Open Text (OTEX) AI Stock Analysis

• Market Cap: C$8.57B
• Dividend Yield: 3.27%
• Average Volume (3M): 1.64M
• Price to Earnings (P/E): 12.2
• Beta (1Y): 1.42
• Revenue Growth: -5.01%
• EPS Growth: 13.21%
• Country: CA
• Employees: 21,700
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 1.54
• Shares Outstanding: 250,602,780
• 10 Day Avg. Volume: 1,838,490
• 30 Day Avg. Volume: 1,644,189
• PEG Ratio: -30.19
• Price to Book (P/B): 1.96
• Price to Sales (P/S): 1.49
• P/FCF Ratio: 11.19
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: C$43.50
• Price Target Upside: 27.21% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 8
• EPS Forecast (FY): 5.66
• Revenue Forecast (FY): C$7.13B

• Rating: 59 Neutral
• Price Target: C$36.00 ▲(5.26% Upside)
• Action: Downgraded Date: 02/08/26
• Date: Action: Downgraded 02/08/26

The score is driven primarily by solid profitability and cash generation but weighed down by negative recent revenue growth and meaningful leverage. Technicals further pressure the score due to a clear downtrend (price below key moving averages and negative MACD). Partially offsetting these are reasonable valuation with a strong dividend and an earnings call that showed improving cloud indicators and margin/cash progress, albeit with conservative growth guidance and divestiture-related revenue impacts.

Positive Factors

Recurring cloud revenue & high renewals

A large, growing ARR base and very high renewal rates create durable, predictable recurring revenue and cash flow. Strong enterprise bookings and rising cloud RPO indicate a robust sales pipeline and stickiness in larger deals, supporting sustainable revenue conversion over multiple quarters.

Strong margins and cash generation

Healthy gross and EBITDA margins, plus high free cash flow conversion, provide structural profitability and internal funding capacity. Consistent cash generation supports debt reduction, buybacks, and reinvestment in cloud/AI initiatives without immediate reliance on external financing.

Portfolio reshaping & targeted capital allocation

Deliberate divestitures of non-core assets and redeploying proceeds to debt paydown and buybacks meaningfully refocus the business. This reduces complexity, improves strategic focus on content/AI, and accelerates deleveraging, strengthening the balance sheet over the medium term.

Negative Factors

Meaningful financial leverage

Elevated leverage increases interest and refinancing risk and constrains strategic flexibility. Even with solid cash generation, sustained high debt relative to equity limits ability to invest aggressively in product development or large tuck‑in M&A without further deleveraging or divestitures.

Negative revenue trend and modest guidance

A pronounced top-line decline and only modest near-term growth guidance reduce operating leverage and slow margin expansion. Prolonged weak revenue makes it harder to repay debt, sustain R&D investment, and achieve meaningful EPS growth without further structural improvements.

Revenue base reduced by divestitures; services weakness

While divestitures sharpen focus, they also shrink the recurring revenue base and remove predictable cash streams, pressuring near‑term growth metrics. Concurrent softness in support and services reduces cross-sell and margin mix, requiring sustained product-led growth to offset lost revenue.

Open Text Business Overview & Revenue Model

Company Description

Open Text Corporation engages in the designs, develops, markets, and sells information management software and solutions. It offers content services; business network that manages data within the organization and outside the firewall; security and protection solutions for defending against cyber threats, and preparing for business continuity and response in the event of a breach; digital investigation and forensic security solutions; OpenText security solutions to address information cyber resilience needs; Carbonite and Webroot products; and OpenText Information Management software platform. The company also provides eDiscovery platform that provides forensics and unstructured data analytics; OpenText Developer Cloud; key developer API services; AI and analytics that leverages structured or unstructured data; digital process automation solutions, which enables organizations to transform into digital data-driven businesses; and OpenText Digital Experience platform. In addition, it offers customer support programs, including access to software upgrades, a knowledge base, discussions, product information, and an online mechanism to post and review trouble tickets; and consulting and learning services relating to the implementation, training, and integration of its licensed product offerings, as well as cloud services. The company serves organizations, enterprise and mid-market companies, public sector agencies, small and medium-sized businesses, and direct consumers in Canada, the United States, the United Kingdom, Germany, rest of Europe, the Middle East, Africa, and internationally. It has strategic partnerships with SAP SE, Google Cloud, Amazon AWS, Microsoft Corporation, Oracle Corporation, Salesforce.com Corporation, Accenture plc, ATOS, Capgemini Technology Services SAS, Cognizant Technology Solutions U.S. Corp., Deloitte Consulting LLP, and Tata Consultancy Services. Open Text Corporation was incorporated in 1991 and is headquartered in Waterloo, Canada.

