Cognyte Software Posts Strong Growth and Margin Gains

Cognyte Software Ltd. ((CGNT)) has held its Q4 earnings call. Read on for the main highlights of the call.

Cognyte Software’s latest earnings call struck an upbeat tone, underscoring a year of double‑digit growth, record margins and a return to GAAP profitability. Executives highlighted strong demand, improved operating leverage and solid backlog visibility, while acknowledging FX pressure, some cash‑collection timing issues and uncertainties tied to subscription mix and geopolitics.

Revenue Growth Reaccelerates in Q4 and Full Year

Cognyte delivered Q4 fiscal 2026 revenue of $106.2 million, up 12.4% year over year, capping a strong finish to the year. Full‑year revenue reached $400 million, rising 14.1% and signaling renewed momentum after prior transitions in the business model and customer base.

Software and Recurring Revenue Expansion

Software remained a key growth engine, with Q4 software revenue climbing 22.6% to $45.9 million and total software activity up 14.2%. Recurring revenue increased 5.6% to $50 million and accounted for 47.1% of total sales, showing steady progress toward a more predictable revenue base.

Margin Expansion Drives Gross Profit Gains

Profitability at the gross level improved sharply, as Q4 non‑GAAP gross margin reached a record 74.7%, up 320 basis points versus last year. For the full year, non‑GAAP gross margin was 73%, 200 basis points higher, lifting Q4 non‑GAAP gross profit 17.4% to $79.4 million as new revenue flowed efficiently to the bottom line.

Profitability and EBITDA Leverage Improve Sharply

Operating performance showed strong leverage, with Q4 non‑GAAP operating income doubling to $12.1 million and adjusted EBITDA jumping 62.5% to $15 million. For fiscal 2026, non‑GAAP operating income more than doubled to $36.7 million, adjusted EBITDA surged 65.7% to $48.2 million and GAAP net income turned positive at $4.6 million.

Backlog and RPO Underpin Revenue Visibility

Management pointed to robust demand visibility with total remaining performance obligations of $557.2 million, combining $123.7 million in contract liabilities and $433.4 million in backlog. Short‑term RPO of $369.5 million supports near‑term revenue confidence, while Q4 billings growth of 15.6% to $109.9 million underscores healthy underlying activity.

Customer Wins and Global Footprint Expansion

Cognyte added 61 new customers in fiscal 2026 and showcased several marquee deals across security and law‑enforcement markets. Highlights included converting a long‑standing national security agreement into a five‑year subscription worth $6 million annually, a roughly $5 million U.S. state law‑enforcement win and multimillion‑dollar contracts across EMEA, NATO and APAC.

Balance Sheet Strength and Active Buybacks

The company ended the year with $116.9 million in cash and no debt, giving it ample financial flexibility for investment and capital returns. Cognyte repurchased about 2.3 million shares for approximately $21.4 million in fiscal 2026, including roughly $5.5 million in Q4, and received board approval for an additional $20 million authorization.

AI and Mission‑Critical Positioning Support Demand

Management stressed Cognyte’s entrenched role in mission‑critical government intelligence and law‑enforcement markets, where its analytics and security solutions are tightly embedded. They highlighted embedded AI as a structural tailwind and cited feedback from a recent Intelligence Summit with global senior leaders as validation of the firm’s market leadership.

Cash Flow Miss Tied to Collection Timing

Operating cash flow for fiscal 2026 came in at $40.3 million, modestly below management’s prior $45 million expectation due to delayed collection of certain receivables. Executives emphasized that these receivables were collected early in Q1 and that free cash flow of roughly $30 million still reflected healthy underlying cash generation.

Foreign Exchange Headwinds from Shekel Strength

The company flagged foreign exchange as a headwind, citing recent strength in the Israeli shekel against the U.S. dollar as a drag on reported results. Guidance assumes that continued gross‑margin improvement will help offset this FX pressure, but management acknowledged it as an ongoing external risk factor.

Subscription Mix and Revenue Recognition Variability

While subscription adoption is growing, especially with some notable new wins, many government customers still favor perpetual licenses. This gradual and uneven shift toward subscription introduces variability in revenue recognition and cash timing, making quarterly patterns less predictable even as long‑term economics improve.

Seasonality and Wider Guidance Range

Executives cautioned that Q1 is expected to come in slightly below Q4, reflecting typical seasonality and some regional uncertainty. They framed the fiscal 2027 revenue outlook with a plus‑or‑minus 3% range, citing normal market fluctuations, seasonal patterns and geopolitical dynamics, and noted that cancelable portions of RPO add some conversion timing variability.

Exposure to Geopolitics and Government Budgets

Demand for Cognyte’s solutions remains closely linked to geopolitical developments and government budget cycles, which can both spur and complicate orders. Management acknowledged that conflicts and security events can accelerate interest, yet outcomes and timing are unpredictable and can impact how quickly pipeline opportunities convert into revenue across regions.

Guidance and Long‑Term Outlook

For fiscal 2027, Cognyte guided to about $448 million in revenue plus or minus 3%, implying around 12% growth at the midpoint with Q1 starting slightly below Q4 and then rising sequentially. Management expects non‑GAAP gross margin near 73.5%, non‑GAAP operating income around $56 million, adjusted EBITDA about $68 million, solid cash flow and reaffirmed targets for roughly $500 million in revenue and more than 20% adjusted EBITDA margin in fiscal 2028.

Cognyte’s call painted the picture of a company exiting its transition phase with renewed growth, expanding margins and solid cash generation, albeit with some near‑term variability. For investors, the combination of strong backlog, disciplined cost control, balance‑sheet strength and clear multiyear targets suggests a story of profitable scale, tempered by FX, subscription‑mix and geopolitical sensitivities.