Summary
OpenText opened fiscal 2026 with $1.29 billion of total revenue in the quarter ended September 30, 2025, up 1.5% from the same quarter a year earlier. Currency flattered the top line. After a favourable $27.3 million foreign exchange impact, total revenue was down 0.6% on a constant currency basis. Cloud services and subscriptions revenue grew 6.0% year over year, the 19th consecutive quarter of cloud organic growth, and the cloud net renewal rate improved to 96% from 94%. Customer support revenue, the largest single line, slipped 1.5%. License revenue rose 6.9%, while professional service and other revenue fell 9.3%. Annual recurring revenue of $1.071 billion was up 1.8%, or down 0.3% in constant currency.
Margins and earnings carried the quarter. Gross profit rose 3.0% to $937.52 million and gross margin reached 72.8%, up from 71.7% a year ago. Operating income climbed 30.9% to $269.95 million, which pushed operating margin to 21.0% from 16.3%. Net income was $146.62 million, up 73.8%, and diluted EPS was $0.58, up 81.2%. Lower special charges helped. Those charges were $20.1 million, down $27.0 million from the prior-year quarter, and management attributed the drop to the timing of Business Optimization Plan work. Adjusted EBITDA, a non-GAAP measure, came to $467 million at a 36.3% margin. Non-GAAP EPS was $1.05 against $0.93 a year earlier.
Cash flow swung sharply positive. Operating cash flow was $147.76 million, up 289.9% from the prior-year quarter, helped by a $177.3 million improvement in working capital as one-time tax payments tied to the AMC Divestiture landed in the year-ago period. Free cash flows, a non-GAAP measure defined as operating cash flow less capital expenditures, were $101 million, compared with a use of $117 million a year earlier. Capital expenditures were $46.53 million, up 18.4%. Current deferred revenue of $1.40 billion was down 3.3% from the prior-year quarter. OpenText repurchased $100 million of common shares and declared a quarterly dividend of $0.275 per share, payable December 19, 2025.
Management left its full fiscal 2026 outlook unchanged: total revenue growth of 1% to 2%, cloud revenue growth of 3% to 4%, Adjusted EBITDA margin improvement of 50 to 100 basis points, free cash flow growth of 17% to 20%, and enterprise cloud bookings growth of 12% to 16%. Enterprise cloud bookings in the quarter were $160 million, up 20.2%. The portfolio is also being reshaped. In October the company agreed to sell its on-premise eDOCS product, part of the Analytics category, to NetDocuments for $163 million in cash, with the transaction expected to close by early calendar 2026.
The clearest risks sit away from the reported results. Tax is the largest. The Canada Revenue Agency continues to dispute OpenText's transfer pricing for fiscal 2012 through fiscal 2016 and has reassessed fiscal 2017 through fiscal 2020, and an adverse outcome could produce up to roughly $470 million of income tax expense with no immediate cash payment. Leadership turnover is the other. James McGourlay is serving as interim CEO while the board searches for a permanent chief executive, and Steve Rai became chief financial officer on October 6, 2025. The Business Optimization Plan has incurred $140.2 million of costs so far against a total expected bill of up to $260 million, and it is meant to deliver annualized savings of $490 million to $550 million, with about 35% realized in fiscal 2025 and another 35% expected in fiscal 2026. Tariffs and geopolitical conflict round out the list; management notes that current trade measures do not target digital goods and services but cannot say whether that will hold.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2026 | Q4 FY2025 | QoQ | Q1 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.29B | $1.31B | -1.7% | $1.27B | +1.5% |
| Gross profit | $937.5M | $947.7M | -1.1% | $910.4M | +3.0% |
| Gross margin | 72.8% | 72.3% | +0.5 pp | 71.7% | +1.0 pp |
| Research & development | $169.1M | $187.2M | -9.6% | $190.7M | -11.3% |
| Sales & marketing | $257.1M | $279.6M | -8.1% | $245.9M | +4.5% |
| General & administrative | $105.8M | $106.0M | -0.2% | $106.7M | -0.9% |
| Total operating expenses | $667.6M | $766.1M | -12.9% | $704.1M | -5.2% |
| Operating income (loss) | $269.9M | $181.6M | +48.7% | $206.2M | +30.9% |
| Operating margin | 21.0% | 13.8% | +7.1 pp | 16.3% | +4.7 pp |
| Net income (loss) | $146.7M | $28.9M | +407.8% | $84.4M | +73.7% |
| Net margin | 11.4% | 2.2% | +9.2 pp | 6.7% | +4.7 pp |
| Diluted EPS | $0.58 | $0.11 | +$0.47 | $0.32 | +$0.26 |
Risks
OpenText appointed James McGourlay as Interim CEO on August 11, 2025 and its former CFO departed on August 15, 2025, with the CEO Search Committee still seeking a permanent chief executive officer as of November 5, 2025. Executive turnover and the ongoing permanent CEO search could disrupt strategy execution and customer relationships.
The Canada Revenue Agency has disputed the company's transfer pricing methodology and issued notices of reassessment for Fiscal 2012 through Fiscal 2020, including a proposal to reduce the depreciable basis of assets in Canada. If unsuccessful, the adjustment could result in income tax expense of up to approximately $470 million to reduce the stated value of deferred tax assets, with a potential corresponding cash tax impact over several future years.
The Business Optimization Plan had incurred $140.2 million of the total expected costs of up to approximately $260.0 million as of September 30, 2025, and is only expected to be substantially completed by the second quarter of Fiscal 2027. The company has realized only about 35% of the target $490.0 million to $550.0 million in annualized savings, exposing results to timing and execution risk.
Foreign exchange was a major swing factor, with total revenue up 1.5% for the first quarter of Fiscal 2026 but down 0.6% after factoring in the favourable impact of $27.3 million of foreign exchange rate changes. Continued currency volatility could mask or reverse reported growth trends.
Management flagged that trade tensions among major economies and the imposition of tariffs and other restrictive measures create an uncertain environment, and the company cannot predict whether digital goods and services such as software will become subject to future tariffs or restrictions. The company also continues to monitor the Russia-Ukraine and Middle East conflicts.
Customer support revenue decreased 1.5% in the first quarter of Fiscal 2026 (down 3.8% after factoring in the favourable $14.2 million foreign exchange impact), and deferred revenue was down 3.3% versus the prior-year quarter, while total revenue growth of 1.5% was driven by cloud services and subscriptions revenue up 6.0% and license revenue up 6.9%. Continued erosion of the largest recurring revenue line could pressure overall growth.
SaaS KPIs
All quarters →Adjusted EBITDA
Adjusted EBITDA Margin
Non-GAAP Gross Margin
Enterprise Cloud Bookings
Cloud Revenues
Free Cash Flow
Cloud Services Contracts > $1.0M
Non-GAAP Operating Income
Annual Recurring Revenue (ARR)
Cloud Net Renewal Rate
Customer Support Net Renewal Rate
Summary, forecast, risks and KPIs are extracted from OPEN TEXT CORP's SEC filings for Q1 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.