Strategy (MSTR)

Bitcoin development company Strategy (NASDAQ:MSTR) beat Wall Street’s revenue expectations in Q4 CY2025, with sales up 1.9% year on year to $123 million. Its GAAP loss of $42.93 per share was significantly below analysts’ consensus estimates.

Company Overview

Once a traditional business intelligence software provider, Strategy (NASDAQ:MSTR) develops AI-powered enterprise analytics software while also functioning as a major corporate holder of Bitcoin cryptocurrency.

Note that our analysis is rooted in fundamentals, not Bitcoin-driven technicals.

Organizations generate a lot of data that is stored in silos, often in incompatible formats, making it slow and costly to extract actionable insights, which in turn drives demand for modern cloud-based data analysis platforms that can efficiently analyze the siloed data.

In the enterprise analytics space, Strategy competes with global software vendors including IBM, Microsoft, Oracle, Salesforce, and SAP. As a Bitcoin development company and major holder, it offers investors an alternative to direct cryptocurrency ownership, Bitcoin ETFs, and crypto-focused companies like Coinbase (NASDAQ: COIN) and Marathon Digital (NASDAQ: MARA).

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Strategy struggled to consistently increase demand as its $477.2 million of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of poor business quality.

Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Strategy’s recent performance shows its demand remained suppressed as its revenue has declined by 1.9% annually over the last two years.

This quarter, Strategy reported modest year-on-year revenue growth of 1.9% but beat Wall Street’s estimates by 0.6%.

Looking ahead, sell-side analysts expect revenue to grow 2.7% over the next 12 months. While this projection implies its newer products and services will fuel better top-line performance, it is still below average for the sector.

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Strategy’s billings came in at $196.5 million in Q4, and over the last four quarters, its growth was underwhelming as it averaged 8.3% year-on-year increases. However, this alternate topline metric grew faster than total sales, meaning the company collects cash upfront and then recognizes the revenue over the length of its contracts - a boost for its liquidity and future revenue prospects.

For software companies like Strategy, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

Strategy’s gross margin is worse than the software industry average, giving it less room than its competitors to hire new talent that can expand its products and services. As you can see below, it averaged a 68.7% gross margin over the last year. Said differently, Strategy had to pay a chunky $31.31 to its service providers for every $100 in revenue.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. Strategy has seen gross margins decline by 9.2 percentage points over the last 2 year, which is among the worst in the software space.

In Q4, Strategy produced a 66.1% gross profit margin, marking a 5.6 percentage point decrease from 71.7% in the same quarter last year. Strategy’s full-year margin has also been trending down over the past 12 months, decreasing by 3.4 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs.

Many software businesses adjust their profits for stock-based compensation (SBC), but we prioritize GAAP operating margin because SBC is a real expense used to attract and retain engineering and sales talent. This metric shows how much revenue remains after accounting for all core expenses – everything from the cost of goods sold to sales and R&D.

Strategy’s expensive cost structure has contributed to an average operating margin of negative 1,141% over the last year. Unprofitable software companies require extra attention because they spend heaps of money to capture market share. As seen in its historically underwhelming revenue performance, this strategy hasn’t worked so far, and it’s unclear what would happen if Strategy reeled back its investments. Wall Street seems to think it will face some obstacles, and we tend to agree.

Analyzing the trend in its profitability, Strategy’s operating margin decreased significantly over the last two years. Strategy’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q4, Strategy generated a negative 14,185% operating margin. The company's consistent lack of profits raise a flag.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Strategy’s demanding reinvestments have drained its resources over the last year, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 22.7%, meaning it lit $22.65 of cash on fire for every $100 in revenue.

We were impressed by how significantly Strategy blew past analysts’ billings expectations this quarter. Zooming out, we think this quarter featured some important positives. The stock remained flat at $105.90 immediately following the results.

Updated: February 5, 2026 at 10:55 PM EST

Are you wondering whether to buy Strategy or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

We cheer for all companies solving complex business issues, but in the case of Strategy, we’ll be cheering from the sidelines. For starters, its revenue has declined over the last five years. On top of that, Strategy’s declining operating margin shows it’s becoming less efficient at building and selling its software, and its operating margins reveal poor profitability compared to other software companies.

Strategy’s price-to-sales ratio based on the next 12 months is 77.4x. At this valuation, there’s a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $452.08 on the company (compared to the current share price of $105.90).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.