Could management clarify what exactly is being excluded from the PROTECT public sector deals (only the perpetual piece?) and elaborate on the overall guidance philosophy as a new public company?

The excluded deals primarily impact perpetual license software and a small portion of services, representing a handful of deals. The guidance philosophy is to set achievable targets that explain the business trajectory well, focusing on full-year outlook with some Q3 color, and the framework will evolve over time. “Yes. And that mostly impacts perpetual license software, but a little bit of services that has to it. Matt, sorry, in terms of the philosophy, we obviously want to set guidance that explains the trajectory of the business well to you guys. There's only 4 months left of the year. So we've set guidance that is primarily focused on the full year with a little bit of extra color on Q3 to help you price model it. And yes, I think that the philosophy is we want to set guidance that we can achieve.”

If the dynamics in public safety are not new, why were these deals initially included in guidance, and what changed? When does the company expect to consistently return to the 3-4% organic growth range?

Long-term, the company expects organic reported growth to align more closely with ARR growth, not necessarily the 3-4% range. The change in guidance for this year was due to deals slipping in Q2, prompting a more cautious approach for the remainder of the year, though some deals could still close in H2. “Yes. I mean, if we start a little bit with the second half of the question, I would say, I mean, long term, we are guiding for that our organic reported growth should close in on the ARR growth, right? So we are not guiding for 3% to 4% long term, right? That was the guidance for this year. So I think maybe that's a good distinction to make.”

Regarding the expansion of workload adoption and cross-selling, with 86% of customers still on a single workflow, are there specific targets or updates on how this is progressing?

The 86% figure is from an older slide and is now lower. In Q2, 100 customers added another solution. The company plans to provide updated figures on multi-workflow adoption annually, but confirmed progress is being made. “Yes, I don't think we said anywhere that it's still 86%. It might be a slide from the Investor Day that we have it updated to be honest. I did say in the call that in my intro that 100 customers added another solution in the quarter, we haven't updated that 6% number. I'm not going to give you a number here. I think that's a number we'll probably give more like once a year. But I could say that it is lower than 86% today. So we are making progress.”

OCTV

Octave Intelligence (OCTV) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 12, 2026

Source: earnings call transcript

Executive summary

Octave Intelligence Q2 FY26 — Solid Performance Amidst Strategic Shift and Prudent Guidance

Octave Intelligence, in its inaugural quarter as an independent public company, delivered solid Q2 FY26 results with organic ARR growth of 7% to $1.43 billion and SaaS revenue up 21%. The company is executing on its strategic shift towards a recurring revenue model, with recurring revenue now comprising 69% of LTM total. While total revenue saw a slight organic decline due to perpetual license timing and a prudent guidance adjustment, profitability remained strong with a 29% adjusted operating margin and 23% free cash flow margin, absorbing public company launch costs. The company is focused on product innovation, go-to-market improvements, and AI monetization to drive sustainable double-digit ARR growth.

Highlights

ARR grew 7% year-on-year on an organic constant currency basis to $1.43 billion, in line with expectations.
SaaS revenue grew 21% in organic constant currency terms over the prior year to $87 million.
Adjusted operating margin was 29%, in line with expectations, demonstrating strong cost discipline.
Free cash flow was $93 million, representing a 23% margin for the quarter.
Recurring revenue now stands at 69% of total LTM revenue, up from 65% in the prior year.

Concerns

Total revenue was down 1% year-over-year on an organic constant currency basis, primarily due to a decline in perpetual licenses.
Total revenue came in $5 million lower than expected due to the slippage of some perpetual deals in the public safety business.
Full-year 2026 organic constant currency total revenue growth outlook was lowered from 3-4% to 0-2% due to perpetual license timing.
Adjusted operating margin of 29% was modestly lower than the prior year (31%) due to incremental public company launch costs and lower R&D capitalization.

Guidance & targets

Category	Target	Timeline	Confidence
Total revenue organic constant currency growth	2% to 4% high materiality	Q3 · FY26	High
Total revenue	$400 million to $410 million high materiality	Q3 · FY26	High
Recurring revenue organic constant currency growth	3% to 5% medium materiality	Q3 · FY26	High
Recurring revenue	$285 million to $290 million medium materiality	Q3 · FY26	High
Adjusted operating margin	approximately 27% medium materiality	Q3 · FY26	High
ARR organic constant currency growth	6% to 8% high materiality	FY26	High
ARR	$1.185 billion to $1.205 billion high materiality	FY26	High
Total revenue organic constant currency growth	0% to 2% high materiality	FY26	High
Total revenue	$1.635 billion to $1.665 billion high materiality	FY26	High
Recurring revenue organic constant currency growth	5% to 6% medium materiality	FY26	High
Recurring revenue	$1.14 billion to $1.15 billion medium materiality	FY26	High
Adjusted operating margin	approximately 30% high materiality	FY26	High
Free cash flow margin	approximately 20% high materiality	FY26	High
ARR growth	above 10% high materiality	Medium-term	High
Total revenue growth	between 6% and 8% high materiality	Medium-term	High
Adjusted operating margin	approximately 30% high materiality	Medium-term	High
Free cash flow margin expansion	300 to 400 basis points high materiality	Medium-term	High
R&D capitalization as % of sales	7% to 8% medium materiality	FY26	High
Restructuring spend	$5 million to $10 million low materiality	H2 FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Build Saw continued strength, operating in an underpenetrated market with strong demand for supply chain, materials management, and project performance software.	—	double-digit growth	—	—
Design Growth accelerated on a recovery in subscription licenses.	—	accelerated	—	—
Operate	—	continued steady growth	—	—
Protect	—	continued steady growth	—	—

Deals & partnerships

European renewable energy operator Contract for Concert at the engineering environment for their bioenergy plants, delivered as cloud-native SaaS. 5-year term

A leading European renewable energy operator signed a 5-year term contract for Concert.

