Commvault’s third quarter saw solid momentum in revenue, but the market responded negatively, likely reflecting concerns over profit margins and earnings below Wall Street’s expectations. Management attributed the period’s growth to accelerated demand for its Cyber Resilience platform, especially among hybrid cloud customers, and highlighted strong adoption of data and identity security offerings. CEO Sanjay Mirchandani noted, “We achieved $1 billion in total ARR two quarters earlier than our original target,” pointing to robust traction in both SaaS and subscription businesses. However, operating margin contraction and higher investments impacted profitability, as the company prioritized capturing share in a rapidly evolving data protection landscape.
Is now the time to buy CVLT? Find out in our full research report (it’s free for active Edge members).
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
- Annual Recurring Revenue: $1.04 billion vs analyst estimates of $1.04 billion (22.3% year-on-year growth, 0.7% beat)
- Billings: $286.9 million at quarter end, up 16.2% year on year
- Market Capitalization: $6.19 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Commvault’s Q3 Earnings Call
- Aaron Rakers (Wells Fargo) asked about the impact of shorter contract durations on growth deceleration. CFO Jennifer DiRico explained that customer demand for flexibility during cloud transitions drove shorter terms but emphasized healthy deal volume and ARR as growth indicators.
- Jason Ader (William Blair) questioned whether the backup modernization cycle is winding down. CEO Sanjay Mirchandani responded that ongoing cyber threats and the emergence of AI are sustaining demand for resilience solutions, with no slowdown anticipated.
- Eric Heath (KeyBanc Capital Markets) pressed on the rationale for increased investment despite margin pressures. DiRico stated that strong ARR and customer metrics justify continued investment, aligning with the company’s strategy to outpace market growth and take share.
- Howard Ma (Guggenheim) inquired about the drivers of the term subscription business and hybrid strength. Mirchandani described ongoing on-premise growth and integration of identity protection across hybrid environments as key contributors.
- James Fish (Piper Sandler) sought clarity on gross margin pressure and whether it was due to competitive discounting. DiRico attributed it primarily to SaaS business mix and term duration shifts, not heightened competition.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will focus on (1) sustained growth in SaaS annual recurring revenue as cloud adoption continues, (2) the margin impact of ongoing investments and business mix changes, and (3) execution of cross-sell and upsell strategies, particularly in identity and data security offerings. The integration of recent acquisitions and the pace of cloud migration across the customer base will also serve as important indicators of future performance.
Commvault currently trades at $139.60, down from $174.16 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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