Commvault Systems, Inc. (CVLT) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects strong financial performance, with significant growth in subscription revenue and ARR. Despite some concerns about competition and contract duration shifts, the company's strategic investments in SaaS and market share gains are promising. The Q&A indicates confidence in growth and resilience strategies, with positive insights on TAM growth and competitive positioning. Overall, the sentiment is positive, with potential for stock price increase driven by strong financials and optimistic guidance.
Key Financial Performance
Net New ARR $47 million net new ARR added, a record in constant currency.
Subscription ARR Rose 30% to $894 million, driven by strong demand for subscription services.
Total Revenue Grew 18% to $276 million, reflecting strong performance across offerings.
Total ARR Grew 22% to $1.04 billion, achieving $1 billion milestone two quarters earlier than expected.
SaaS ARR Grew 56% to $336 million, surpassing the $330 million target two quarters early.
SaaS Customers Increased nearly 9,000, representing a 40% year-over-year growth.
Net Dollar Retention Remained healthy at 125%, supported by successful up-sell and cross-sell initiatives.
Gross Margins 80.5%, reflecting the acceleration in SaaS mix and shift in software duration.
Operating Expenses $170 million, consistent with prior quarter and fiscal year, supporting growth trajectory.
Non-GAAP EBIT $51 million, resulting in a margin of 18.6%, influenced by SaaS bookings and integration costs.
Free Cash Flow Grew 37% year-over-year to $74 million, driven by strong deferred revenue and cash collections.
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Operating Highlights
Commvault Cloud Cyber Resilience platform: Strong demand from hybrid cloud customers, addressing new attack vectors and AI-driven threats. Identity and data security offerings grew double digits sequentially, representing nearly 40% of net new ARR.
Active Directory and Entra ID: Fastest-growing SaaS offering, used for identity protection services. A large bank in Asia Pacific used it to recover identity operations after a cyberattack.
Clumio portfolio: Introduced new recovery capabilities for AWS, including DynamoDB and Apache Iceberg. Added new customers, including 3 Fortune 1000 and 2 Fortune 500 companies.
Satori Cyber acquisition: Provides monitoring and protection for large language models and structured data. Integrated into Commvault Cloud platform.
Cloud adoption: Commvault moved and protects approximately 8 exabytes of customer data into the cloud, with a 40% CAGR over the past 5 years. SaaS customers grew nearly 9,000, a 40% increase year-over-year.
New customer acquisitions: Added 3 Fortune 1000 and 2 Fortune 500 customers to the Clumio platform. BBVA chose Commvault to reduce cloud-native complexity and protect AWS data.
ARR growth: Achieved $1 billion in total ARR, 2 quarters earlier than expected. SaaS ARR grew 56% to $330 million.
Revenue growth: Total revenue grew 18% to $276 million. Subscription revenue increased 29%, including 61% growth from SaaS platform.
Profitability: Q2 free cash flow grew 37% year-over-year to $74 million. Gross margins were 80.5%.
Partnership with BeyondTrust: Integrated identity security capabilities with Commvault Cloud platform to enhance recovery and reduce unauthorized access.
Focus on AI resilience: Acquired Satori Cyber to address resilience requirements in the age of AI. Provides automated discovery, classification, and access management for structured data.
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Risk or Challenges
Cybersecurity Threats: New attack vectors are constantly emerging, and with AI, data is more distributed, introducing more threat vectors for organizations to manage. This increases the need for robust detection, protection, and recovery solutions.
Regulatory Compliance: Organizations face challenges in meeting complex regulatory requirements, such as DORA compliance, which can impact operations and require advanced solutions.
Cloud Transition Complexity: Customers are choosing shorter contract durations to maintain flexibility between software and SaaS as they evaluate their transition to the cloud, which could impact deal sizes and revenue predictability.
Economic Uncertainty: The shift in term duration and customer caution in committing to long-term contracts may reflect broader economic uncertainties, potentially affecting revenue stability.
Integration Costs: The integration of acquisitions like Satori Cyber adds costs and operational complexity, which could impact profitability in the short term.
Competitive Pressures: The company operates in a highly competitive market, requiring continuous innovation and investment to maintain its leadership position.