How the Company Makes Money

OpenText generates revenue primarily through the sale of software licenses, subscriptions, and professional services. Its revenue model includes a mix of one-time license fees and recurring subscription fees, particularly from its cloud-based offerings. Key revenue streams come from product licenses, maintenance and support services, and professional consulting services. The company has established significant partnerships, including collaborations with major technology firms like Microsoft and SAP, which enhance its market reach and integration capabilities. Additionally, OpenText benefits from strategic acquisitions that expand its product portfolio and customer base, further contributing to its financial growth.

Open Text Financial Statement Overview

Summary

Profitable and cash-generative (TTM gross margin ~66%, EBITDA margin ~26%, FCF ~0.88B and ~85% of net income), but revenue has turned negative (TTM ~-15%, 2025 annual ~-10%) and leverage is meaningful (debt ~6.6B vs equity ~4.0B; elevated debt-to-equity), increasing risk if growth stays soft.

Income Statement

Profitability is solid for an application software business, with TTM (Trailing-Twelve-Months) gross margin around 66% and EBITDA margin around 26%, supporting consistent earnings power. Net margin is positive (~8%), but well below prior-year peaks, and revenue growth has turned negative (TTM about -15% and 2025 annual about -10% after a strong 2024), pointing to a weaker top-line trajectory and some margin compression versus 2024.

Balance Sheet

The balance sheet shows meaningful leverage: total debt is ~6.6B against equity of ~4.0B, and recent annual debt-to-equity levels have been elevated (roughly 1.6–2.3x in 2023–2025 annual data), which increases financial risk if growth remains soft. Offsetting this, equity is sizable and return on equity is steady around ~11% in the last two annual periods, suggesting the company is still generating reasonable profits on its capital base.

Cash Flow

Cash generation is a relative strength: TTM (Trailing-Twelve-Months) operating cash flow is ~1.03B and free cash flow is ~0.88B, with free cash flow running at a high share of net income (about 85%), indicating good earnings quality. However, free cash flow growth is negative (TTM down sharply and 2025 annual also down), and operating cash flow relative to accounting earnings is not especially high in recent periods, suggesting cash conversion has softened versus earlier years.

Breakdown	TTM	Jun 2025	Jun 2024	Jun 2023	Jun 2022	Jun 2021
Income Statement
Total Revenue	5.17B	5.17B	5.77B	4.48B	3.49B	3.39B
Gross Profit	3.64B	3.73B	4.19B	3.17B	2.43B	2.35B
EBITDA	1.51B	1.50B	2.10B	1.27B	1.17B	1.35B
Net Income	434.72M	435.87M	465.09M	150.38M	397.09M	310.67M
Balance Sheet
Total Assets	13.57B	13.77B	14.21B	17.09B	10.18B	9.61B
Cash, Cash Equivalents and Short-Term Investments	1.27B	1.16B	1.28B	1.23B	1.69B	1.61B
Total Debt	6.59B	6.64B	6.69B	9.25B	4.47B	3.87B
Total Liabilities	9.52B	9.84B	10.01B	13.07B	6.15B	5.51B
Stockholders Equity	4.04B	3.93B	4.20B	4.02B	4.03B	4.10B
Cash Flow
Free Cash Flow	881.65M	687.40M	808.40M	655.37M	888.70M	812.45M
Operating Cash Flow	1.03B	830.62M	967.69M	779.21M	981.81M	876.12M
Investing Cash Flow	-153.90M	-153.51M	2.06B	-5.65B	-970.96M	-68.77M
Financing Cash Flow	-770.35M	-834.68M	-2.96B	4.40B	138.46M	-924.55M

Open Text Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 34.20
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:OTEX, the sentiment is Negative. The current price of 34.2 is above the 20-day moving average (MA) of 33.33, below the 50-day MA of 38.80, and below the 200-day MA of 43.27, indicating a neutral trend. The MACD of -1.32 indicates Negative momentum. The RSI at 42.91 is Neutral, neither overbought nor oversold. The STOCH value of 57.33 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:OTEX.

Open Text Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DSG	72 Outperform	$8.00B	43.26	10.70%	―	14.55%	15.55%
DCBO	72 Outperform	C$721.70M	16.69	56.90%	―	16.25%	31.71%
ENGH	69 Neutral	$980.11M	15.58	12.20%	5.69%	-0.72%	-9.27%
KXS	67 Neutral	C$3.69B	54.72	8.24%	―	15.11%	75.40%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
OTEX	59 Neutral	C$8.57B	12.20	10.55%	3.27%	-5.01%	13.21%
LSPD	56 Neutral	C$1.75B	-12.26	-37.01%	―	17.23%	-435.45%