Open Text Corporation Q2 FY2026 earnings call

• Announced Ayman Antoun as the new CEO, to join in a couple of months. - Divested Vertica to Rocket Software for $150 million. - Q2 performance beat expectations with total revenues, adjusted EBITDA margin, and adjusted EPS. - Strong cloud growth with overall cloud growth of 3.4% y-o-y, enterprise cloud bookings of $295 million (18% y-o-y growth), and total cloud RPO up 13.7% y-o-y. - Key customer wins including US Bank, Solenis, and BNP Paribas. - Positive feedback at OpenText World Conference, with customers like IBM, Honda, United Airlines discussing use of OpenText solutions. - Introduced OpenText AI Data Platform, to be shipped next quarter. - Progress on portfolio reshaping, including divestitures of Vertica and eDOCS, and reaffirmed focus on core content business.

In Q2, OpenText generated total revenues of approximately $1.33 billion. Cloud revenue was $478 million, up 3.4% year-on-year. The content business, which constitutes 43% of total revenues, grew 4.5% year-on-year. Cloud revenue for content specifically grew 18% year-on-year. Customer support revenue was $582 million, down 1.5%. Annual recurring revenue (ARR) was $1.06 billion, up 0.7% year-on-year. GAAP gross margin was 74.0% and non-GAAP gross margin was 77.6%. Adjusted EBITDA was $491 million with a margin of 37.0%. GAAP net income was $168 million, while non-GAAP net income was $286 million. Free cash flow was $279 million.

• Reaffirmed total revenue growth target of 1% to 2% year-on-year. - Expect Q3 total revenues to be between $1.26 billion and $1.28 billion. - Q3 adjusted EBITDA margin expected to be between 33.0% and 33.5%. - Continuing $300 million share buyback program, with half repurchased year-to-date in F26, and looking to increase the program. - Second half of F26 expected to skew higher from Q3 to Q4.

Q: Richard Tse asked about whether AI cannot disrupt OpenText and the divestitures' pricing and confidence in one per quarter.

A: Paul Jenkins responded that OpenText feeds content into applications used to train agentic AI, so AI doesn't disrupt it. On divestitures, there's strong interest, high-quality assets, and valuations are driven by DCF analysis, so confident in one per quarter.

Q: Raimo Lenschow asked about Ayman's mandate and revenue breakdown.

A: Paul Jenkins stated good congruence between the Board and Ayman, who understands both core and noncore, and the revenue breakdown shows core business doing well.

Q: Kevin Krishnaratne asked about Aviator adoption.

A: Paul Jenkins said it's very early, customers are getting content in order and running prototypes, but it's a long process.

Q: Stephanie Price asked about cloud migrations and demand environment.

A: Paul Jenkins and James McGourlay said customers are actively engaging, deals take time, and there's a vigorous cloud campaign with both installed base and first-time sales.

Q: Thanos Moschopoulos asked about cloud migrations and product segments.

A: Paul Jenkins said they're going to hyperscalers, and there's a hybrid strategy considering sovereign cloud, with a book on deploying enterprise AI outlining this.

Q: Paul Treiber asked about tuck-in M&A and AI risk.

A: Paul Jenkins said tuck-ins are for subject matter experts to help with training agentic AI, not focusing on software applications.

Q: George Kurosawa asked about license revenue and cloud move.

A: James McGourlay said there were large deals in the quarter, with deals moving around quarters but expecting to be in line with forecasts.

Q: David Kwan asked about enterprise cloud bookings and other products.

A: Christopher McGourlay and Paul Jenkins said content is leading, but other core products will contribute over time as agentic AI matures.

Q: Seth Gilbert asked about enterprise cloud bookings momentum.

A: Christopher McGourlay said there's a strong pipeline in content, expecting growth to continue.