Open Text Corporation ((TSE:OTEX)) has held its Q4 earnings call. Read on for the main highlights of the call.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
OpenText Corporation’s recent earnings call painted a balanced picture of the company’s current standing and future prospects. While the call highlighted strong growth in cloud services and a promising outlook for fiscal 2026, it also acknowledged challenges such as revenue declines in fiscal year 2025, cybersecurity issues, and broader economic headwinds. This duality in sentiment reflects both optimism and caution as the company navigates its path forward.
Strong Cloud Bookings and Growth
OpenText reported impressive growth in its cloud segment, with cloud bookings reaching $238 million, marking a 32% increase year-over-year. Cloud revenue also saw a modest rise to $475 million, growing by 2%. The total cloud remaining performance obligations (RPO) increased by 13%, underscoring the company’s robust performance in this sector.
Positive Outlook for Fiscal 2026
Looking ahead, OpenText is optimistic about fiscal 2026, projecting total revenue growth of 1% to 2% and cloud growth of 3% to 4%. The company also anticipates an expansion in adjusted EBITDA by 50 to 100 basis points and a substantial increase in free cash flow by 17% to 20%.
Record Capital Return in Fiscal 2025
Fiscal 2025 was notable for OpenText’s record capital return to shareholders, amounting to $683 million through dividends and stock repurchases. This includes $411 million allocated for share buybacks, reflecting the company’s commitment to delivering shareholder value.
New Product and Partnership Initiatives
OpenText introduced the MyAviator AI platform and announced new partnerships with Microsoft for cybersecurity solutions and TELUS for Canadian cloud services. These initiatives highlight the company’s strategic focus on innovation and collaboration to drive growth.
Fiscal Year 2025 Revenue Decline
Despite the positives, fiscal year 2025 saw a decline in total revenues, down 3% excluding AMC and 1% excluding IP rights and DXC. This negative growth presents a challenge that the company aims to address in the coming fiscal year.
Cybersecurity Segment Challenges
The cybersecurity segment faced difficulties, with a 4% decline in cloud revenue. However, OpenText remains optimistic about a return to growth in this area in the next fiscal year, driven by strategic initiatives and partnerships.
Economic and Geopolitical Headwinds
OpenText is navigating through economic and geopolitical challenges, including trade and tariff issues and market uncertainties. These factors have impacted the company’s performance, but it remains focused on mitigating these risks.
Guidance for Fiscal 2026
OpenText’s guidance for fiscal 2026 reflects a strategic focus on growth, driven by cloud and AI innovations. The company expects total revenue growth of 1% to 2% and cloud revenue growth of 3% to 4%. Additionally, OpenText plans to expand its adjusted EBITDA margin by 50 to 100 basis points and increase free cash flow by 17% to 20%. The company is also set to raise its annual dividend by 5% and has announced a new $30 million share repurchase program.
In conclusion, OpenText Corporation’s earnings call provided a comprehensive overview of its current achievements and future aspirations. While the company celebrates strong cloud growth and a positive fiscal 2026 outlook, it remains vigilant in addressing fiscal year 2025 revenue declines and cybersecurity challenges. The strategic initiatives and forward-looking guidance underscore OpenText’s commitment to innovation and shareholder value, positioning it for continued success despite economic and geopolitical headwinds.