MSTR's $10B quarterly profit is unsustainable, driven by new accounting rules and Bitcoin's bull run.

MSTR's $10B quarterly profit is unsustainable, driven by new accounting rules and Bitcoin's bull run.

MicroStrategy Inc., rebranded as Strategy, reported a massive quarterly profit of $10.02 billion, marking a significant turnaround from the previous year's loss. The company attributed this substantial gain to a recent accounting rule change and a rally in the price of Bitcoin [1].

The company's operating income ballooned to $14.03 billion, representing an annual increase of over 7,000%. This surge was primarily driven by an unrealized gain on the company's digital assets, amounting to $14 billion, which was permitted under the new accounting rule [1].

MicroStrategy holds 628,791 bitcoins at a total cost of $46.07 billion, with each token valued at $73,277. The company's Bitcoin holdings have been a key driver of its financial performance. However, the sustainability of this profit growth is a topic of debate among analysts. Some argue that the recent accounting rule change and Bitcoin's bull run are unsustainable factors that could lead to a correction in future quarters [1].

The company's stock price saw a modest increase of over 1% in the extended session following the announcement. This positive reaction reflects investor confidence in the company's Bitcoin holdings and the potential long-term value of the cryptocurrency [1].

MicroStrategy has guided for full-year operating income of $34 billion, net income of $24 billion, and earnings of $80 per share, based on a Bitcoin price outlook of $150,000 by the end of the year [1]. However, analysts polled by FactSet expect a GAAP loss of $16.32 per share for the year, indicating a significant discrepancy between the company's projections and market expectations [1].

In contrast, Bitcoin's price has shown potential for support near $113,000, with key resistance levels near $114,000 and potential corrections below $110,000 [2]. The cryptocurrency's recent price decline reflects increased selling pressure and a failure to sustain above the $114,000 resistance level. If Bitcoin closes below $113,000, it could test support levels around $112,000 and potentially move towards $110,000 [2].

Analysts like Brett Knoblauch of Cantor have highlighted the strategic importance of Bitcoin treasuries, with MicroStrategy (MSTR) and Semler Scientific (SMLR) identified as two of the best options in this space [3]. Knoblauch emphasizes the significance of capital access and management expertise in the crypto ecosystem for successful Bitcoin treasury companies.

In conclusion, MicroStrategy's $10B quarterly profit is a testament to the company's strategic positioning in the Bitcoin market. However, the sustainability of this performance hinges on the continued bull run of Bitcoin and the ongoing impact of the new accounting rules. Investors should closely monitor these factors to assess the long-term viability of MicroStrategy's financial performance.

References:
[1] https://www.morningstar.com/news/marketwatch/20250731525/microstrategy-just-posted-a-huge-profit-its-the-second-time-riding-on-an-accounting-rule-change
[2] https://en.coinotag.com/bitcoin-price-shows-potential-for-support-test-near-113000-amid-seller-dominance/
[3] https://finance.yahoo.com/news/mstr-smlr-brett-knoblauch-picks-102130758.html