 billion on its books. But by the end of this year’s first quarter, this figure turned from positive to negative, leaving an accumulated deficit of $6.47 billion.
This is the direct consequence of ASU 2023-08 (Odaily Planet Daily note: this standard requires publicly listed companies to measure BTC at fair value starting in 2025, with price changes directly flowing into the income statement). But from the perspective of GAAP—the most commonly used framework in traditional financial markets—Strategy’s historical accumulated profits over more than thirty years have been wiped out entirely by a single quarter of BTC decline.
Of course, when there is a decline, there is also an upswing. If BTC’s price rebounds later, this number can turn positive again. This metric once again highlights the high risk and high volatility of crypto assets compared with traditional financial assets.
Key Point 7: DeFi ecosystem centered around STRC is under construction
Strategy’s Q1 financial report mentions that DeFi protocols such as Apyx and Saturn have absorbed more than $270 million worth of STRC assets. $150 million worth of STRC assets have been included in corporate asset custody/reserve pools 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 STRC’s attractiveness to the capital markets and the crypto ecosystem continues to increase (Odaily Planet Daily note: whether in traditional financial markets or in crypto markets, fixed income is highly appealing in the wealth-management track), STRC will gradually surpass MSTR (traditional preferred stock).
Of course, there are gains and losses. As STRC’s share increases, requirements for Strategy’s ability to pay dividends also rise, and the scope of risk transmission that affects the market will expand.
Key Point 8: There are tax deduction limits, but they won’t be usable for the next 10 years
Beyond business-related data, Strategy’s Q1 financial report also mentions a significant swing in deferred tax liabilities.
According to the table data, Strategy’s deferred tax liabilities dropped sharply from nearly $1.93 billion at the start of the year to only $1.38 million by the end of Q1—nearly zero.
In other words, previously Strategy had a “tax prepayment/withholding bill” of nearly $1.93 billion due to business profit floating higher. But because business losses were driven by BTC’s decline, the company recorded the unpaid taxes as “income tax benefit” in its statement of profit and loss. In addition, Strategy’s $14.46 billion unrealized loss in Q1 could theoretically be used to offset some taxes—creating a “tax shield.”
But the issue is that this tax shield that can be used to offset taxes is only effective if Strategy truly has taxable profits in the future. It also indicates that it expects no taxable profits for more than ten years. In other words, Strategy gained the benefit of $1.9 billion in “tax deduction” due to BTC’s decline, but because taxable profits are unlikely to exist in the future, this benefit will likely not be realized.
Finally, besides purchasing Strategy-related stocks, market wagers on whether Strategy will sell Bitcoin before the end of the year are already live. Currently, the probability of “Yes” stands at 44%.
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