MicroStrategy buys more Bitcoin, riding the AI trend, and turns losses into profits through tax revenue.

MicroStrategy has announced its second-quarter financial report, once again increasing its holdings of Bitcoin. The Business Intelligence (BI) platform of MicroStrategy has also embraced the trend of AI, providing a more diverse range of services. MicroStrategy reported a net profit of $22.2 million in the second quarter, marking two consecutive quarters of turning losses into profits. However, a closer look at its financial report reveals that this turnaround was achieved primarily through the reversal of income tax provisions.

MicroStrategy Buys More Bitcoin

MicroStrategy has purchased 12,800 bitcoins at a price of $3.614 billion since the first quarter, with an average price of $28,233 per bitcoin. As of July 31, 2023, the company holds a total of 152,800 bitcoins, with a total cost of $4.53 billion and an average price of $29,672 per bitcoin.

AI Integration: MicroStrategy ONE = BI+AI

MicroStrategy is a U.S. company founded in 1989 that provides business intelligence, data analytics, mobile software development, and cloud computing. It went public in 1998 and competes with Salesforce, IBM's Cognos, and Oracle's Business Intelligence (BI) platform.

Now, its BI platform, MicroStrategy ONE, is integrating AI capabilities. MicroStrategy announced an upgrade in the third quarter that includes advanced AI features and a new dimension called MicroStrategy AI, allowing organizations to deploy secure, regulated, and trusted AI applications rapidly. It has also partnered with Microsoft, using Microsoft 365 and its Azure OpenAI Service.

Lightning Network Platform to Offer Satoshi Rewards

In addition to its focus on the Bitcoin Lightning Network, MicroStrategy has announced new reward features. MicroStrategy Lightning Rewards is an enterprise platform that incentivizes employees and customers to take certain actions and receive immediate satoshi rewards. The company aims to launch Lightning Rewards in the third quarter.

MicroStrategy Turns Profitable? Thanks to Tax Credits Again

According to MicroStrategy's financial report, the company reported a net profit of $22.2 million in the second quarter, compared to a nearly $1.1 billion loss in the same period in 2022. The main difference was the digital asset impairment related to Bitcoin, which was $24.1 million in 2023, compared to $917.8 million in the same period last year, attributed to the rise in Bitcoin prices.

However, upon closer examination of its financials, the gross profit margin for 2023 slightly decreased. Even after excluding the digital asset impairment, the operating profit was still -$2.56 million, performing worse than the -$0.28 million in the same period last year. It seems that MicroStrategy is not making progress in its core business.

The key to turning a profit seems to lie in the reversal of the provision for income taxes.

It was the same story in the previous quarter: MicroStrategy reported its first profit in nine quarters, thanks to tax breaks?

Benefiting from Bitcoin's significant rebound this year, MicroStrategy's stock price has surged from $140 to $434, a 198% increase year-to-date. It seems that the market still favors the approach of indirectly owning Bitcoin through investing in MicroStrategy.

MicroStrategy Plans to Issue New Shares, Potentially for Bitcoin Purchases

MicroStrategy also submitted a prospectus to the SEC yesterday. MicroStrategy has signed sales agreements with Cowen and Company, LLC, Canaccord Genuity LLC, and Berenberg Capital Markets LLC regarding the sale of shares. According to the terms of the sales agreements, MicroStrategy can issue up to $750 million in Class A common stock.

The proceeds from the issuance will be used for general corporate purposes, including Bitcoin purchases, operating funds, and repurchasing or repaying debt based on market conditions.