Summary Strategy Inc. remains a Buy despite Bitcoin's bear market, leveraging a $2.25B cash reserve and trading at a rare discount to NAV. MSTR's Q4 net loss is a non-cash accounting distortion; the company’s robust cash position covers over 2.5 years of interest and dividends. The legacy software business now generates a $200M+ annual run rate, with 66% gross margins, potentially subsidizing OpEx and protecting the cash reserve. Downward-revised BTC yield guidance (5–14% for 2026) signals prudent risk management, while index reclassification and capital rotation are key risks. All eyes have been on Michael Saylor, founder and executive chairman of Strategy Inc. (MSTR). In recent weeks, as Bitcoin ( BTC-USD ) stumbles in what can now be confirmed as a bear market. Strategy, unsurprisingly, has been on the receiving end of extreme volatility, with MSTR dropping over 70% since Bitcoin peaked at its all-time high around $126,000 in October. In my latest article covering a similar Bitcoin proxy play, MARA Holdings ( MARA ), published here on Seeking Alpha last Saturday, I highlighted the technical breakdown for Bitcoin's bear case using key technical moving averages and trend lines. Just like Strategy, MARA has now transformed into a pure-play leveraged bet on Bitcoin. And in that article, I showed how we are likely in a multi-quarter bear market and how likely it is for MARA to mirror BTC’s downward trajectory throughout the bear market. The MARA analysis came with a Sell rating. Now over to MSTR. It is facing the same fate as MARA, but the structural differences are night and day. I am bucking the trend in this piece by maintaining a Buy rating on MSTR, and I’ll show why in this piece. Strategy: Q4 Recap Q4 results came in at a tumultuous time for the markets, with Bitcoin seeing a ~20% decline YTD when Q4 results were released last Thursday. In the midst of the drawdown, the market naturally would cling to the headline net loss figure of $12.6 billion (EPS of -$42.93) reported by Strategy. If you focus only on the Q4 headlines, you would think the wheels have fallen off. But for anyone who understands the playbook, they know this is a non-cash accounting distortion. As we are aware, Strategy’s net loss or profit is mainly driven by mark-to-market accounting on its Bitcoin holdings. Strategy's 713,502 BTC has to be marked to market (fair value rules). With Bitcoin sliding from its October highs around $126k to the ~$65k - 70k range, that huge loss was inevitable. What actually matters are the two moves Saylor made to harden the company for the multi-quarter bear market we are now likely in, which anchors the title of the piece and what I’d call Strategy’s most important edge among Bitcoin treasury companies. Firstly, it is the timing of capital raises and how the funds were used. Operating in a highly volatile market, timing is the difference marker for crypto treasury companies. An error in timing could compress core metrics like BTC yield or mNav by a wide margin, just like a simple miscalculation in inventory planning would damage a company running a low-margin production business. This timing precision is what we've seen with Strategy shifting from holding almost zero cash in 2024 and most of 2025 to building a $2.25 billion cash reserve in Q4. That cash reserve is the pillar for the current Buy thesis as the market resets and MSTR trades at a rarely seen discount to NAV at $40 billion market cap while Bitcoin holdings are worth ~$50 billion if BTC stays around $70k. Another noteworthy highlight from Q4 is that the legacy software side of Strategy's business beat expectations, with $51.8 million in cloud subscription services revenue. Subscription services saw a 62% YoY increase. That revenue was $37.1 million in Q1, meaning in a nine-month period, subscription revenue has grown by nearly 40%. As subscription revenue scales, the software business has now moved closer to covering the Strategy's total OpEx. A $51.8 million revenue also means the annual run rate is now around $200 million. Total gross profit from the software business was $81.3 million, representing a 66% gross margin on the $123 million revenue. The main takeaway here is that Strategy's software arm is no longer a drag on the company’s total operating cash flow, and it keeps the $2.25 billion reserve safe from being cannibalized by day-to-day corporate overhead. Our total interest and dividend obligations are now $888 million, which is made up of about $35 million in interest on our converts. That represents an average cost of about 42 basis points. It's also made up of $713 million in dividend obligations from our cumulative preferreds, an additional $140 million related to our noncumulative preferreds. You can see here at the bottom, our cash reserve of $2.25 billion, which was established in Q4, now provides over 2.5 years of interest and dividend coverage, and it's an important and direct benefit to our debt and credit investors. - Excerpt from Q4 2025 earnings call . One of the bones of contention, based on post-earnings commentary I've read online, is that the above statement by management during the earnings call was overstating the cash runway. Most bears look at that $888 million figure and the $2.25 billion reserve and immediately claim the math is a distraction. Q4 earnings presentation But when you look at it, $140 million is in non-cumulative preferred dividends. Non-cumulative means if the company chooses not to pay, they don't necessarily owe it later. While Saylor will almost certainly pay to maintain MSTR’s reputation, this still provides a safety buffer in a very worst-case market scenario. So if things got truly dire, the legal obligation they must pay is actually lower than the $888 million headline. Even at the full $888 million in yearly obligations, the $2.25 billion reserve gives about 30 months of runway. Even if BTC went to $15,000 tomorrow, MSTR doesn't have a margin call because of the cash vault that keeps paying the