Commvault Systems, Inc. Q2 FY2026 earnings call

• Commvault had a strong quarter with record $47 million net new ARR in constant currency, 30% growth in subscription ARR to $894 million, 18% growth in total revenue to $276 million, and total ARR reached $1 billion 2 quarters earlier than target.
• SaaS ARR grew 56% to $336 million, and the company hit key milestones in hybrid cloud resilience, cloud migration, and innovation. Identity and data security-focused offerings grew double digits and made up nearly 40% of net new ARR.
• The company invested in its partner ecosystem, announced a partnership with BeyondTrust, and acquired Satori Cyber to enhance its platform for cyber resilience and AI-related data protection.
• Commvault's Innovation Engine drove first-to-market capabilities like Cleanroom Recovery and Active Directory, and it was recognized as a leader in industry reports.

In Q2, Commvault achieved strong financial results. Subscription ARR increased 30% to $894 million, representing 29% growth on a constant currency basis. SaaS ARR grew 56% to $336 million, exceeding the original $330 million target 2 quarters earlier. Total annual recurring revenue grew 22% to $1.04 billion (21% on constant currency basis). Subscription ARR now constitutes 86% of total ARR. Total revenue grew 18% to $276 million, led by 61% growth from the SaaS platform. Term software revenue rose 10%, but was tempered by a shift in term duration reducing average deal size.

• For fiscal Q3 '26, subscription revenue is expected to be in the range of $195 million to $197 million (24% growth at midpoint), total revenue in $298 million to $300 million (14% growth at midpoint), and consolidated gross margins 80% to 81%. Non-GAAP EBIT margins expected 18% to 19%.
• Full year fiscal '26: Constant currency total ARR growth 18% to 19%, subscription ARR growth 24% to 25%. Subscription revenue expected $753 million to $757 million (28% growth at midpoint). Total revenue $1.161 billion to $1.165 billion (17% growth at midpoint). Gross margins 80.5% to 81.5%, non-GAAP EBIT margins 18.5% to 19.5%, free cash flow $225 million to $230 million.

• Market competition: Continued competitive landscape in the cyber resilience and data protection space could impact market share.
• Term duration shift: Customers choosing shorter contract durations to maintain flexibility in transitioning to cloud, which may affect term software revenue growth.
• Cyber threats: Evolving cyber threats and attack vectors require continuous innovation, and failure to keep up could impact customer adoption.

Q: How are you approaching pricing and packaging to help customers consume more of the platform?

A: Sanjay Mirchandani said they're working to make it easy for customers to take additional services, with a focus on innovation and logical integration of capabilities, to be detailed at Shift event.

Q: Is the capital allocation strategy still focused on buying back shares?

A: Jennifer DiRico stated the capital allocation strategy includes share buybacks, M&A, and investment, with $146 million repurchased year-to-date and expected to be opportunistic and active, with share count expected to remain flat at ~45 million shares.