Skip to content
    OTEX
    Earnings call· Jun 2026(Q4 FY26)

    OPEN TEXT Q4 FY26 earnings call OTEX

    Aug 6, 2026 Source

    Executive summary

    OpenText Q4 FY26 — Strong Core Cloud Growth and Strategic Investments for FY27

    OpenText concluded FY26 with solid Q4 results, particularly in core cloud revenue and bookings, driven by AI adoption. The company is designating FY27 as a "foundation year," marked by strategic investments in sales capacity, ecosystem partnerships, and R&D reallocation to core cloud and AI offerings. This focused approach aims to drive consistent growth and leverage its secure data foundation in the evolving AI landscape, despite near-term margin impacts from these investments.

    Highlights

    5

    • Total revenue grew 2.9% year-over-year (0.9% in constant currency) to $1.35 billion in Q4 FY26.

    • Core portfolio revenue increased 5.3% year-over-year (3.1% in constant currency) to $1.05 billion.

    • Core cloud revenue grew 10.7% year-over-year (8.9% in constant currency) to $341 million.

    • Enterprise cloud bookings were $295 million in Q4, up 24.1% year-over-year, exceeding the fiscal '26 target range.

    • Net leverage ratio reduced from 3.02x to 2.75x, now within the target range of 2.5x to 3x.

    Concerns

    4

    • FY26 free cash flow of $808 million came in approximately $31 million below outlook due to collections timing.

    • FY27 total revenue guidance is negative 2% to negative 1% on a reported basis, inclusive of a $30 million foreign currency headwind.

    • FY27 adjusted EBITDA margin is expected to be 32% to 33%, moderated by $100 million to $200 million in growth investments.

    • Cloud net renewal rate was 94% for FY26, down 180 basis points year-over-year.

    Guidance & targets

    9
    CategoryTargetConfidence
    Total Revenue
    $5.135B to $5.185B
    high materiality
    High
    Total Revenue Growth
    0% to 1%
    high materiality
    High
    Total Core Revenue Growth
    2% to 3%
    high materiality
    High
    Core Cloud Revenue Growth
    8% to 10%
    high materiality
    High
    Adjusted EBITDA Margin
    32% to 33%
    high materiality
    High
    Free Cash Flow
    $625M to $725M
    high materiality
    High
    Total Revenue
    $1.22B to $1.25B
    medium materiality
    High
    Adjusted EBITDA Margin
    32% to 33%
    medium materiality
    High
    NCIB Repurchase Authorization
    up to 10% of public float
    medium materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Core Portfolio
    Revenue growth was 3.1% in constant currency.
    		$1.05B5.3%——
    Core Cloud
    Revenue growth was 8.9% in constant currency.
    		$341M10.7%——
    Total Cloud
    Revenue growth was 4.3% in constant currency.
    		$503M6.0%——
    Customer Support
    Includes impact from divested eDOCS and Vertica businesses.
    		$554M-4.6%——
    License
    Full fiscal year 2026 growth.
    		—8.4%——
    Professional Services and Other
    Full fiscal year 2026 decline.
    		—-8.6%——

    Operational metrics

    20
    Adjusted EBITDA margin
    37.1%
    Q4 FY26
    Adjusted EBITDA margin
    36.3%up 170 bps
    FY26

    Increase mainly due to continued streamlining of operations, including business optimization plan and FX.

    GAAP gross margin
    75.0%up 270 bps YoY
    Q4 FY26

    Reflects continued improvement of cloud gross margin, mainly related to lower hyperscaler costs and infrastructure performance improvements.

    Non-GAAP gross margin
    78.3%up 220 bps
    Q4 FY26

    Reflects continued improvement of cloud gross margin, mainly related to lower hyperscaler costs and infrastructure performance improvements.

    GAAP net income
    $156Mup 439.9% YoY
    Q4 FY26

    Increase primarily due to higher profit, unrealized derivative gains, FX and gain on sale from divestitures.

