Unlike the ten or so U.S. multinationals whose operating profits are expected to exceed $10 billion last quarter by generating billions of dollars in sales, the former MicroStrategy Inc. can attribute the eye-popping results to a rebound in the price of Bitcoin and a fairly recent accounting change when it comes to valuing its massive holdings of the cryptocurrency. Strategy is forecast to post only about $112.8 million in second-quarter revenue from the software business, according to analysts surveyed by Bloomberg News. 

The likely record profit for the three months ended June 30 follows a barrage of criticism from naysayers such as Jim Chanos. The renowned short-seller has recommended an arbitrage trade to short the shares of Strategy and buy Bitcoin, betting the large premium the stock commands over the value of its token holdings will shrink. The call has sparked a war of words that has captivated Wall Street, with Chanos calling Saylor’s model to value the crypto-treasury firm “financial gibberish” while Saylor argued that Chanos just does not understand it. 

“Saylor definitely has a right to feel vindicated,” said Mark Palmer, an analyst at Benchmark Capital, who has maintained a “buy” rating on Strategy since February 2024. “He’s had people criticizing him for more than four years now and his company has outperformed all other stocks and even the S&P by a long mile.”

Strategy’s shares have soared over 3,300% since Saylor began buying Bitcoin in the middle of 2020 as a hedge against inflation. Bitcoin is up around 1,000% during the same period, while the S&P 500 has increased around 115%. The stock rose 40% in the second quarter as the S&P climbed 11%.   

In the first quarter, Strategy adopted an accounting change that requires valuing the firm’s now roughly $64 billion in Bitcoin at market prices. Strategy and fellow corporate buyers of Bitcoin are now recognizing the unrealized changes that often produce big swings in earnings. Strategy posted a record $4.2 billion loss the first quarter, which saw Bitcoin slump 12%. 

Prior to the accounting change, Strategy had been classifying its Bitcoin holdings similar to intangible assets like patents or trademarks. That designation forced Strategy to permanently mark down the value of its holdings when the price of Bitcoin dropped below the previous carrying value. Gains could only be recognized when tokens were sold. 

The company held 528,185 Bitcoin at the beginning of the quarter, worth over $43.5 billion when the tokens traded for about $82,444.71 each on March 31. The 30% appreciation in Bitcoin increased the market value of those holdings by over $13 billion alone, and the dozen weekly purchases since have tacked on over $600 million more to the unrealized gains, according to Bloomberg News calculations.

Strategy is expected to release second-quarter results in August. A company representative didn’t reply to a request for comment.

Even though the change in accounting was widely known, the first-quarter loss has triggered several class-action lawsuits alleging Strategy executives made untrue and misleading statements that resulted in harm to shareholders. Strategy said it intended to “vigorously defend against these claims” in a recent filing with the U.S. Securities and Exchange Commission.