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OPEN TEXT CORP (OTEX)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY25 delivered $1.311B revenue (-3.8% YoY; +4.5% QoQ) and non-GAAP EPS of $0.97; both exceeded S&P Global consensus ($1.301B revenue; $0.83 EPS). GAAP EPS was $0.11 due to special charges and FX in “other income (expense)” .*
  • Cloud revenue rose to $474.5M (+2.1% YoY), cloud bookings surged 32.3% YoY to $238M, and cloud renewal rate held at 96%, underpinning FY26 outlook for 3–4% cloud growth and 1–2% total revenue growth .
  • Margins remained resilient: GAAP gross margin 72.3% (-20 bps YoY), non-GAAP gross margin 76.2% (-30 bps YoY), and adjusted EBITDA margin 33.9% (flat vs Q4 FY24) despite divestiture headwinds and FX volatility .
  • Capital returns: dividend raised 5% to $0.275/share; new $300M repurchase program. OTEX also agreed to divest eDOCS for $163M cash to sharpen focus on core AI/cloud/security portfolio .

What Went Well and What Went Wrong

  • What Went Well

    • “Cloud bookings growth surged to 32%, driven by demand for our new AI-driven Titanium X platform… FY26 outlook of 3% to 4% cloud revenue growth and 1% to 2% total revenue growth.” – CEO Mark J. Barrenechea .
    • “Operational discipline and excellence… sustained margin and free cash flow growth.” – CFO Chadwick Westlake; adjusted EBITDA margin 33.9% in Q4, 34.5% for FY25 .
    • Strong renewal metrics: cloud renewal rate 96% in Q4; cloud RPO up 13% YoY (current portion +8%, long-term +17%), providing visibility into FY26 growth .

  • What Went Wrong

    • Topline pressure: total revenue -3.8% YoY; customer support revenue declined 7.6% YoY in Q4 amid maintenance headwinds ex-AMC and macro volatility .
    • GAAP EPS compressed to $0.11 (vs $0.91 in Q4 FY24) driven by special charges ($79.7M) and FX in other income (expense) (-$89.2M) .
    • Free cash flow down 14.6% YoY in Q4 ($124M vs $145M) due to lower operating cash flow and higher capex; sequentially also down vs Q3’s seasonal high .

Financial Results

MetricQ2 FY25Q3 FY25Q4 FY25
Total Revenues ($USD Billions)$1.335 $1.254 $1.311
GAAP EPS ($)$0.87 $0.35 $0.11
Non-GAAP EPS ($)$1.11 $0.82 $0.97
GAAP Gross Margin (%)73.3% 71.6% 72.3%
Non-GAAP Gross Margin (%)77.2% 75.7% 76.2%
Adjusted EBITDA ($USD Millions)$501 $395 $443.9
Adjusted EBITDA Margin (%)37.6% 31.5% 33.9%
Operating Cash Flows ($USD Millions)$348 $402 $158.2
Free Cash Flows ($USD Millions)$306.7 $374 $124.0
MetricQ4 FY24Q4 FY25YoY Change
Total Revenues ($USD Millions)$1,362.1 $1,310.5 (3.8%)
GAAP EPS ($)$0.91 $0.11 (87.9%)
Non-GAAP EPS ($)$0.98 $0.97 (1.0%)
GAAP Gross Margin (%)72.5% 72.3% (20 bps)
Non-GAAP Gross Margin (%)76.4% 76.2% (30 bps)
Adjusted EBITDA ($USD Millions)$445.4 $443.9 (0.3%)
Operating Cash Flows ($USD Millions)$185.2 $158.2 (14.6%)
Free Cash Flows ($USD Millions)$145.2 $124.0 (14.6%)

Actual vs Consensus

MetricQ2 FY25Q3 FY25Q4 FY25
Revenue Actual ($USD Millions)1,334.5 1,254.4 1,310.5
Revenue Consensus Mean ($USD Millions)1,316.3*1,281.1*1,301.45*
EPS Actual ($)1.11 0.82 0.97
EPS Consensus Mean ($)0.928*0.762*0.829*
Revenue – # of Estimates10*9*2*
EPS – # of Estimates12*11*11*

Values retrieved from S&P Global.*

Segment Breakdown (Revenue)

Segment ($USD Millions)Q4 FY24Q4 FY25
Cloud services and subscriptions$464.9 $474.5
Customer support$628.4 $580.6
Total annual recurring revenues$1,093.3 $1,055.1
License$171.5 $172.5
Professional service and other$97.3 $82.9
Total Revenues$1,362.1 $1,310.5

KPIs

KPIQ4 FY25
Enterprise cloud bookings ($USD Millions)$238
Cloud bookings YoY growth (%)32.3%
Cloud renewal rate (%)96%
Cloud RPO YoY growth (%)13% (current +8%, LT +17%)
ARR ($USD Millions)$1,055.1
Non-GAAP cloud gross margin (%)63.2%
Share repurchases ($USD Millions)$145
Dividend per share ($)$0.275

