# How Strategy makes money

CXProWealth Business Lens · Strategy (MSTR) · Q3 FY2026

Read from the 10-Q for the period 2026-07-01 to 2026-09-30, filed 2026-11-02 with the SEC (accession 0001050446-26-000060): https://www.sec.gov/Archives/edgar/data/1050446/000105044626000060/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $125.4M (-2.5% on the year)
- Operating income: $20.9B (operating margin 16,670.9%)
- Net income: $19.5B (net margin 15,573.2%)
- Gross margin: 71.5%
- Free cash flow: $4.0M (3.2% of revenue)
- Cash conversion (operating cash flow / net income): 0.00x
- Capital expenditure: 0.4% of revenue

## Where the money goes (Q3 FY2026)

- Product licenses → Total revenues: $3.8M
- Subscription services → Total revenues: $68.6M
- Product support → Total revenues: $37.7M
- Other services → Total revenues: $15.3M
- Total revenues → Total cost of revenues: $35.8M
- Total revenues → Gross profit: $89.6M
- Gross profit → Income (loss) from operations: $89.6M
- Total operating (income) expenses → Income (loss) from operations: $20.8B
- Income (loss) from operations → Interest expense: $15.4M
- Income (loss) from operations → Income (loss) before income taxes: $20.9B
- Interest income → Income (loss) before income taxes: $47.1M
- Other income (expense), net → Income (loss) before income taxes: $821.0K
- Income (loss) before income taxes → Provision for (benefit from) income taxes: $1.4B
- Income (loss) before income taxes → Net income (loss): $19.5B

## Where the revenue comes from

### Products and services (CONSOLIDATED STATEMENTS OF OPERATIONS)

| Member | Value | Share |
|---|---:|---:|
| Subscription services | $68.6M | 54.7% |
| Product support | $37.7M | 30.0% |
| Other services | $15.3M | 12.2% |
| Product licenses | $3.8M | 3.1% |

The members sum to total revenue.

### Segments (Segment Information - Schedule of Revenue and Expenses (Details))

| Member | Value | Share |
|---|---:|---:|
| Software | $125.4M | 100.0% |
| Bitcoin | $0 | 0.0% |

The members sum to total revenue.

### Regions (Segment Information - Total Revenues and Long-Lived Assets, by Geographic Region (Details))

| Member | Value | Share |
|---|---:|---:|
| Emea | $43.0M | 34.3% |
| Other Regions | $11.2M | 8.9% |

The members do not sum to total revenue.

## Key insights

### Bitcoin's quarter-end price, not software, made the profit

The gain is unrealized, so a $19.53B net income came with just $3.96M of free cash flow.

Revenue was $125.4M, all of it from the Software segment; the Bitcoin segment booked none. The $20.9B gain on digital assets, booked under fair value accounting as bitcoin's price rose during the quarter, is how income from operations reached $20.9B and net income $19.53B, against $2.79B a year earlier. The filing states that "unrealized gains on digital assets do not generate cash". Operating cash flow was $4.42M. _(from the filing)_
The same accounting cut the other way earlier in the year: net losses of $12.54B in the first quarter and $8.22B in the second. Tax took 6.7% of pretax income this quarter, a $1.41B provision on $20.94B. The filing explains that bitcoin's value moved back above the company's average cost, which reversed a deferred tax asset and the valuation allowance set up earlier in the year, so the low rate reflects a one-time reversal. _(from the filing)_
Analysis: reported earnings here follow one price on one day. A lower bitcoin price at the next quarter end would be booked as a loss, and a close below the average cost of $75,437 per coin would bring the deferred tax question back. _(analysis)_

### More bitcoin in total, less behind each share

Holdings grew to 847,666 bitcoins, but share sales funded dividends and reserves, so each share's claim fell from 199,984 sats.

Bitcoins held rose to 847,666 at quarter end from 640,031 a year earlier, while diluted weighted average shares rose to 428.0M from 315.4M, so the share count grew faster than the holdings. Bitcoin per assumed diluted share fell to 187,712 sats from 199,984, and BTC Yield, the company's own scorecard, turned negative after 6.2% a year earlier. _(from the filing)_
Purchases slowed to 7,218 bitcoins in the quarter from 42,706 a year earlier, 16.9% of the prior pace. The filing says "We increased sales of our class A common stock for purposes other than purchasing bitcoin": funding the dollar reserve, repurchasing preferred stock and paying larger preferred dividends. The share sales that did buy bitcoin were raised "at prices reflecting lower premiums relative to the value of our underlying bitcoin holdings". _(from the filing)_
Analysis: new stock adds bitcoin per share only when it sells above the bitcoin behind it and the money buys bitcoin. This quarter the premium was lower and much of the money went to obligations and reserves, which is how a rising bitcoin price and a shrinking per-share claim appeared together. _(analysis)_

### The software business cannot carry the dividend bill

Preferred dividends reached $419.6M, against $139.9M a year earlier, so the model's fixed cost now rests on capital markets.

Preferred dividends were $419.6M in the quarter, against $139.9M a year earlier. Software gross profit of $89.6M covered 21.4% of them, and free cash flow of $3.96M covered 0.9%. Sales and marketing, research and development, and general and administrative costs together were larger than gross profit. _(from the filing)_
The company does not expect its software business "to generate sufficient cash flow from operations to satisfy our financial obligations or liquidity needs over the next twelve months". It relies on equity and debt capital markets, its dollar reserve and, if it chooses, bitcoin sales under its BTC Monetization Program. _(from the filing)_
Analysis: the useful question each quarter is which source carries the dividend: the reserve, new share sales or bitcoin. A growing role for bitcoin sales would mean the treasury had begun paying its obligations from its own principal. _(analysis)_

## For members

Signed-in members read, on the page: the investor's and the founder's views of Strategy (its fundamentals against its peers, where the profit is made, how the model works, where every $100 of revenue goes against the industry, the path to scale), its performance over time with every line as filed, and the edge and the risks. Membership is free.

## Member research

Signed-in members read, on the page: what Strategy's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Strategy 10-Q for the period to 2026-09-30: https://www.sec.gov/Archives/edgar/data/1050446/000105044626000060/ (2026-11-02)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-03 · as of 2026-11-03