Data protection software company Commvault (NASDAQ: CVLT) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, with sales up 18.4% year on year to $276.2 million. The company expects next quarter’s revenue to be around $299 million, close to analysts’ estimates. Its non-GAAP profit of $0.91 per share was 3.3% below analysts’ consensus estimates.
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Commvault (CVLT) Q3 CY2025 Highlights:
- Revenue: $276.2 million vs analyst estimates of $273.3 million (18.4% year-on-year growth, 1.1% beat)
- Adjusted EPS: $0.91 vs analyst expectations of $0.94 (3.3% miss)
- Adjusted Operating Income: $51.41 million vs analyst estimates of $54.72 million (18.6% margin, 6.1% miss)
- The company reconfirmed its revenue guidance for the full year of $1.16 billion at the midpoint
- Operating Margin: 4.5%, down from 6.4% in the same quarter last year
- Free Cash Flow Margin: 26.6%, up from 10.6% in the previous quarter
- Annual Recurring Revenue: $1.04 billion vs analyst estimates of $1.04 billion (22.3% year-on-year growth, 0.7% beat)
- Billings: $286.7 million at quarter end, up 16.2% year on year
- Market Capitalization: $7.74 billion
"Commvault delivered a strong quarter fueled by solid ARR and SaaS growth that accelerated a key milestone for the company – achieving $1 billion in total ARR – two quarters earlier than projected," said Sanjay Mirchandani, President and CEO, Commvault.
Company Overview
Born from the need to create ironclad protection in an increasingly dangerous digital world, Commvault (NASDAQ: CVLT) provides data protection and cyber resilience software that helps organizations secure, back up, and recover their data across on-premises, hybrid, and multi-cloud environments.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Commvault’s 9.8% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the software sector and is a poor baseline for our analysis.
Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Commvault’s annualized revenue growth of 17.2% over the last two years is above its five-year trend, suggesting its demand recently accelerated. 
This quarter, Commvault reported year-on-year revenue growth of 18.4%, and its $276.2 million of revenue exceeded Wall Street’s estimates by 1.1%. Company management is currently guiding for a 13.8% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 12.2% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.
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Annual Recurring Revenue
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
Commvault’s ARR punched in at $1.04 billion in Q3, and over the last four quarters, its growth was impressive as it averaged 21.3% year-on-year increases. This performance aligned with its total sales growth and shows that customers are willing to take multi-year bets on the company’s technology. Its growth also makes Commvault a more predictable business, a tailwind for its valuation as investors typically prefer businesses with recurring revenue. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
Commvault is extremely efficient at acquiring new customers, and its CAC payback period checked in at 7.7 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give Commvault more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.
Key Takeaways from Commvault’s Q3 Results
It was encouraging to see Commvault beat analysts’ billings expectations this quarter. On the other hand, adjusted operating income missed, suggesting that growth was less profitable than expected. Overall, this print could have been better, and the stock traded down 12.7% to $151.98 immediately following the results.
So do we think Commvault is an attractive buy at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