    Non-GAAP net income
    $299Mup 19.7% YoY
    Q4 FY26
    GAAP diluted EPS
    $0.64up 481.8% YoY
    Q4 FY26

    Increase primarily due to higher profit, unrealized derivative gains, FX and gain on sale from divestitures.

    Non-GAAP diluted EPS
    $1.23up 26.8%
    Q4 FY26
    GAAP diluted EPS
    $2.58up 56.4%
    FY26
    Non-GAAP diluted EPS
    $4.42up 15.7%
    FY26
    Debt reduction
    $459M
    Q4 FY26
    Total debt paid
    $649M
    FY26
    Net leverage ratio
    2.75xdown from 3.02x
    Q4 FY26

    Now in line with historical target range of 2.5x to 3x.

    Dividends paid
    $268.4M
    FY26
    Quarterly dividend
    $0.28
    Q4 FY26

    Board declared.

    Shares repurchased and canceled
    14.8M
    FY26
    Investment for growth
    $100M to $200M
    FY27

    These investments are estimated to moderate adjusted EBITDA margin range for FY27.

    Sales capacity increase
    over 300
    FY27

    Investment in sales capacity is a key early action to drive growth.

    Cloud bookings from new clients
    92%
    FY26

    As opposed to base converting to the cloud.

    Aviator deal size
    4x larger
    Q4 FY26

    When Aviator agents are included in client deals.

    Industry KPIs

    10
    MetricValueDetails
    Revenue growth$1.35BUSD
    Arr net new arr$1.06BUSD
    Rpo current rpoUp 7% YoY (Total RPO); Up 1% YoY (Total CRPO); Up 10% YoY (Cloud CRPO)%
    Bookings billings$295MUSD
    Large deal new logo metrics64deals
    Gross retention renewal rate93%%
    Multi product platform attach4x largermultiple
    Operating FCF margin rule of 4037.1%%
    Ai product adoption monetizationmore than doubled annuallyrate
    Net revenue net dollar retention94%%

    Orderbook & backlog

    6
    Enterprise cloud bookings$295MQ4 FY26

    up 24.1% YoY

    Will no longer be reported as a stand-alone metric starting in Q1 FY27.

    Total RPOUp 7% YoYQ4 FY26
    Total CRPOUp 1% YoYQ4 FY26
    Cloud CRPOUp 10% YoYQ4 FY26

    Mainly due to strong bookings in Content and Business Network, partially offset by cyber, SMB, and C.

    Customer support and other CRPODown 6% YoYQ4 FY26

    Includes impact from divested eDOCS and Vertica businesses.

    Annual recurring revenue (ARR)$1.06BQ4 FY26

    up 0.2%

    Represents 78.3% of total revenue.

    Product announcements

    4
    ProductTypeDetails
    Aviator agents (Content Cloud)update
    Aviator agents (Cybersecurity)update
    Aviator agents (Business Network - Trading Grid)update
    Aviator agents (Application Delivery Management - ADM)update

    Deals & partnerships

    1
    eDOCS and Vertica businessesSale of non-core assets

    Divested businesses that impacted customer support revenue and on-premise business comparisons. Management continues an active and disciplined divestiture strategy for non-core assets, not inclined to 'fire sale' them, seeking fair and reasonable prices.

    Risks & headwinds

    8
    Foreign currency headwind on total revenueFY27

    $30M

    Foreign currency headwind on core revenueFY27

    $25M

    Foreign currency headwind on core cloud revenueFY27

    $5M

    Free cash flow miss vs. outlookFY26

    $31M below outlook

    Mitigation: Mainly due to collections timing near the year-end cutoff.

    Impact of divestitures on FY27 free cash flowFY27

    Natural impact from divestiture of profitable eDOCS and Vertica businesses

    Moderation of Adjusted EBITDA margin due to growth investmentsFY27

    Adjusted EBITDA margin expected to be 32% to 33% (down from 36.3% in FY26)

    Mitigation: Strategic investments of $100M to $200M in sales capacity, partner ecosystem, and R&D reallocation for long-term growth.

    Cloud net renewal rate declineFY26

    94%, down 180 bps YoY

    Mitigation: Management expects improvement over time due to stickiness and investments in AI deployments.

