Is OpenText stock undervalued?

OpenText (Open Text Stock Quote, Chart, News, Analysts, Financials NASDAQ:OTEX) posted fiscal Q4 revenue of US$1.31 billion, in line with National Bank of Canada Financial Markets analyst Richard Tse’s forecast and above the US$1.29 billion consensus. Organic year-over-year growth, excluding AMC from last year, improved to roughly minus 1 per cent after sharper declines earlier in the fiscal year.

Adjusted EBITDA margin reached 33.9 per cent, topping both Tse’s 31.4 per cent projection and the 31.3 per cent consensus, driving adjusted EPS of US$0.97, ahead of his US$0.86 estimate and the US$0.82 expected by the Street.

Tse is maintaining his “Sector Perform” rating and US$34.00 target on the stock.

“With OpenText trading at just ~7.1x EV/EBITDA on our FY26E, we think the above shift helps set up the potential for a sustained valuation re-rating in the name,” he said. “That said, given recent history, we believe the name will require a few consecutive quarters to confirm that turn before a sustained re-rating occurs.”

OpenText, founded in 1991 and based in Waterloo, Ontario, is Canada’s largest enterprise software company. It provides enterprise information management solutions that help organizations store, share, and manage information, serving around 100,000 customers worldwide with a workforce of about 24,000.

Tse said OpenText’s FY26 guidance calls for 1–2% constant currency revenue growth, or $5.22–$5.27 billion, slightly above expectations of $5.22 billion at NBF and $5.19 billion on the Street. The outlook includes 3–4% growth in cloud revenue, supported by a projected 12–16% increase in cloud bookings. Adjusted EBITDA margins are expected to improve by 50–100 basis points from FY25, landing between 35.0% and 35.5% (NBF: 35.2%, consensus: 35.9%). For FQ1/26, the company is targeting flat to 1% year-over-year revenue growth and an Adjusted EBITDA margin in the same 35.0–35.5% range, matching NBF’s forecast and coming in above consensus.

“All in, we think the results and outlook point to a stabilizing business following a challenging FY25 that saw negative (organic) growth and underperformance against early (fiscal) year expectations,” Tse said. “While it’s unclear whether that execution on growth will follow through, the reported results corroborate a moderation in declines, while OpenText’s Business Optimization Plan adds operating leverage.

Tse said Open Text should do $1,860.0-million in Adjusted EBITDA on revenue of $5,239.9-million in fiscal 2026. He thinks those numbers will improve to $2,021.7-million on revenue of $5,425.3-million in fiscal 2027.

Tse said OpenText delivered in-line FQ4 results, with Cloud revenue up 2.1% year over year and bookings up 32% to $238-million, helped by demand for its AI-driven Titanium X platform. The company closed 43 large Cloud deals over $1-million, up 34%, with clients such as Atos, Bayer and BMO. Cloud cRPO reached $1.2-billion, about 63% of FY26 cloud revenue guidance, while total cRPO was $2.6-billion, or half of total FY26 guidance. Renewal rates were 96% in cloud and 90% in off-cloud.

Customer support revenue declined 3% year over year (excluding AMC), improving from a 6% drop in Q3, and management sees a 2% decline in FY26, followed by growth in FY27. ARR was $1.055-billion, down 0.8% excluding AMC, and accounted for 80.5% of total revenue. In FY25, content management contributed 40% of revenue, cybersecurity 25%, business network, OSM and devops about 10% each, and analytics 5%. Content management, OSM and devops all posted double-digit growth; other segments were flat or down, with cybersecurity expected to return to growth in FY26.

“Bottom line, all the above would point to signs of stabilization – a positive against what has been a string of declines,” Tse said.

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