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1. Company Snapshot

1.a. Company Description

Open Text Corporation engages in the designs, develops, markets, and sells information management software and solutions.It offers content services; business network that manages data within the organization and outside the firewall; security and protection solutions for defending against cyber threats, and preparing for business continuity and response in the event of a breach; digital investigation and forensic security solutions; OpenText security solutions to address information cyber resilience needs; Carbonite and Webroot products; and OpenText Information Management software platform.The company also provides eDiscovery platform that provides forensics and unstructured data analytics; OpenText Developer Cloud; key developer API services; AI and analytics that leverages structured or unstructured data; digital process automation solutions, which enables organizations to transform into digital data-driven businesses; and OpenText Digital Experience platform.


In addition, it offers customer support programs, including access to software upgrades, a knowledge base, discussions, product information, and an online mechanism to post and review trouble tickets; and consulting and learning services relating to the implementation, training, and integration of its licensed product offerings, as well as cloud services.The company serves organizations, enterprise and mid-market companies, public sector agencies, small and medium-sized businesses, and direct consumers in Canada, the United States, the United Kingdom, Germany, rest of Europe, the Middle East, Africa, and internationally.It has strategic partnerships with SAP SE, Google Cloud, Amazon AWS, Microsoft Corporation, Oracle Corporation, Salesforce.com Corporation, Accenture plc, ATOS, Capgemini Technology Services SAS, Cognizant Technology Solutions U.S. Corp., Deloitte Consulting LLP, and Tata Consultancy Services.


Open Text Corporation was incorporated in 1991 and is headquartered in Waterloo, Canada.

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1.b. Last Insights on OTEX

Open Text Corporation's recent performance has been driven by growing optimism about its earnings prospects, reflected in its upgrade to a Zacks Rank #1 (Strong Buy) rating. The company's fiscal Q1 earnings report showed $146.6 million in earnings, with a per-share profit of 58 cents. RBC Capital Markets maintains a sector-perform rating with a $35 price target. New cybersecurity capabilities and SAP Cloud certification have also contributed to positive momentum, showcasing the company's expanding integration with SAP Cloud ERP and enhancing document management, compliance, and AI-ready information.

1.c. Company Highlights

2. Open Text's Q1 Fiscal 2026 Results: Steady Cloud Growth and Margin Expansion

Open Text Corporation reported total revenues of $1.3 billion for Q1 fiscal 2026, representing a 1.5% year-over-year increase. Cloud revenue was $485 million, up 6% year-over-year, driven by strong cloud bookings with Cloud cRPO growing 6% and long-term cloud RPO increasing 16%. The company's GAAP-based gross margin was 72.8%, while the non-GAAP gross margin was 76.5%, up 60 basis points year-over-year. Adjusted EBITDA for the quarter was $467 million, a 36.3% margin, up 130 basis points year-over-year. Earnings per share (EPS) came in at $1.48, beating estimates of $1.1. Annual recurring revenue (ARR) was $1.1 billion, up 1.8% year-over-year, and accounted for 83.2% of total revenues.

Publication Date: Nov -16

📋 Highlights
  • Cloud Revenue Growth:: Cloud revenue rose to $485 million (+6% YoY), with Cloud cRPO up 6% and long-term cloud RPO up 16% YoY.
  • Strong ARR Performance:: ARR reached $1.1 billion (83.2% of total revenue), growing 1.8% YoY despite maintenance declines.
  • Margin Expansion:: Non-GAAP gross margins hit 76.5% (+60 bps YoY), and adjusted EBITDA margin reached 36.3% (+130 bps YoY).
  • Content Cloud Momentum:: Grew 21% YoY, driven by wins in financial services, energy/utilities, and telecom, with 43% increase in >$1M deals.
  • Strategic Divestitures:: Plans to sell 15–20% of revenue (1x divestiture/qtr) to pivot cloud-centric, with EBITDA growth expected in H2 from optimization.

Cloud Growth and Bookings

The company's cloud growth was driven by enterprise cloud bookings, which were up 20% year-over-year in Q1. Open Text's Content Cloud grew 21% year-over-year, driven by bookings in financial services, energy and utilities, and telecom verticals. The company closed 33 deals greater than $1 million in Q1, up 43% year-over-year, indicating strong demand for its cloud offerings.

Valuation and Outlook

Open Text's valuation metrics indicate a relatively stable outlook. The company's P/E Ratio is 19.91, P/B Ratio is 2.21, and EV/EBITDA is 9.31. Analysts estimate revenue growth of 3.6% for the next year. The company's guidance for Q2 implies a possible quarter-over-quarter decline in total revenue, driven by the mix of revenue from cloud and license. However, Open Text expects EBITDA growth in the second half to be significant, driven by portfolio reshaping and business optimization initiatives.

Strategic Initiatives

Open Text is focused on becoming a fully cloud-centric company, with recent appointments supporting this goal. The company announced the sale of a non-core business unit within analytics, helping to pivot towards cloud. The company's strategy involves leveraging its data for AI, with a competitive edge built over 35 years. Open Text's Content business is growing rapidly, driven by cloud adoption, AI readiness, and data curation.

Divestiture Plans

The company aims to divest 15-20% of overall revenue, with a goal to complete this within the next year, at a pace of approximately one divestiture per quarter. Open Text will prioritize maintaining EBITDA discipline during this process. The company's new CFO, Steve Rai, has been focused on understanding customer priorities, products, and strategic initiatives, and his initial priorities are to drive growth and optimize the business.

