OPEN TEXT CORP Q2 FY2026 earnings

OpenText turned in a low-growth second quarter of fiscal 2026 with a weaker bottom line. Total revenues were $1.33 billion, down 0.6% from the prior-year quarter. The MD&A pins the decline on increases in the Content and Business Network product categories that were more than offset by decreases in Cybersecurity (Enterprise), Cybersecurity (SMB & Consumer), ADM, ITOM and Analytics. Annual recurring revenue of $1.060 billion rose 0.7%, and enterprise cloud bookings of $295 million rose 18.0%. The company logged its 20th consecutive quarter of cloud organic growth and closed 53 cloud services contracts larger than $1.0 million, versus 51 a year earlier.

Profitability split in two directions. GAAP gross profit was $982.2 million, and gross margin rose to 74.0% from 73.3%. Operating income fell 1.4% to $291.8 million, leaving an operating margin of 22.0%, down from 22.2%. Net income attributable to OpenText dropped 26.9% to $168.1 million, and diluted EPS fell 24.1% to $0.66. Management's preferred view looked steadier. Non-GAAP net income of $286 million slipped 2.4%, adjusted EBITDA was $491 million at a 37.0% margin, and non-GAAP diluted EPS edged up to $1.13 from $1.11. The CFO tied the adjusted EBITDA margin and free cash flow performance to the company's fiscal 2026 margin targets.

Cash is still the engine. Operating cash flow was $318.7 million in the quarter, down 8.4%, and capital expenditures were $39.2 million, down 5.0%. Free cash flow, a non-GAAP measure the company reconciles to operating cash flow less capital expenditures, was $279 million, down 8.9%. Over six months, operating cash flow jumped 72.6% to $466.4 million, helped by one-time tax payments made in the prior year related to the AMC Divestiture, and free cash flow reached $381 million. Year-to-date capital expenditures were $85.7 million, up 6.4%, and current deferred revenue was $1.46 billion, essentially flat against the prior-year quarter. The company returned $119 million to shareholders in the quarter, including $69 million of dividends and $50 million of buybacks, and declared a quarterly dividend of $0.275 per share payable March 20, 2026.

Six-month results carried the better tone. Total revenues were $2.61 billion, flat against the prior-year period. Operating income climbed 11.9% to $561.7 million, net income of $314.7 million was flat, and diluted EPS rose 5.1% to $1.24. OpenText kept its full-year fiscal 2026 outlook unchanged: total revenue growth of 1% to 2%, cloud services and subscriptions revenue growth of 3% to 4%, adjusted EBITDA margin expansion of 50 to 100 basis points, free cash flow growth of 17% to 20%, and enterprise cloud bookings growth of 12% to 16%. That full-year revenue plan absorbs the second-half revenue loss from the eDOCS divestiture, which closed on January 12, 2026.

Portfolio reshaping and a CEO handover framed the period. OpenText closed the $163.0 million sale of eDOCS, and on February 2, 2026 agreed to sell Vertica to Rocket Software for $150 million, with proceeds aimed at paying down debt. Ayman Antoun takes the CEO role on April 20, 2026, succeeding interim chief executive James McGourlay, and Steve Rai became CFO in October 2025. The Business Optimization Plan has incurred $154.4 million of expected total costs of up to $260.0 million, with targeted annualized savings of $490.0 million to $550.0 million; roughly 35% landed in fiscal 2025 and another 35% is expected in fiscal 2026. Renewal rates held at 95% for cloud and 92% for customer support, though days sales outstanding stretched to 45 days from 43. The main overhang is the Canada Revenue Agency transfer pricing dispute, where an adverse outcome could reduce deferred tax assets by up to about $470 million with no immediate cash payment. Tariff and trade policy uncertainty, geopolitical conflicts and currency swings round out the risk list.