OpenText beats estimates on adjusted EPS, cloud bookings
Revenue decline and CEO transition weigh on shares trading near 52-week low despite earnings beat
OpenText shares fell more than 3 percent in early trading Thursday, hovering near their 52-week low despite the Canadian enterprise software company beating Wall Street expectations on adjusted earnings and revenue. The Waterloo-based company reported fiscal fourth-quarter adjusted earnings per share of $1.13, surpassing analyst estimates of $1.03, while revenue reached $1.327 billion compared with the $1.287 billion consensus forecast.
The quarterly results underscore the complex transition OpenText is navigating as it shifts toward cloud-based services while facing broader economic headwinds in the enterprise software market. Total revenue declined 0.6 percent year-over-year, and GAAP earnings per share dropped 24.1 percent, reflecting the challenges of integrating past acquisitions and moving customers to subscription-based models.
Cloud revenue grew 3.4 percent year-over-year, marking the twentieth consecutive quarter of organic cloud growth. Enterprise cloud bookings jumped 18 percent to $295 million, with adjusted EBITDA margins reaching 37 percent. The company declared a quarterly dividend of $0.275 per share, representing a 4.8 percent increase from the prior year's distribution.
"Our cloud performance remains resilient with 20 consecutive quarters of organic growth, reflecting the strength of our platform and the trust customers place in us," said OpenText in its earnings announcement. "We continue to execute on our strategy to drive profitable cloud growth while maintaining strong free cash flow generation."
The earnings beat was overshadowed by the announcement of a leadership transition. Ayman Antoun, who has been with OpenText since 2019 and currently serves as president of the company's cloud business unit, will become chief executive officer effective April 2026, succeeding current leadership. The extended transition timeline—more than a year away—has raised questions among some investors about strategic direction during a critical period for the company's cloud transformation.
The stock's decline despite the earnings beat reflects investor concerns about several factors: the overall revenue contraction in a period when enterprise software peers are showing growth, the significant gap between adjusted and GAAP profitability, and the uncertainty surrounding the CEO transition. Shares are now trading at $22.79, just above their 52-week low of $22.21 and down 42 percent from their yearly high of $39.58.
Analysts remain cautiously optimistic about the company's long-term prospects. The consensus target price stands at $38.72, implying substantial upside from current levels, with three analysts rating the stock a strong buy and nine maintaining hold ratings. The company's forward price-to-earnings ratio of 5.85 suggests the market is pricing in significant challenges ahead despite the dividend yield of 4.29 percent.
OpenText's enterprise information management solutions face intensifying competition from both established players like IBM and Microsoft and cloud-native specialists. The company's strategy has focused on acquisitions to expand its capabilities and customer base, but integrating these businesses while transitioning to recurring revenue models has created near-term profitability pressure.
The company's market capitalization of approximately $5.9 billion and institutional ownership of 82.8 percent indicate strong backing from sophisticated investors, but the stock's recent performance suggests growing impatience with the pace of the cloud transition and revenue growth acceleration.
Looking ahead, investors will focus on several key metrics: the pace of cloud revenue growth acceleration, the company's ability to stabilize and grow total revenue, the execution of the CEO succession plan, and progress toward bridging the gap between adjusted and GAAP profitability. With the dividend increase and continued cloud bookings growth, management appears committed to balancing shareholder returns with strategic investment in the cloud platform, but the market's near-term skepticism is evident in the stock's current valuation near annual lows.