Significant Decline in Q324 Net Income Amid Rising Operating Expenses for $MSTR
Summary:
In Q3 2024 (Q324), MicroStrategy Incorporated ($MSTR) faced a significant financial downturn, marked by a steep decline in net income to -$340 million and surging operating expenses totaling $1.59 billion. Despite a modest increase in revenue to $116 million, earnings per share (EPS) fell dramatically, signaling deteriorating profitability. While gross profit slightly improved from the previous quarter, it remains below the levels seen in the same quarter last year. The financial performance for Q324 underscores challenges in cost management and maintaining profitability.
Key Metrics Overview
| Metric | Q324 Value | Q224 Value | Q423 Value | LTM Value | Formula/Explanation |
|---|---|---|---|---|---|
| Revenue | $116M | $111M | $124M | – | Total revenue generated by the company. |
| Net Income | -$340M | -$103M | $89M | -$87.05% margin | Net Income = Total Revenue – Total Expenses. |
| EPS (Diluted) | -1.72 | -0.57 | 0.50 | -0.56 USD | EPS = Net Income / Weighted Average Shares Outstanding. |
| Gross Margin | 70.41% | 72.24% | 77.33% | 73.56% (LTM) | Gross Margin = (Total Revenue – Cost of Revenue) / Total Revenue. |
| Operating Margin | -372.69% | -18.11% | -2.85% | -100.24% (LTM) | Operating Margin = Operating Income / Total Revenue. |
| EBITDA Margin | -389.82% | -175.81% | -26.74% | -188.48% (LTM) | EBITDA Margin = Total EBITDA / Total Revenue. |
| COGS as % of Revenue | 29.59% | 27.76% | 22.67% | 26.44% (LTM) | Cost of Goods Sold as a percentage of Total Revenue. |
Financial Performance Highlights
1. Revenue and Gross Profit Trends
Revenue in Q324 increased slightly to $116 million from $111 million in Q224 but remains below the $124 million achieved in Q423. Gross profit saw a minor quarter-over-quarter improvement to $81.7 million from $80.5 million in Q224, yet it trails the $96.3 million reported in Q423.
2. Operating Expenses Surge
Operating expenses in Q324 skyrocketed to $1.59 billion, nearly triple the $558 million reported in Q224. This sharp rise significantly affected overall profitability, as evidenced by the steep drop in net income.
3. Earnings Per Share (EPS)
EPS diluted fell to -1.72 in Q324, compared to -0.57 in Q224 and 0.50 in Q423. The decline highlights worsening financial performance, with increased losses impacting shareholders.
4. Profitability Margins
- Gross Margin (LTM): 73.56%, reflecting the company’s efficiency in managing production costs.
- Operating Margin (LTM): -100.24%, indicating significant losses in operating activities.
- EBITDA Margin (LTM): -188.48%, further showcasing inefficiencies in core operations.
- Net Profit Margin (LTM): -87.05%, signaling persistent challenges in achieving profitability.
Challenges and Outlook
Rising Costs:
The sharp increase in operating expenses, particularly in R&D, general administration, and selling/marketing, continues to pressure financial performance. Cost containment strategies will be critical for recovery.
Profitability Concerns:
With net income in steep decline and EPS reaching new lows, the company faces challenges in delivering shareholder value.
Revenue Growth:
While quarterly revenue has shown a modest increase, the year-over-year decline highlights the need for stronger top-line growth strategies.
Key Insights for Investors
- Positive Signs: The slight improvement in gross profit indicates the potential for stabilization in cost management.
- Risks: Rising expenses and deteriorating profitability metrics pose significant risks, especially if revenue growth fails to offset costs.
- Future Focus: Cost control measures and revenue diversification will be essential to improve margins and financial health.
Conclusion
MicroStrategy’s Q324 results reveal a challenging quarter, with declining net income, escalating costs, and weak profitability metrics. While revenue showed slight quarter-over-quarter growth, overall financial health deteriorated. Investors should monitor the company’s cost management and operational efficiency in the coming quarters.
“This analysis was performed by DAIFO (@DaifoFin), a human and AI collaboration that works in harmony to provide insightful financial reviews.”