Two largest owner operators Signed important deals, one for Concert and one for Sequent.

Both wins represent the consolidation of fragmented systems into one environment, validating the breadth and depth of Octave's offerings.

Data center operator (hyperscaler) Landed a large new customer, a hyperscaler, for the operate part of data centers.

This win is mainly on the operating side with the Attune product, where Octave has seen the most success.

Bestel and Flor Participation in 'coal labs' program to build generative workflows on customer's real data. 5 marquee accounts signed

Bestel and Flor are two of the world's largest PCs, participating in the program to validate drawings, plan materials, check design rules, and manage project change using AI.

Risks & headwinds

Decline in perpetual license revenue Q2 FY26

Total revenue down 1% year-over-year on an organic basis

Mitigation:Strategic shift to drive more customers to recurring revenue model, which are worth more over the life of a customer.

Timing delays in public safety business deals Q2 FY26, expected to close this year or early 2027

Approximately $5 million in deals did not close in Q2, contributing to total revenue being $5 million lower than expected. Full-year total revenue guidance lowered from 3-4% to 0-2%.

Mitigation:Actively shifting the business towards subscription; adopting a prudent and cautious approach in guidance due to long sales cycles and less predictable timelines.

Incremental public company launch costs Q2 FY26

Adjusted operating margin of 29% (modestly lower than prior year's 31%)

Mitigation:Costs were factored into the full-year outlook and partly offset by ongoing cost discipline and savings from restructuring actions.

Lower level of R&D capitalization Q2 FY26, ongoing

R&D capitalization around 7% of revenues (down from 8% a year ago), representing a 100 basis point drag on the adjusted operating margin.

Mitigation:Stems from transitioning more of the product portfolio to SaaS; has no effect on free cash flow margin, which is expected to improve over time.

What to watch in Q3 FY26

Public safety perpetual deals closure

H2 FY26 / early FY27

Current ~$5M in Q2 deals slipped, full-year guidance lowered to reflect prudence.

Target Closure of slipped deals, potentially recognized in FY26 or early FY27.

Why it matters

These deals significantly impact total revenue, especially given the shift to recurring revenue. Their closure would provide upside to current guidance.

The reason for this change is that we have removed from the guidance on a number of large public faced perpetual deals in the Protect which you said that we still expect to win the main once it into 2027, including the GBP 5 million in IP deals from the second quarter. They may still be recognized in 2026.

Find out whether OCTV delivers this. Inve re-checks your case every morning.

Q&A highlights

Given the lowered full-year revenue guidance and pre-market stock reaction, how confident is management in its assessment of perpetual deal timing and the implied acceleration in organic constant currency total revenue growth for the rest of the year?

Management expressed confidence in the guidance, stating it reflects their best judgment and a prudent approach to perpetual deals. Most Q2 KPIs were in line with expectations, with only the unpredictable perpetual deals causing the adjustment. These deals are not lost, but their long sales cycles make timing uncertain.

“No, I would agree with that Mattias, I think if you look at the quarter, most KPIs were bang in line with our expectations. So subscription growth free cash generation, the operating margin, and it was just the large perpetual deals where you have long sales cycles, and they are there more unpredictable. We've decided to take those out of the forecast. And if they come in, they become positive.”

asked by John Difucci · answered by Benjamin Maslen

2 min read 6 chapters

Detailed narrative

Public Company Transition and Strategic Focus

Octave Intelligence successfully completed its first earnings call as an independent public company, delivering solid Q2 FY26 results while simultaneously establishing its public operations. The company's strategic focus remains unchanged, centered on addressing the industry problem of information fragmentation across the lifecycle of mission-critical assets by operating as a single platform across design, build, operate, and protect workflows.

Shift to Recurring Revenue Model

A key priority is the strategic shift towards a recurring revenue model, aiming for 75% recurring revenue in the medium term. Recurring revenue reached 69% of total LTM revenue, up from 65% in the prior year, indicating good progress. This shift, however, has led to a short-term impact on total revenue growth due to the decline in perpetual license sales.

AI Strategy and Early Monetization Efforts

Octave's AI strategy focuses on expanding its sales opportunities by leveraging its deep context in customer asset history and engineering standards. Generative AI work is already being used by early customers, and the multi-agent framework 'Octavia' is in private preview.

The company launched 'coal labs' to co-build generative workflows with customers, with 5 marquee accounts signed and 3 already live, demonstrating customer demand for AI solutions built on Octave's system of record.

Product Innovation and Platform Development

Product innovation is driven by building a unified platform with a common data and context layer, shared integration, and governance across its four workflow environments. This includes consolidating and deepening each environment and moving more of the portfolio to multi-tenant SaaS. This approach aims to increase velocity in releases and enable AI capabilities across the portfolio, with Optimist running over 2 million AI assists daily.

Go-to-Market Enhancements

The company is building a commercial engine to sustain double-digit growth, implementing target account lists, value-based sales processes, updated compensation designs, and sales enablement playbooks. The renewals team has been consolidated into the sales organization to improve pricing discipline and uplift opportunities. These efforts are showing early positive signs, with over 100 customers adding another solution in the quarter.

Customer Spending Environment and Market Trends

The customer spending environment in Q2 was broadly consistent with Q1 and the past 12-18 months, with stable budget conversations and deal cycles. While diversified across industries and geographies, customer investment decisions are influenced by supply chain conditions, commodity prices, and industrial capital cycles. Trends in owner-operator CapEx budgets and EPC backlogs appear stable, with no significant macroeconomic headwinds beyond the perpetual license shift.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.