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CS

COMMVAULT SYSTEMS INC (CVLT)·Q3 2025 Earnings Summary

Executive Summary

  • Record quarter: revenue $262.6M (+21% YoY), subscription revenue $158.3M (+39% YoY), non-GAAP EPS $0.94; non-GAAP EBIT margin 20.8% at high end of guide .
  • Results materially exceeded prior Q3 guidance (issued last quarter): revenue $262.6M vs $243–$247M guided; subscription revenue $158.3M vs $143–$147M guided; execution and product momentum (SaaS, term software volume) drove the beat .
  • FY25 guidance raised on revenue and ARR (now $980–$985M total revenue; ARR growth 19–20%; Subscription revenue $575–$580M; Subscription ARR growth 28–30%); FCF range trimmed to $170–$200M (from “at least $200M”) due to FX headwinds; Q4 guide: revenue $260–$264M, non-GAAP op margin 20–21% .
  • Catalysts: accelerating SaaS ARR (71% YoY; $259M), 1,000+ net new subscription customers (c.200 from Clumio), strong multiproduct adoption; new Active Directory automated recovery and CrowdStrike integration enhance platform differentiation .

What Went Well and What Went Wrong

  • What Went Well

    • Subscription-led acceleration: Subscription revenue +39% YoY; term software transactions >$100k up 18% on 30% higher volume; SaaS NRR steady at 127%; non-GAAP EBIT margin 20.8% at high end of guide .
    • Product differentiation resonating: CEO cited “record-breaking quarter” and emphasized unified cyber resilience platform; Active Directory automated forest recovery and Clumio Backtrack for S3 expand use cases and TAM .
    • International and Americas strength: Americas revenue +24% YoY to $155.4M; International +17% to $107.2M; sales productivity up double digits with strong close rates .

  • What Went Wrong

    • GAAP profitability mixed: GAAP operating margin 5.2% (down from 6.4% in Q2 and 8.2% in Q1); GAAP diluted EPS $0.24 vs $0.38 in Q3’24; elevated SBC ($31.2M) remained a headwind .
    • Free cash flow pressure: Q3 FCF $29.9M impacted by FX headwinds and higher tax payments tied to stronger full-year pretax income .
    • M&A dilution near term: Clumio expected to dilute operating margin by ~1–2 pts for 2–3 quarters; non-GAAP FCF outlook trimmed to $170–$200M from at least $200M, citing FX .

Financial Results

Revenue, EPS (GAAP and Non-GAAP)

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($M)$216.8 $224.7 $233.3 $262.6
GAAP Diluted EPS$0.38 $0.41 $0.35 $0.24
Non-GAAP Diluted EPS$0.78 $0.85 $0.83 $0.94

Margins

MetricQ1 2025Q2 2025Q3 2025
GAAP Operating Margin %8.2% 6.4% 5.2%
Non-GAAP EBIT Margin %21.5% 20.5% 20.8%
Gross Margin %——82.0%

Segment Revenue

($M)Q1 2025Q2 2025Q3 2025
Subscription$124.1 $134.0 $158.3
Perpetual License$13.7 $10.5 $16.4
Customer Support$76.3 $77.7 $77.1
Other Services$10.6 $11.0 $10.8
Total Revenue$224.7 $233.3 $262.6

Key KPIs and Cash

KPIQ1 2025Q2 2025Q3 2025
Total ARR ($M)$802.7 $853.3 $889.6
Subscription ARR ($M)$635.9 $687.1 $734.2
SaaS ARR ($M)——$259.0
SaaS Net Dollar Retention %——127%
Operating Cash Flow ($M)$44.7 $55.6 $30.1
Free Cash Flow ($M)$43.8 $53.7 $29.9
Cash & Equivalents ($M)$287.9 $303.1 $243.6
Share Repurchases ($M)$51.4 $51.9 $31.9; ~200k sh, avg $160.07

Geography

($M)Q3 2024Q4 2024Q1 2025Q2 2025Q3 2025
Americas Revenue$125.1 $131.1 $138.7 $144.4 $155.4
International Revenue$91.8 $92.2 $85.9 $88.9 $107.2

