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OPEN TEXT CORP (OTEX)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered $1.288B total revenue (+1.5% YoY), GAAP EPS $0.58 (+81% YoY), non-GAAP EPS $1.05 (+12.9% YoY), and Adjusted EBITDA margin 36.3% (+130 bps YoY), driven by 6% cloud revenue growth and margin expansion; management emphasized resilience and strong free cash flow of $101M .
  • Versus consensus, OpenText posted a clean beat: revenue $1.288B vs $1.275B consensus and non-GAAP EPS $1.05 vs $0.99 consensus; narrative focused on content-led cloud momentum and bookings strength (enterprise cloud bookings +20% YoY to $160M) . EPS and revenue estimates from S&P Global*.
  • Guidance: FY26 annual outlook maintained (total revenue growth 1–2%, cloud revenue 3–4%, new cloud bookings 12–16%, Adjusted EBITDA margin +50–100 bps, FCF +17–20%); Q2 FY26 revenue guided to $1.275–$1.295B and Adjusted EBITDA margin 35.5–36% .
  • Strategic catalysts: portfolio-shaping divestiture of eDOCS ($163M) and expanding AI/product integrations (SAP S/4HANA Cloud certification; Guidewire solutions; cybersecurity enhancements), positioning core information management for AI as growth engine .

What Went Well and What Went Wrong

What Went Well

  • Cloud momentum and bookings: cloud revenue $485M (+6% YoY) and enterprise cloud bookings $160M (+20.2% YoY); 19 consecutive quarters of cloud organic growth .
  • Margin expansion and FCF: GAAP gross margin 72.8% (+100 bps YoY), non-GAAP gross margin 76.5% (+60 bps YoY), Adjusted EBITDA $467M (36.3% margin), free cash flow $101M (+$218M YoY). “OpenText delivered strong margin and free cash flow performance…” — CFO Steve Rai .
  • Content-led cloud growth: “Content Cloud grew 21% YoY in Q1,” underpinned by wins across financial services, energy/utilities, telecom; management highlighted agentic AI and data curation as demand drivers .

What Went Wrong

  • Maintenance decline and PS softness: customer support revenue fell 1.5% YoY; professional services and other declined 9.3% YoY, reflecting mix and timing .
  • License variability: management cautioned that license revenue could be lumpy versus cloud ratability; Q2 guide implies potential quarter-over-quarter license softness depending on customer deployment choices .
  • Cybersecurity cloud traction mixed: investor Q&A probed enterprise cybersecurity cloud declines and cross-sell; management acknowledged work underway and regional investments to improve trajectory .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ1 FY25Q4 FY25Q1 FY26
Total Revenue ($USD Billions)$1.269 $1.311 $1.288
GAAP EPS (Diluted) ($)$0.32 $0.11 $0.58
Non-GAAP EPS (Diluted) ($)$0.93 $0.97 $1.05
GAAP Gross Margin (%)71.7% 72.3% 72.8%
Non-GAAP Gross Margin (%)75.8% 76.2% 76.5%
Adjusted EBITDA Margin (%)35.0% 33.9% 36.3%
GAAP Net Income Margin (%)6.6% 2.2% 11.4%

Segment Revenue Breakdown

Revenue Line ($USD Millions)Q1 FY25Q1 FY26YoY Change
Cloud Services & Subscriptions$457 $485 +6.0%
Customer Support$595 $587 (1.5)%
License$126 $135 +6.9%
Professional Services & Other$91 $82 (9.3)%
Annual Recurring Revenue (ARR)$1,053 $1,071 +1.8%

KPIs and Cash Flow

KPIQ1 FY25Q1 FY26
Enterprise Cloud Bookings ($USD Millions)~$133 (implied from +20.2% YoY) $160
Deals >$1M (Count)23 (implied from +43% YoY) 33
Cloud CRPO YoY (%)—+6%
Cloud RPO YoY (%)—+11% total; +16% long-term
ARR as % of Revenue (%)82.9% 83.2%
Operating Cash Flow ($USD Millions)$(78) $148
Free Cash Flow ($USD Millions)$(117) $101
Share Repurchases ($USD Millions)$87 $100

Results vs Wall Street Consensus (S&P Global)

MetricQ1 FY26 ConsensusQ1 FY26 ActualSurprise
Revenue ($USD Billions)$1.275*$1.288 +$0.013 (+1.0%)*
Primary EPS (Non-GAAP) ($)$0.99*$1.05 +$0.06 (+6.1%)*

Values retrieved from S&P Global*.
Bolded beats: revenue and EPS both exceeded consensus.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue Growth (%)FY261–2% 1–2% Maintained
Cloud Revenue Growth (%)FY263–4% 3–4% Maintained
New Cloud Bookings Growth (%)FY2612–16% 12–16% Maintained
Adjusted EBITDA Margin (bps YoY)FY26+50–100 bps +50–100 bps Maintained
Free Cash Flow Growth (%)FY2617–20% 17–20% Maintained
ARR trajectoryFY26Return to growth Return to growth Maintained
Quarterly Dividend ($/share)Current—$0.275 (Dec 19, 2025) Declared
Revenue ($USD Billions)Q2 FY26—$1.275–$1.295 Provided
Adjusted EBITDA Margin (%)Q2 FY26—35.5–36.0 Provided

