Open Text Corp. (TSE:OTEX)
TSX:OTEX
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Open Text
(TSX:OTEX)
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Rating:59Neutral
Price Target:
C$31.00
▼(-1.05% Downside)
Action:DowngradedDate: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
High Recurring Revenue
A large ARR base representing ~80% of revenue and a 95% cloud renewal rate create durable, predictable cash flows. This recurring revenue mix reduces volatility, supports multi-year contract visibility, and underpins sustainable investment in cloud and AI product development.
Negative Factors
Elevated Leverage
Meaningful leverage increases interest and refinancing risk and constrains strategic flexibility, especially if revenue growth remains muted. While divestiture proceeds are earmarked for debt paydown, the current debt load is a structural vulnerability that limits capital allocation choices.
Read all positive and negative factors
Positive Factors
Negative Factors
High Recurring Revenue
A large ARR base representing ~80% of revenue and a 95% cloud renewal rate create durable, predictable cash flows. This recurring revenue mix reduces volatility, supports multi-year contract visibility, and underpins sustainable investment in cloud and AI product development.
Read all positive factors
Open Text (OTEX) vs. iShares MSCI Canada ETF (EWC)
Market Cap
C$7.85B
Dividend Yield3.27%
Average Volume (3M)1.80M
Price to Earnings (P/E)12.2
Beta (1Y)1.24
Revenue Growth-5.01%
EPS Growth13.21%
CountryCA
Employees21,700
SectorTechnology
Sector Strength88
IndustrySoftware - Application
Share Statistics
EPS (TTM)1.54
Shares Outstanding250,602,780
10 Day Avg. Volume1,978,843
30 Day Avg. Volume1,801,127
Financial Highlights & Ratios
PEG Ratio-30.19
Price to Book (P/B)1.96
Price to Sales (P/S)1.49
P/FCF Ratio11.19
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$44.29Price Target Upside41.37% Upside
Rating ConsensusHold
Number of Analyst Covering8
EPS Forecast (FY)5.66
Revenue Forecast (FY)C$7.13B
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...
How the Company Makes Money
OpenText primarily makes money by selling enterprise software and related services that help organizations manage content and information flows and secure users, endpoints, and digital identities.
Key revenue streams include:
1) Software subscrip...
Open Text Earnings Call Summary
Earnings Call Date:Feb 05, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Apr 30, 2026
Earnings Call Sentiment Positive
The call conveyed constructive progress on OpenText's strategic pivot to a higher-growth content cloud and AI-focused company: cloud bookings, RPO, content cloud revenue, renewal rates, ARR and gross margins showed positive trends, portfolio reshaping is underway with divestitures and capital return actions, and year-to-date free cash flow improved materially. Offsetting these positives were notable GAAP earnings and EPS declines (driven by FX/derivatives), a modest decline in adjusted EBITDA and quarter free cash flow, softness in customer support and professional services, and the removal of revenue from divestitures that will require modeling adjustments. Management reaffirmed a conservative full-year revenue guide of 1%–2% growth while highlighting multi-quarter cloud momentum and product innovation (AI platform). Overall, the highlights modestly outweigh the lowlights given strong cloud bookings, content traction, margin improvement, cash generation YTD, and clear strategic actions.Positive Updates
Solid Total Revenue and Cloud Revenue
Q2 total revenues of approximately $1.33 billion; cloud revenue of $478 million, up 3.4% year-over-year.
Negative Updates
GAAP Profitability Decline
GAAP net income of $168 million, down 26.9% year-over-year; GAAP diluted EPS $0.66, down 24.1%, largely attributed to FX on acquisition-related derivatives.
Read all updates
Q2-2026 Updates
Positive
Negative
Solid Total Revenue and Cloud Revenue
Q2 total revenues of approximately $1.33 billion; cloud revenue of $478 million, up 3.4% year-over-year.
Read all positive updates
Company Guidance
Management reaffirmed FY26 guidance of 1–2% total revenue growth and said core business revenue should grow in constant currency, while asking investors to reduce models by ~$15M to reflect the eDOCS divestiture; they guided Q3 revenue of $1.26–$1.28B (net $7M impact from eDOCS) and Q3 adjusted EBITDA margin of 33–33.5% (seasonally lower). Q2 and YTD metrics supporting the outlook included total revenue $1.33B, cloud revenue $478M (+3.4% y/y), ARR $1.06B (+0.7%) representing 80% of revenue (+1 ppt), cloud RPO +13.7%, enterprise cloud bookings $295M (+18%) with 53 deals >$1M, cloud net renewal rate 95% and customer support $582M (‑1.5%, 92% renewal). Profitability/cash: GAAP gross margin 74% / non‑GAAP 77.6%, adjusted EBITDA $491M (37% margin), GAAP net income $168M, non‑GAAP net income $286M, GAAP EPS $0.66 / non‑GAAP EPS $1.13, Q2 free cash flow $279M (YTD FCF $381M), plus announced divestitures (eDOCS $163M closed; Vertica ~$150M) and planned use of proceeds to pay down debt while pursuing buybacks and tuck‑in M&A.Open Text Financial Statement Overview
Summary
Income Statement
62
Positive
Balance Sheet
58
Neutral
Cash Flow
66
Positive
| 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
Negative
31.33
Price Trends
33.44
Negative
39.46
Negative
42.23
Negative
Market Momentum
-1.05
Negative
42.92
Neutral
31.78
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 31.33 is below the 20-day moving average (MA) of 31.89, below the 50-day MA of 33.44, and below the 200-day MA of 42.23, indicating a bearish trend. The MACD of -1.05 indicates Negative momentum. The RSI at 42.92 is Neutral, neither overbought nor oversold. The STOCH value of 31.78 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:OTEX.
Open Text Risk Analysis
Open Text disclosed 49 risk factors in its most recent earnings report. Open Text reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Open Text Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | C$8.47B | 38.38 | 10.76% | ― | 14.55% | 15.55% | |
74 Outperform | C$694.37M | 16.69 | 73.40% | ― | 16.25% | 31.71% | |
69 Neutral | C$3.88B | 49.33 | 16.46% | ― | 15.11% | 75.40% | |
67 Neutral | C$900.32M | 14.62 | 12.17% | 5.69% | -0.72% | -9.27% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
59 Neutral | C$7.85B | 12.20 | 10.88% | 3.27% | -5.01% | 13.21% | |
56 Neutral | C$1.71B | -12.26 | -37.01% | ― | 17.23% | -435.45% |
* Technology Sector Average
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31.33
-2.43
-7.20%
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.