3. NewsRoom

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Has the Market Mispriced Open Text After Its Recent Share Price Pullback?

Dec -04

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Is Open Text (NasdaqGS:OTEX) Undervalued After Its Recent 12% Pullback? A Fresh Look at the Numbers

Dec -04

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OpenText named a Leader in 2025 IDC MarketScape for Worldwide Analytical Databases

Dec -02

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How Open Text, Restaurant Brands, And Essential Utilities Can Put Cash In Your Pocket

Nov -27

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Does Open Text Offer Real Value After Recent Acquisition Push and 15% Share Price Dip?

Nov -20

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What Catalysts Are Shaping the Changing Story for Open Text?

Nov -19

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OpenText Deepens Partnership with Google to Accelerate AI Innovation, Data Security, and Sovereign Cloud Solutions

Nov -19

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All You Need to Know About Open Text (OTEX) Rating Upgrade to Strong Buy

Nov -13

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.44%)

6. Segments

Customer Support

Expected Growth: 7%

Open Text Corporation's Customer Support growth is driven by increasing adoption of cloud-based services, expansion into new markets, and strategic partnerships. Additionally, the company's focus on AI-powered support tools and enhanced customer experience have contributed to the 7% growth rate.

Cloud Services and Subscriptions

Expected Growth: 9%

Open Text Corporation's Cloud Services and Subscriptions segment growth is driven by increasing demand for cloud-based content management, digital transformation initiatives, and the need for secure information exchange. Additionally, the company's strategic acquisitions, expanding partner ecosystem, and investments in AI-powered solutions contribute to its 9% growth rate.

License

Expected Growth: 5%

The 5% growth in the License from Open Text Corporation can be attributed to increasing demand for Enterprise Information Management (EIM) solutions, driven by digital transformation, cloud adoption, and regulatory compliance. Additionally, the growing need for data analytics, artificial intelligence, and cybersecurity also contribute to this growth.

Professional Service and Other

Expected Growth: 6%

Open Text Corporation's Professional Service and Other segment growth of 6% is driven by increasing demand for digital transformation, cloud-based services, and cybersecurity solutions. Additionally, the company's strategic acquisitions, expansion into new markets, and strong partnerships with leading technology companies contribute to its growth momentum.

7. Detailed Products

Content Suite

A comprehensive enterprise content management system that enables organizations to manage their content across the entire information lifecycle.

Extended ECM

A platform that extends the capabilities of SAP, Oracle, and Microsoft systems to provide a unified content management experience.

AppWorks

A low-code development platform that enables organizations to build custom applications and automate business processes.

Customer Experience Management (CEM)

A platform that enables organizations to manage customer interactions and experiences across multiple channels and touchpoints.

InfoArchive

A platform that enables organizations to archive and manage large volumes of data from various sources, including ERP, CRM, and other systems.

OpenText Analytics

A platform that enables organizations to analyze and visualize their data to gain insights and make informed decisions.

OpenText Media Management

A platform that enables organizations to manage and deliver rich media assets, including images, videos, and audio files.

OpenText EnCase

A platform that enables organizations to conduct digital forensic investigations, incident response, and e-discovery.

8. Open Text Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Open Text Corporation operates in a niche market, providing enterprise information management solutions. While there are some substitutes available, they are not as comprehensive as Open Text's offerings, reducing the threat of substitutes.

Bargaining Power Of Customers

Open Text Corporation's customers are typically large enterprises with complex information management needs. While they may have some bargaining power, it is limited by the specialized nature of Open Text's products and services.

Bargaining Power Of Suppliers

Open Text Corporation has a diverse supplier base, and its suppliers do not have significant bargaining power. The company's size and scale also give it negotiating power in its supplier relationships.

Threat Of New Entrants

The enterprise information management market is characterized by high barriers to entry, including significant capital investments and specialized expertise. This limits the threat of new entrants.

Intensity Of Rivalry

The enterprise information management market is highly competitive, with several established players competing for market share. Open Text Corporation faces intense rivalry from companies like Microsoft, IBM, and Oracle.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 69.69%
Debt Cost 5.78%
Equity Weight 30.31%
Equity Cost 9.51%
WACC 6.91%
Leverage 229.95%

11. Quality Control: Open Text Corporation passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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OpenText

A-Score: 6.0/10

Value: 5.0

Growth: 5.6

Quality: 5.4

Yield: 6.0

Momentum: 6.5

Volatility: 7.7

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Value: 3.2

Growth: 5.2

Quality: 5.6

Yield: 0.0

Momentum: 7.0

Volatility: 6.0

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Elastic

A-Score: 4.2/10

Value: 2.5

Growth: 8.0

Quality: 4.9

Yield: 0.0

Momentum: 6.0

Volatility: 4.0

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Progress Software

A-Score: 4.2/10

Value: 4.4

Growth: 6.4

Quality: 6.0

Yield: 1.0

Momentum: 1.0

Volatility: 6.3

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Manhattan Associates

A-Score: 4.0/10

Value: 0.6

Growth: 7.9

Quality: 8.6

Yield: 0.0

Momentum: 1.0

Volatility: 5.7

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Agilysys

A-Score: 3.5/10

Value: 0.0

Growth: 7.9

Quality: 7.5

Yield: 0.0

Momentum: 2.5

Volatility: 3.3

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

46.36$

Current Price

46.36$

Potential

-0.00%

Expected Cash-Flows