    Tight debt markets for divestituresOngoing

    Debt markets remain pretty tight in the space

    Mitigation: Company is being methodical, not fire-selling, and waiting for fair and reasonable prices for non-core assets.

    What to watch in Q1 FY27

    5

    Core Revenue Growth

    next quarter
    Current0% cc (FY26)
    Target2% to 3% cc (FY27 guide)

    Why it matters

    Verifying initial progress towards the FY27 core revenue growth target, which is a key focus for the 'foundation year'.

    Total core revenue growth is expected to be positive 2% to 3% in constant currency terms.

    Q&A highlights

    9

    Asked for a breakdown of the 2-3% core growth expectation for FY27 across segments, specifically if Content will accelerate and if ITOM/Cyber will return to growth.

    Management confirmed that each core category is expected to grow in FY27. Content is anticipated to have a faster growth trajectory than the overall core, and both Cyber and ITOM are also expected to grow, supported by R&D reallocation and AI/cloud infusions.

    “It's very important for us that each category of core growth, and that's the commitment that we have and the outlook that we have as well. We today feel that content as a subset of core will be in a faster growth trajectory than the total of core. And we expect cyber and ITOM to also grow in FY '27.”

    asked by Kevin Krishnaratne · answered by Ayman Antoun

    2 min read6 chapters

    Detailed Narrative

    01

    CEO's Initial Assessment and Priorities

    Upon assuming the CEO role, Ayman Antoun focused on listening, learning, assessing, and acting. This involved extensive engagement with clients, partners, employees, and investors. The feedback highlighted the need for a more integrated OpenText, increased speed and simplicity, and consistent revenue growth with clear KPIs, all while leveraging the company's secure data foundation for AI.

    02

    Enterprise Assessment and Early Actions

    OpenText launched an end-to-end enterprise assessment to identify immediate growth actions and lay the groundwork for sustained performance. This assessment covers go-to-market strategies, portfolio composition, marketing, execution models, and talent/culture. Concurrently, the company is taking early actions, including investing in over 300 new quota-carrying sales colleagues, reactivating and investing in ecosystem partners, and empowering client-facing teams with greater decision rights to accelerate cross-selling.

    03

    Strategic R&D Reallocation and Capital Discipline

    The company is shifting R&D investments towards its core portfolio, cloud capabilities, and AI offerings to drive momentum. This reallocation is part of a broader capital discipline commitment. In Q4 FY26, OpenText made an additional $300 million debt payment from net cash, contributing to a total of $649 million in debt paid in fiscal 2026, significantly reducing its net leverage ratio.

    04

    AI as a Differentiator and Growth Driver

    OpenText positions itself as a secure data foundation in the AI stack, emphasizing that governed, secured, and integrated data is fundamental for trusted AI outcomes. The Aviator AI platform, integrated across its portfolio, uses agents to turn secure data into actionable AI. Deals including Aviator agents have more than doubled annually over the last eight quarters, and these deals are four times larger than those without Aviator.

    05

    Aviator's Impact Across Product Categories

    Aviator agents are demonstrating significant value across OpenText's offerings. In Content Cloud, they transform HR records into instant conversational self-service. For Cybersecurity, Aviator helps telecom companies find and fix vulnerabilities, reducing mean time to repair from one day to one hour. Within Business Network, Aviator is built into Trading Grid, flagging risks and resolving issues in real time for financial transactions. In Application Delivery Management (ADM), Aviator automates testing, cutting mobile test effort by 35% for a major healthcare provider.

    06

    FY27 Outlook and Investment Impact

    Fiscal 2027 is projected as a foundation year with core revenue expected to grow 2% to 3% in constant currency, and core cloud revenue growth of 8% to 10% in constant currency. However, adjusted EBITDA margin is guided lower to 32% to 33% due to significant growth investments ranging from $100 million to $200 million, primarily in go-to-market initiatives. Free cash flow is also expected to be lower, between $625 million and $725 million, reflecting these investments and the impact of prior divestitures.

    AI-generated summary of the company’s earnings call. Not investment advice.