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY25)Previous Mentions (Q4 FY25)Current Period (Q1 FY26)Trend
Agentic AI & content curationEmphasis on AI-first; digital workers; margin optimization via AI Titanium X product cycle; AI driving bookings/pipeline “Information Management for AI” focus; Content Cloud +21% YoY Strengthening
Sovereign/private cloudCustomers deploying locally amid tariffs; opportunity in sovereign clouds Visibility into sovereign cloud (France, Germany, UK, Canada) Sovereign Cloud showcased; hybrid choice reinforces mix Building
Tariffs/macro impactsTariff shock disrupted bookings ~$40–$50M in Q3 Macro caution; outlook conservative Less emphasized; mix variability acknowledged Normalizing
Portfolio shaping/divestituresOptimization plan expansion via AI Consider divestitures to accelerate growth eDOCS divestiture announced; cadence ~one per quarter; 15–20% revenue targeted Executing
CybersecurityPlatform progress; Microsoft TDR partnership Plan to return cyber to growth Addressing cloud declines; cross-sell expanding Improving
Cloud metrics (RPO/CRPO)Year-over-year comparables planned Cloud RPO up 13%; CRPO ~60% revenue visibility Cloud CRPO +6% YoY; long-term RPO +16% YoY Positive
License vs cloud mixCustomers choosing local/cloud deployments License strong in Q4; ratability trade-offs License variability cautioned; cloud acceleration persists Mixed

Management Commentary

  • “OpenText performed well in the quarter, driven by growth in our Content Management cloud business... strengthening our position at the forefront of Information Management for AI” — James McGourlay, Interim CEO .
  • “Business Optimization Plan is well underway… tremendous scale and capital flexibility to continue investing for growth…” — Steve Rai, EVP & CFO .
  • “We have started the process of portfolio-shaping and divesting non-core assets” — P. Thomas Jenkins, Executive Chair & Chief Strategy Officer .
  • “Content being our largest business continues to lead our growth in cloud. Content Cloud grew 21% YoY in Q1” — James McGourlay .
  • “We’re on the cusp of a major step change… agentic AI… 35 years in the making” — Steve Rai .

Q&A Highlights

  • Mix and revenue recognition: Management reiterated variability in license vs cloud given customer choice; investors should watch RPO/CRPO for underlying demand despite quarter-to-quarter RevRec shifts .
  • Divestiture cadence: Goal to complete non-core divestitures within ~1 year, roughly one per quarter, while preserving EBITDA discipline; eDOCS transaction is first step .
  • Content Cloud drivers: Growth is customer-driven (AI readiness, managed capability), not incentivized push from OpenText; emphasis on vertical traction and seat/modules expansion .
  • Cybersecurity trajectory: Addressing enterprise cybersecurity declines; cross-selling with content and regional investments expected to lift cloud numbers .
  • Margin commitment: Regardless of revenue mix, management is committed to maintaining margins via optimization and operating discipline (the “dump truck” analogy on ratability) .

Estimates Context

  • OpenText beat Street consensus on both top and bottom line: Revenue $1.288B vs $1.275B consensus and non-GAAP EPS $1.05 vs $0.99 consensus*, supported by content-led cloud growth and bookings strength . Values retrieved from S&P Global*.
  • Implications: Estimate models likely to reflect higher cloud margin trajectory and improved FCF conversion; near-term revisions may adjust license/cloud mix and Q2 revenue midpoint ($1.285B) guidance .

Key Takeaways for Investors

  • Cloud momentum and content leadership underpin sustained margin expansion and FCF strength; watch CRPO/RPO metrics for demand visibility as mix shifts to cloud .
  • The beat on both revenue and EPS, coupled with higher gross/EBITDA margins, supports a resilient earnings profile into FY26; near-term catalysts include OpenText World and expanded AI integrations (SAP, Guidewire, Microsoft) .
  • Portfolio shaping is accelerating (eDOCS divestiture) with an expected cadence of ~one per quarter, targeting 15–20% revenue divestitures while maintaining EBITDA stability — potential multiple re-rating on focus/quality mix .
  • Q2 guide (revenue $1.275–$1.295B; A-EBITDA margin 35.5–36%) signals steady execution amid license variability; focus on ARR returning to growth in FY26 and content-led bookings .
  • Cybersecurity is a swing factor; integration with Microsoft security ecosystem and managed services could turn declines to growth, enhancing cross-sell and margin leverage .
  • Dividend continuity ($0.275/share) and buybacks ($100M in Q1) reinforce capital return; medium-term model targets rule-of-40 trajectory and FCF growth 17–20% — supportive of valuation .
  • Tactical trade ideas: Lean long into content/AI catalysts and CRPO-backed demand; hedge for license variability via guidance ranges; re-rate potential as divestitures close and cybersecurity growth inflects .

Notes and Sources:

  • Q1 FY26 press release and 8-K tables, margins, KPIs, dividend, reconciliations: .
  • Q1 FY26 earnings call transcript (prepared remarks and Q&A): .
  • Prior quarters (Q3/Q4 FY25) context, outlook, metrics: .
  • Additional relevant press releases (AI/product partnerships and security): SAP S/4HANA Cloud certification , Guidewire solutions , cybersecurity capabilities .
  • Estimates comparison: S&P Global consensus via GetEstimates for Q1 FY26 (EPS and revenue). Values retrieved from S&P Global*.