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueFY25$952–$957M $980–$985M Raised
Total ARR GrowthFY2518% YoY 19–20% YoY Raised
Subscription RevenueFY25$552–$557M $575–$580M Raised
Subscription ARR GrowthFY2526–28% YoY 28–30% YoY Raised
Non-GAAP Op Margin %FY2520–21% 20–21% Maintained
Free Cash FlowFY25At least $200M $170–$200M Lowered
Total RevenueQ4 FY25—$260–$264M New
Subscription RevenueQ4 FY25—$160–$164M New
Non-GAAP Op Margin %Q4 FY25—20–21% New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1–Q2 FY25)Current Period (Q3 FY25)Trend
AI/Cloud data protection initiativesQ2: Enhanced Active Directory, deeper AWS/Google integrations; Clumio tech for S3; multi-cloud focus . Q1: “Need for resilience is paramount”; platform momentum .Active Directory automated forest recovery (GA in 1H25); Clumio Backtrack to revert billions of S3 objects; AI-driven anomaly/threat detection; marketplace traction doubled .Accelerating product cadence and adoption
Regulatory/macroQ2: Partnered with Pure Storage to help meet EU DORA requirements .Europe had a “pretty good quarter”; continuing readiness for DORA; balanced geo mix .Stable-to-improving international
Product performance, monetizationQ2: Strong term and SaaS momentum .SaaS ARR +71% YoY to $259M; 1,000+ new subscription customers; ~30% of SaaS customers on multiproduct; term deals >$100k +18% on +30% volume .Expansion and upsell driving growth
Go-to-market executionQ2: Execution underpinning raised outlook .Record close rates; double-digit sales productivity; strong pipeline .Strengthening
M&A integrationQ1/Q2: Appranix acquired; Clumio closed 10/1/24 .Clumio integration progressing; ~$24M ARR contribution; ~1–2pt margin dilution for 2–3 quarters .Integration on track; near-term dilution
Partner ecosystemQ2: Deeper AWS/Google ties .CrowdStrike Falcon integration for Threat Scan and clean recovery; alliances (Hitachi, HPE, Dell) contributed .Expanding breadth

Management Commentary

  • “Once again, Commvault has delivered a record-breaking quarter with accelerating revenue growth.” — Sanjay Mirchandani, CEO .
  • “Total revenue increased 21% to $263 million, driven by a robust 39% increase in subscription revenue… SaaS net dollar retention rate steady at 127%.” — Jen DiRico, CFO .
  • “Q3 gross margins were 82%… Non-GAAP EBIT margins of 20.8% came in at the high end of our guidance range.” — CFO .
  • “Starting this spring, we plan to … recover [entire] Active Directory systems… Nobody else offers this capability on one platform.” — CEO .
  • “We are once again raising our outlook for the full fiscal year ’25… total ARR growth of 19% to 20%… subscription ARR 28% to 30%.” — CFO .

Q&A Highlights

  • Renewal health and NRR: Term software renewals strong; software NRR 105–110% remains the right ballpark; SaaS NRR 127% underscores expansion .
  • M&A impact on margins: Clumio expected to dilute operating margin by ~1–2 pts for 2–3 quarters; balanced investment to capture share in FY26 .
  • ARR cadence and FX: Organic net new ARR ~$38M in Q3 (constant currency); FX shifted from a +1pt tailwind in Q2 to a ~3pt headwind in Q3; FCF outlook trimmed accordingly .
  • Contribution from acquisitions: Clumio ~$24M ARR; ~+$6M revenue contribution in Q3 .
  • Competitive and partner ecosystem: Differentiation via Clean Room, AD recovery, Backtrack, FedRAMP High; new CrowdStrike integration accelerates detection-to-recovery workflows .

Estimates Context

  • S&P Global (Wall Street) consensus could not be retrieved in this session; therefore beat/miss vs consensus is not available at this time.
  • Relative to company guidance (issued last quarter), Q3 revenue ($262.6M) and subscription revenue ($158.3M) materially exceeded the guided ranges ($243–$247M; $143–$147M), while non-GAAP operating margin landed at the high end of 20–21% .

Key Takeaways for Investors

  • Mix shift to subscription/SaaS is accelerating and remains margin-accretive on a non-GAAP basis; sustained 20–21% non-GAAP EBIT margin alongside 20%+ revenue growth supports a “Rule of 40+” profile .
  • Broad-based strength (Americas and International) and record close rates point to durable demand for cyber resilience, with multiproduct adoption and large term deals contributing .
  • Product cycle is a core catalyst: automated AD recovery and Clumio Backtrack expand high-value use cases (AI/ML data, cloud-native recovery), likely supporting ARR expansion into FY26 .
  • FY25 outlook raised across revenue and ARR; monitor FX as a headwind to FCF and near-term Clumio dilution (~1–2 pts) to margins .
  • Capital returns remain active (repurchased $31.9M in Q3; >$135M YTD), with cash of $243.6M and no debt; continued commitment to return ≥75% of FCF over time noted on the call .
  • Near-term trading: Positive setup given material beat vs prior guidance and raised FY25 outlook; watch Q4 execution on subscription revenue ($160–$164M) and gross margin (81–82%) to sustain momentum .
  • Medium-term: Management reiterated tracking ahead of FY26 targets ($1B ARR; $330M SaaS ARR), suggesting continued ARR compounding and platform monetization potential into next fiscal year .

Additional Context from Q3 Press Releases

  • CrowdStrike integration: New integration with Falcon platform enables layered threat detection and faster, orchestrated recovery via Commvault Cloud Threat Scan and “last known clean” restoration workflows .
  • Active Directory recovery: Introduced Commvault Cloud Backup & Recovery for Active Directory Enterprise Edition, enabling automated, rapid AD forest recovery; GA targeted 1H 2025 .