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Guidance & Outlook
Key Business Drivers: Commvault anticipates continued growth driven by three factors: strong demand for the Commvault Cloud Cyber Resilience platform, the ongoing shift to the cloud, and reliance on the company's innovation engine to meet evolving customer needs.
Cloud Data Growth: The company expects rapid growth in cloud-borne and cloud-bound data, fueled by the proliferation of AI. Commvault projects continued acceleration in moving and protecting customer data in the cloud, with a focus on its Clumio portfolio for AWS.
SaaS ARR Growth: Commvault achieved $336 million in SaaS ARR, exceeding its $330 million target two quarters early. The company expects SaaS ARR to continue growing, supported by strong adoption and new customer acquisitions.
Subscription ARR and Revenue: Subscription ARR is projected to grow by 24%-25% year-over-year in fiscal 2026. Subscription revenue is expected to reach $753-$757 million, representing 28% growth at the midpoint.
Total Revenue: Total revenue for fiscal 2026 is expected to be in the range of $1.161 billion to $1.165 billion, reflecting a 17% increase at the midpoint.
Gross Margins: Gross margins for fiscal 2026 are projected to be between 80.5% and 81.5%, reflecting the growth of the SaaS platform.
Non-GAAP EBIT Margins: Non-GAAP EBIT margins are expected to be approximately 18.5%-19.5%, reflecting ongoing investments in growth initiatives.
Free Cash Flow: Free cash flow guidance for fiscal 2026 has been raised to $225-$230 million, benefiting from recent federal tax law changes.
Innovation and AI Integration: Commvault plans to integrate its recent acquisition, Satori Cyber, into its platform to address resilience requirements in the age of AI. The company will introduce new innovations at its upcoming customer event.
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Shareholder Return Plan
Repurchase of $131 million of stock: During the quarter, the company repurchased $131 million of stock, of which $118 million was executed in conjunction with a convertible senior notes offering.
Convertible Senior Notes Offering: The company closed a private offering of $900 million of convertible senior notes with a 0% coupon rate. This capital raise was aimed at optimizing the balance sheet and providing additional flexibility for capital allocation decisions.
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Key Q&A
Q:Can you explain the shift in term duration and its impact on growth deceleration in fiscal Q4?
A:The shift in term duration has normalized to levels seen a few quarters ago, as customers seek flexibility in anticipation of moving to the cloud. Despite this, the company saw strong volume in term software, with deals over $100,000 increasing by 17%. ARR growth remains a key indicator of business strength, and both subscription ARR and total ARR were raised by 50 basis points.
Q:What are your expectations for TAM growth and Commvault's competitive positioning?
A:The TAM is expected to grow at a 12% CAGR over the next few years. Commvault is outpacing the SaaS market with 55% ARR growth in SaaS this quarter and is growing its software business at healthy double digits, taking market share. The company attributes this to customer consolidation, resilience strategies, and platform innovation.
Q:Are we nearing the end of the backup modernization cycle driven by ransomware?
A:No, the company does not believe the cycle is winding down. Cyberattacks and new threat vectors continue to emerge, requiring ongoing cyber resilience programs. The company is preparing for future needs, including AI-related threats, and plans to unveil new capabilities at its Shift event.
Q:What are your thoughts on the Veeam and Security AI deal?
A:The company views the deal as aligning with its long-held belief that data security and data protection must converge for true cyber resilience. Commvault's acquisition of Satori Cyber reflects a similar strategy to integrate identity, observability, and policy enforcement for enhanced protection.
Q:What is driving confidence in increased investments despite margin reductions?
A:The company is confident due to continued market share gains, increased ARR, higher customer volume, and growing contributions from new offerings. Investments are focused on accelerating the SaaS motion and maintaining a competitive edge.
Q:Is the competitive landscape becoming more challenging?
A:Yes, the landscape is becoming more competitive, especially with the increasing relevance of cyber resilience and AI. Commvault continues to focus on innovation and meeting customers' needs across on-premise, edge, and cloud environments to maintain its competitive edge.
Q:What are the drivers of the term subscription business, and how does on-premise data growth factor in?