interest and dividends until the cycle turns bullish. The looming principal payments wall is also an unfounded fear I've seen regarding how the $2.25 billion reserve actually stacks up to 30 months of runway without interruption. Obligations amounting to $1.05 billion in 0% convertible notes due 2027 already have notice of full redemption and will be cleared later this month, with nearly all of it settled in shares rather than cash. The earliest major repayment (the $1.01 billion 0.625% notes) doesn't arrive until September 2028 (and September 2027 put date), and history suggests that like its predecessors, it will be handled via the equity printing press rather than the cash reserve. This bifurcation of capital (using equity to retire debt while using the cash reserve solely for interest obligations on the series of issued preferreds) is the secret sauce that makes MSTR's survival math far more resilient than most Bitcoin treasury peers. A treasury peer like MARA has a high marginal cost to run all its business segments. They have power contracts, depreciation from mining hardware, and a constant need to spend CapEx just to maintain hash rate. In a bear market, MARA is a factory that might lose money on every Satoshi produced. While MSTR has little to no marginal cost to hold its Bitcoin. The software business, on the other hand, generates $81.3 million in gross profit to subsidize most costs. This is the differentiating factor for the treasury companies as Bitcoin dips. Looking Ahead Q4 results show MSTR achieved its target BTC yield metric for 2025, hitting 22.8% for the full year. And as expected, management rightly lowered expectations for 2026 BTC yield, shifting from a target that reached as high as 30% during the 2025 bull run to a more conservative 5% to 14% for 2026. Q4 earnings presentation I would have been on the side of bears here if the BTC yield guidance wasn't reviewed downward. That would have been where the potential over-leverage debate would have held true. By lowering the bar, Saylor is signaling that Strategy is maintaining an accretive-only Bitcoin acquisition even in the bear market. To hit a 5% yield target for this year, Strategy only needs to acquire around 35,000 to 40,000 additional BTC (assuming no further share dilution). That figure is obtained by measuring the accretive growth of Bitcoin holdings relative to the company's total diluted share count. Strategy holds 713,502 BTC. Assuming the diluted share count remains static (no new equity issuance for the remainder of the year), the equation to hit a 5% yield is simply 713,502 BTC x 0.05 = ~35,700 BTC. Because Strategy already front-loaded 41,002 BTC in January alone (management disclosed this total January purchase figure in the Q4 earnings), they have effectively already secured that 5% baseline yield for the year (if the static share assumption holds true) before even factoring in the remaining eleven months of potential accumulation. In the Q4 results, it was disclosed that there is still about $8.2 billion in remaining capacity under its Class A common stock ATM program. With $8.1 billion still available on the current ATM program (net of the $89.5 million amount used so far this month, according to updates just released today ), there is dry powder to buy BTC whenever basic mNAV crosses back above 1.0 (mNAV is currently around 0.87). This allows management to be opportunistic even in the bear market. And if the market premium returns, the lower 5% target can easily be exceeded and pushed toward the upper end of the 14% guidance. Risks The primary and immediate risk to the thesis remains the MSCI Index and other indices reclassification, which MSTR narrowly dodged in January . As the premium compresses and the mNAV sits below 1.0, there is a legitimate risk of index outflows. If MSTR’s market cap falls below the required threshold for any of the indices during the next review, passive funds tracking those indices will be forced to sell regardless of the underlying Bitcoin value. If this happens, the selloff of MSTR could further depress the mNAV, making it harder for Strategy to return to its accretive money loop. The next MSCI Index review is scheduled for tomorrow , February 10. So fingers are crossed as we watch what the decision would be. Furthermore, the introduction of preferreds like Stretch ( STRC ) poses a capital rotation risk. If large-scale investors decide that the over $700 million in cumulative preferred dividends offers a better risk-adjusted return than the MSTR common shares itself during the bear market, there could be a rotation out of MSTR into the preferred equities. This would further keep the premium suppressed even if Bitcoin stabilizes, effectively delaying the recovery of the mNAV until the bull cycle begins again, which could be months away if the 10 - 12 months typical bear market pattern holds. Takeaways While headline numbers currently look rough, I believe Strategy has executed well. It would have been a different pressure story if the pivot to holding substantial cash didn't happen in Q4. I think Strategy's reserve strategy here is a playbook for even individual Bitcoin investors on the importance of knowing when to stop buying and holding cash or stablecoins for tumultuous times or for dip buying. With 713,502 BTC unencumbered and no major principal repayments due until September 2027, Strategy won't likely be too bothered during the bear market. Even if Bitcoin stays below Strategy’s $76,052 cost basis, the cash flow from the software segment being buoyed by the subscription revenue is enough to keep the lights on without forcing asset sales. At the current discount to mNAV, the market is essentially ignoring the software business, even though the software segment has been seeing an uptick lately, with the cloud pivot now bringing an annual run rate just over $200 million. Buying MSTR now would mean getting exposure to both undervalued Bitcoin and a growing software business at a steep discount.
