Summary Strategy Inc. delivered a massive Q2 earnings beat, driven by its aggressive Bitcoin accumulation and rising Bitcoin prices. Management raised Bitcoin yield guidance to 30% for the year, with expectations of significant earnings growth if Bitcoin rallies to $150,000. Strategy shares offer leveraged exposure to Bitcoin at an attractive mNAV multiple, presenting a compelling entry point for bullish investors. Risks include Bitcoin price volatility and potential share dilution, but I reiterate my Buy rating given the company's strong execution and outlook. Investment Thesis Strategy Inc. ( MSTR ) , which was newly rebranded from the MicroStrategy moniker earlier this year, posted their Q2 earnings report that showed the company smashed earnings expectations by a mammoth 32x compared to the 7 cents per share loss that analysts were expecting. A big reason behind Strategy’s earnings beat is the run in Bitcoin this year that continues after surging 114% last year. Strategy has been pioneering the concept of PBTC (public bitcoin treasury companies) , is counted as the world’s first & largest PBTC, and has been busy accumulating Bitcoin tokens in its treasury through this year. Exhibit A: Strategy Inc’s performance on markets so far this year versus Bitcoin and the markets. (Seeking Alpha) At the time of publishing the Q2 ER, Strategy now holds 628,791 bitcoins, a 40% increase since the start of the year. Strategy has been doubling down on its leveraged capital structure of buying bitcoin and allowing MSTR shareholders to get exposure to its bitcoin treasury. Recently, the company also launched a slew of preferreds to expand the company’s funding sources beyond common equity to continue its goal of purchasing Bitcoin and raising its Bitcoin yield. So far, Strategy has already achieved its Bitcoin yield targets of 25% while raising the yield guidance to 30% for the year, pointing to further possible gains in exposure to Bitcoin for shareholders. At the moment, I continue to reiterate my buy rating on Strategy and expect the company’s stock to outperform Bitcoin through the year. Bitcoin Yield Raised For Strategy Investors By now, all Strategy investors are aware of the fact that the company continues to operate an enterprise analytics software business on the side, which originally was the mainstay of Strategy until it transitioned into a Bitcoin treasury company over the last few years. The Q2 ER showed Strategy's software business generated $115M in revenues, growing at 2% y/y, decelerating from the previous quarter. The Subscriptions segment of the software business continues to show promise, growing at a 70% y/y growth rate, accelerating from the previous quarter. Gross margins came in at 69%, flat from the previous quarter but decelerating 34 bp from last year. But Strategy’s Bitcoin Treasury is what drove major gains in the company’s earnings. Strategy reported operating income of $14B, up 7000% over the previous year. This led the company to post earnings worth $10B, or $32.6 per share on an adjusted basis. Part of the reason for the jump in earnings is due to the moderately strong rally in Bitcoin this year, along with the fact that Strategy had adopted a new accounting rule that would allow the company to report the value of its Bitcoin holdings at fair value. Strategy has been doubling down on its capital raise efforts to fund its Bitcoin purchases and recently unveiled its 42/42 plan, a jump from the 21/21 plan I delved into in earlier coverage , aiming to purchase $84B in Bitcoin by 2027 split between a combination of equity, preferreds, and debt. At the time of their Q2 ER announcement, Strategy reported 628.8k Bitcoins in their treasury, which now accounts for 3% of all Bitcoin to ever be in existence when Bitcoin finally maxes out its total supply of 21M coins in the future. So far, Strategy’s Bitcoin war chest has been acquired for a total of $46.1B, or a cost basis of $73,277 per Bitcoin. Factoring in the volume of Bitcoins in the treasury, Strategy investors get 0.002 Bitcoin, or 198,543 satoshis, per share, yielding Strategy investors 25% in additional Bitcoin exposure, on a per-share basis, vs. the 158,827 satoshis per share in 2024. Exhibit B: Strategy investors exposure to the company’s Bitcoin holdings now at 198,543 satoshis, yielding 25% more than the satoshis in 2024. (Company presentation) With the performance delivered in Strategy’s Q2 report, the company achieved its 2025 Bitcoin Yield targets of 25%, five months before the end of the year. Strategy’s management revised up their guidance, now expecting to raise Bitcoin yields up to 30% while expecting to gain $20B from their Bitcoin holdings this year. Exhibit C: Strategy raises in guidance forecasts for the year expecting Bitcoin’s price to jump to $150,000. (Company presentation) Management’s raised expectations mean