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total revenue growthFY2026Not provided prior+1% to +2% YoY Introduced
Cloud revenue growthFY2026Not provided prior+3% to +4% YoY Introduced
New cloud bookings growthFY2026Not provided prior+12% to +16% YoY Introduced
Adjusted EBITDA marginFY2026Not provided prior+50 to +100 bps expansion Introduced
Free cash flow growthFY2026Not provided prior+17% to +20% YoY Introduced
ARR trajectoryFY2026N/AARR to return to growth; cloud to outpace maintenance Positive
Maintenance decline rateFY2026~-4% ex AMC (FY25) ~-2% ex AMC Improving
Q1 FY26 total revenue growthQ1 FY26N/AConstant to +1% Introduced
Q1 FY26 adjusted EBITDA marginQ1 FY26N/A35%–35.5% Introduced
DividendFY2026$0.2625/qtr (Q3 FY25) +5% to $0.275/qtr Raised
Share repurchaseFY2026FY25 program up to $450M New $300M program Renewed
Portfolio actionEarly 2026N/ADivest eDOCS for $163M cash (close expected early 2026) Announced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 FY25)Trend
AI/Titanium XQ2: Titanium X targeted for Q4 delivery ; Q3: launched, AI-first roadmap and expanded optimization First full quarter in market; bookings surge on AI demand Strengthening
Macro/tariffs/sovereign cloudQ3: Demand shock from auto tariffs; customers reassessing Sovereign cloud demand rising (France, Germany, UK, Canada, APAC) Improving visibility
Cloud bookings/renewals/RPOQ3: Bookings -8% YoY; cloud renewal 96%, RPO disclosure initiated Bookings +32% YoY; renewal 96%; cloud RPO +13% YoY Acceleration
Security businessQ3: Microsoft TDR integration; trajectory improving Cybersecurity cloud -4% in FY25; expected return to growth in FY26 via Microsoft ecosystem Turning positive
Maintenance trajectoryQ3: maintenance decline impacted by DXC; metrics improving FY26 decline targeted to ~-2% (half FY25 rate); ARR to return to growth Improving
Capital allocationQ3: Buyback program increased to $450M New $300M FY26 buyback; dividend raised; M&A pipeline rebuilding Ongoing returns
Portfolio shapingQ3: considering divestitures to accelerate growth eDOCS divestiture for $163M cash announced Executing

Management Commentary

  • “OpenText had a strong Q4 and our cloud business is accelerating. Cloud bookings growth surged to 32%, driven by demand for our new AI-driven Titanium X platform… FY26 outlook of 3% to 4% cloud revenue growth and 1% to 2% total revenue growth.” – Mark J. Barrenechea, CEO & CTO .
  • “Our fourth quarter performance demonstrated operational discipline and excellence, reinforcing OpenText’s ability to drive sustained margin and free cash flow growth.” – Chadwick Westlake, EVP & CFO .
  • “Cloud current RPO in fiscal 2026 is roughly 60% of our revenues… strong visibility with pipeline up 30%, supporting 3%–4% organic cloud revenue growth.” – Mark J. Barrenechea .

Q&A Highlights

  • Demand/macro: Management noted sovereign cloud as a tailwind and customers seeking local control; volatility from tariffs persists but visibility is improving .
  • Maintenance: Team targets halving the decline rate to ~-2% in FY26 with stronger renewal metrics and new support offerings (ACS) aiding upsell .
  • Cloud disclosures: Cloud RPO $2.5B (+13%), current $1.2B (+8%), long-term $1.1B (+17%); content/OSM/DevOps >10% growth; cybersecurity to turn positive in FY26 with Microsoft partnerships .
  • Capital allocation: New $300M buyback planned; readiness for tuck-in M&A; ongoing portfolio optimization via divestitures .
  • Free cash flow: FY26 outlook +17%–20% growth; no expected one-time items like FY25 divestiture tax; maintain adjusted tax rate .

Estimates Context

  • Q4 FY25 beat: Revenue $1,310.5M vs $1,301.45M consensus; EPS $0.97 vs $0.83 consensus .*
  • Q3 FY25 mixed: Revenue $1,254.4M vs $1,281.1M consensus (miss); EPS $0.82 vs $0.76 consensus (beat) .*
  • Q2 FY25 beat: Revenue $1,334.5M vs $1,316.3M consensus; EPS $1.11 vs $0.93 consensus .*
  • Implication: EPS trajectory ahead of expectations, while revenue re-accelerated in Q4 on AI/Titanium X and bookings strength; consensus likely recalibrates upward on FY26 cloud growth, bookings and ARR trends.*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Q4 inflection in cloud metrics (32% bookings growth, 96% renewal, cloud RPO +13%) supports FY26 growth guide and likely upward estimate revisions for cloud-led segments .
  • Margin durability (33.9% adjusted EBITDA) amidst top-line pressure signals continued operating discipline; FY26 guide for +50–100 bps expansion provides valuation support .
  • Capital returns remain robust (dividend +5%; $300M buyback), and portfolio shaping (eDOCS sale) should streamline focus toward higher-growth AI/cloud/security assets .
  • Near term: potential catalysts include pipeline conversion from Titanium X and sovereign cloud wins; watch maintenance decline moderation and cybersecurity inflection to positive growth in FY26 .
  • Risks: macro/tariff volatility and maintenance normalization could weigh on ARR; FX swings in “other income (expense)” can impact GAAP EPS; monitor Q1 FY26 margins (35–35.5%) vs guide .
  • Medium term: AI-first operating model and optimization savings ($490–$550M annualized) support rule-of-40 ambition; tuck-in M&A may add to growth while maintaining disciplined returns .