A:On-premise data growth remains a significant driver, supported by partnerships with HPE, Pure, and NetApp. The company provides a hybrid platform that allows customers to transition workloads to the cloud while maintaining on-premise capabilities. Identity and data security offerings also contribute to ARR growth.
Q:Are you seeing increased cross-sell between term and SaaS customers?
A:Yes, the percentage of SaaS customers who are also term customers is slowly increasing. Customers value the flexibility to transition workloads between software and SaaS as needed.
Q:What is the impact of shorter contract durations on term licenses?
A:Shorter contract durations are seen across the board as customers seek flexibility for cloud transitions. The average duration has decreased by 9%, but the company continues to see strong new deal volume.
Q:Where are you making incremental investments, and could this lead to ARR growth acceleration?
A:Investments are focused on accelerating the SaaS motion and maintaining competitive positioning. The company expects these investments to drive ARR growth, with SaaS expected to account for approximately 60% of net new ARR in the second half of the year.
Q:What are you doing to make it easier for customers to consume more of the platform?
A:The company is working on simplifying packaging and consumption, enabling customers to easily add services across on-premise, cloud, and edge environments. Automation and integrated capabilities are being built into the platform to enhance resilience.
Q:What is your capital allocation strategy?
A:The strategy remains focused on share buybacks, M&A, and organic investments. The company has repurchased $146 million in shares year-to-date and plans to remain opportunistic and active in buybacks.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the average contract duration and its exact impact on term licenses. Additionally, they did not offer clear parameters for SaaS and term license splits in the second half of the year, only providing approximate figures. The response to the Veeam and Security AI deal was also somewhat vague, focusing on general strategy rather than specifics.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI Today
AI cloud
AI requirement
AI set
ARR Clumio
ARR milestone
ARR quarter
AWS Clumio
AWS cloud
Active Directory
Asia Pacific
Azure Government
BBVA world
BeyondTrust leader
Cloud platform
Cyber Resilience
Fortune
IDC
Resilience platform
access
cyber recovery
detail
engine
gap
identity security
momentum identity
move cloud
pace
readiness resilience
resilience requirement
security offering
support
system
vector
CVLT Transcript
Commvault Systems, Inc. (CVLT) Q4 2026 Earnings Call Transcript
Positive4-28
The earnings call highlights strong subscription revenue growth, optimistic guidance with 18% total revenue growth and 30% subscription revenue growth, and a promising partnership with Pinecone for AI solutions. The focus on AI and cloud sovereignty is a positive market strategy. Despite some uncertainties in management responses, the overall sentiment is positive due to robust financial metrics and strategic initiatives, likely leading to a stock price increase in the 2% to 8% range over the next two weeks.
Commvault Systems, Inc. (CVLT) Q3 2026 Earnings Call Transcript
Positive1-27
The earnings call highlights strong SaaS ARR growth, a positive outlook on cloud data, and increased free cash flow guidance. Despite some concerns about ARR and term duration, the company's innovation and integration of Satori Cyber, as well as a focus on cloud and SaaS, suggest positive momentum. The Q&A session confirms a robust performance across regions and verticals, with no significant negative trends. The absence of market cap data suggests a moderate positive reaction, likely in the 2% to 8% range, given the overall positive sentiment and strategic growth initiatives.
Commvault Systems, Inc. (CVLT) Q2 2026 Earnings Call Transcript
Positive10-28
The earnings call reflects strong financial performance, with significant growth in subscription revenue and ARR. Despite some concerns about competition and contract duration shifts, the company's strategic investments in SaaS and market share gains are promising. The Q&A indicates confidence in growth and resilience strategies, with positive insights on TAM growth and competitive positioning. Overall, the sentiment is positive, with potential for stock price increase driven by strong financials and optimistic guidance.
Commvault Systems, Inc. (CVLT) Q1 2026 Earnings Call Transcript
Positive7-29
The earnings call summary reflects strong financial performance, with a 46% increase in revenue and consistent gross margins. While operating expenses are high, the increase in non-GAAP EBIT and free cash flow is encouraging. The Q&A section highlights successful cross-sell and upsell strategies, and the raised revenue guidance indicates confidence in future performance. Despite some unclear responses from management, the overall sentiment is positive, driven by robust growth metrics and strategic focus on cyber resilience.
CVLT Slides
CVLT Report
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