the company will expect to report operating income of $34B, significantly ahead of the consensus estimates of $22.1B , while earnings are projected to jump 4x to $24B, or $80 on a per-share basis when adjusted. All of these projections by management are focused on one key expectation—that Bitcoin rallies to the end of the year to $150,000. So, if investors are bullish on Bitcoin, like I am , Strategy’s shares offer a leveraged play on participating in the coming Bitcoin rally, and Strategy’s Q2 ER was just a taste of what to expect if this rally continues, in my view. Framing The Bullish Case For Strategy’s Shares Firstly, valuing Strategy on traditional valuation metrics doesn’t make sense for Strategy and is almost myopic, in my opinion. A majority of Strategy’s business is the Bitcoin treasury operations operating like any other fund, and one of the ways to see forward value in Strategy is by assessing the premium that investors would be willing to pay over the company’s net asset value, which is captured by Strategy’s mNAV metric (market to net asset value) . Exhibit D: Strategy’s shares trade at 1.76x the value of the company’s assets which include its Bitcoin holdings. (Strategy Tracker) At the time of writing, Strategy’s market cap is 1.76x its net asset value, and as can be seen above, that mNAV metric is the second lowest NAV multiple Strategy was assigned by investors over the past 12 months. Strategy’s current mNAV multiple does present a reasonably attractive entry point for investors to access the company’s Bitcoin hoard. Investors who buy Strategy’s shares at the current multiple will get exposure of ~198.5k satoshis per share. Getting in at the current multiple will also allow investors to participate in Strategy’s road to now deliver a target of 206.5 satoshis per share. If Bitcoin rallies towards management’s target of $150k, investors can expect Strategy’s mNAV multiple to expand to at least 2x, if not 2.5x. That would imply an upside of at least 13-15% in the base case and +40% in the bullish case. Risks & Other Factors To Consider First is the perennial risk of Bitcoin falling, which could force a liquidation in their holdings. On the call to discuss earnings, management mentioned that the company should be able to survive severe drawdowns despite having a cost basis in the low seventies. However, if the value of Bitcoin “ goes below 90% ,” they may start to have problems, which is a severe scenario stress test for Strategy. The other risk is share dilution. Management was quite clear in the call about when they intend to dilute shares to raise capital for ATM Bitcoin buy rounds. This also ties in with my mNAV multiple that I stated in the previous section. At the moment, Strategy's share dilution activity is limited, and if done, the proceeds can only be used for paying interest or dividends, as noted below. Exhibit E: Strategy’s roadmap to issuing shares reveals their target multiples. (Company presentation) Beyond an mNAV of 2.5x, Strategy will feel compelled to take advantage of the demand in its shares and the overall Bitcoin price appreciation to dilute shareholders and use the proceeds to buy more Bitcoin. This is why any mNAV above 2.5x is worth selling into, and lower mNAVs like the one we see now are worth buying into. Finally, the recently issued preferreds may be stealing some of the capital away that otherwise may have gone towards getting deployed at Strategy. For example, preferreds like STRIFE ( STRF ), Strategy’s 10%-yielding senior preferred equity, have gained more traction because they offer investors preferred exposure to Strategy’s underlying assets, which are its Bitcoin holdings, while awarding a 10% yield. Exhibit F: Strategy’s share performance on the markets versus the performance of its preferred equity. (Seeking Alpha) Strategy’s management raised their FY25 yield targets to 30%, 500 bp over their current achievement, which is not a substantial jump in projected Bitcoin yield. Under these circumstances, while Strategy will still perform well on the markets as Bitcoin runs per my expectations, preferreds like STRIFE might outperform Strategy. Strategy may also conduct more capital raises in the future, like the one they announced yesterday . Takeaway Strategy's Q2 results were one of the strongest indications that the company’s bitcoin treasury company-style operations are gaining more traction among investors while the company manages its operations in a manner consistent with shareholders’ expectations to generate more Bitcoin yield. The company sees multifold growth in earnings as Bitcoin’s price appreciation is expected to power ahead, leading management to raise its guidance on Bitcoin yield to 30% for the year. Strategy does sit at a relatively attractive multiple to the net asset value of its holdings, and I reiterate my Buy rating on the company.