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MicroStrategy Earnings Miss Mark as Bitcoin Weighs on Assets

2 mins
Updated by Ryan Boltman
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In Brief

  • MicroStrategy’s earnings have stagnated over the past few quarters, since Bitcoin began its precipitous fall from its peak late last year.
  • While the company’s initial investment paid off handsomely, it has since weighed significantly on the company.
  • The chief architect of the company’s Bitcoin strategy, Michael Saylor, stepped down as CEO, after a $1 billion loss in the second quarter.
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MicroStrategy published third-quarter financial results which show the company’s revenue has been stagnating, coming in under expectations. 

Despite a solid 51% growth year-over-year in subscription services revenues, among other positives, Microstrategy saw its third-quarter financial results fall below expectations. The business intelligence firm’s revenue fell short of expectations as total revenue declined by 2.1% totaling $125.4 million, according to its latest earnings report. The expected revenue was $127.58. This figure has largely fallen in line with the previous two quarters, despite both coming in under the anticipated amount.

But considering their most noteworthy investment over the past two years, things could be much worse than stagnant earnings.

MicroStrategy is the largest corporate holder of Bitcoin, a position it helped to popularize among other corporations. Unfortunately for the company, the price of Bitcoin has diminished tremendously over the past year, significantly affecting MicroStrategy’s bottom line.

MicroStrategy Bitcoin strategy

As of Sept 20, MicroStrategy owns 130,000 Bitcoin. It spent roughly $4 billion on these purchases, for an average of $30,623 per coin. MicroStrategy started pursuing its investment strategy on August 11, 2020, with an initial investment of $250 million.

The Tyson’s Corner-based company was founded in Nov. 1989, by Michael Saylor, and MIT classmates Sanju Bansal, and Thomas Spahr. The firm creates tools for business intelligence, such as analytics dashboards, and went public on June 1998.

The company experienced its most profitable year in 2014, with $580 million in revenue, although it has diminished since then.

This likely had something to do with Saylor as CEO choosing to put Bitcoin on the company’s books. He called Bitcoin a “dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.” The chief executive revealed shortly thereafter making a significant personal investment in cryptocurrency as well.

Bitcoin Rocky Road

Within months of its initial investment, the price of Bitcoin began to soar, elevating the company’s status and stock price. Share prices increased nearly tenfold in one year upon reaching their peak of over $1,300 in Feb. 2021.

Thereafter, several prominent companies followed suit, most notably Tesla, who bought $1.5 billion of Bitcoin in Feb. 2021. As the price of Bitcoin continued to rise, MicroStrategy continued making significant purchases.

But once Bitcoin began to sink from its peak in Nov. 2021, MicroStrategy shares took a sharp turn for the worse.

While things seem to stabilize after its first quarter earnings report, by the second quarter report something had to give.

While the company avoided a margin call, it booked a loss of $1.062 billion, due to a $917 million impairment charge on its Bitcoin holdings.

Saylor subsequently stepped down from his position as CEO, to be replaced by the company’s CFO Phong Le.

For BeInCrypto’s latest Bitcoin (BTC) analysis, click here

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Nicholas Pongratz
Nick is a data scientist who teaches economics and communication in Budapest, Hungary, where he received a BA in Political Science and Economics and an MSc in Business Analytics from CEU. He has been writing about cryptocurrency and blockchain technology since 2018, and is intrigued by its potential economic and political usage.
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