Open Text NASDAQ: OTEX used its fiscal third-quarter 2026 earnings call to highlight record cloud metrics, expanding margins, and a steady full-year revenue outlook, while newly appointed CEO Ayman Antoun outlined early priorities focused on clients, execution, and building an organic growth plan.
New CEO outlines priorities centered on clients, partners, and execution
Antoun, speaking on his 14th working day as CEO, said his near-term focus is guided by four priorities: “listen,” “learn,” “assess,” and “build.” He said he reached out to more than 100 clients and 20 partners on his first day to set up one-on-one conversations, describing first-hand feedback as essential to strengthening the company’s strategy.
In early observations shared during Q&A, Antoun said client and partner feedback has reinforced OpenText’s “client-focused” culture and “the strength of our core portfolio.” He also pointed to opportunities to improve and scale ecosystem partner engagement and to strengthen “the muscle of disciplined execution across the entire operating model,” including sales execution, development prioritization, and capital allocation.
Asked about demand conditions amid geopolitical uncertainty, Antoun said he has not seen evidence of a “material slowdown in clients making decisions,” particularly around AI-related opportunities, based on his early client discussions and feedback from the team. He added that some clients are accelerating AI efforts “to catch up” after feeling behind on deploying AI models.
Q3 results: cloud growth, margin expansion, and record adjusted EPS
President and Chief Client Officer James McGourlay said OpenText ended the quarter with “solid performance in total revenues,” and that the company exceeded its own expectations for free cash flow and adjusted EPS. For the quarter, the company reported total revenue of approximately $1.28 billion, led by 6.6% year-over-year cloud growth.
McGourlay highlighted growth in the content business, stating that total content revenue—44% of total revenue—grew 6% year-over-year in Q3, while cloud revenue for content grew 22% year-over-year. He described content as the company’s “largest and fastest growing business” and said it is leading cloud growth.
Chief Financial Officer Steve Rai said Q3 marked OpenText’s 21st consecutive quarter of organic cloud growth. He reported cloud revenue of $493 million, calling it mainly driven by Content Cloud. Rai said cloud net renewal rate was 95%, down 1% year-over-year and “consistent with our annual model.” Customer support revenue was $565 million, down 0.4%, while customer support net renewal rate was 93%, up 3% year-over-year.
Rai also reported annual recurring revenue (ARR) of $1.06 billion, up 2.7% year-over-year, representing 82% of total revenue, consistent year-over-year.
Profitability improved year-over-year, with Rai reporting GAAP gross margin of 73.1% and non-GAAP gross margin of 76.7%, up 150 basis points and 100 basis points, respectively. Adjusted EBITDA was $438 million, or a 34.1% margin, up 10.8% and 260 basis points year-over-year, which Rai attributed primarily to cost management actions and the business optimization plan.
GAAP net income was $173 million, up 86% year-over-year, which Rai said was “largely due to the sale of eDOCS and unrealized derivative gains.” Non-GAAP net income was $250 million, up 15.9%. Diluted EPS was $0.70 on a GAAP basis and $1.01 on a non-GAAP basis, with Rai noting non-GAAP diluted EPS reached a Q3 record for the company.
Free cash flow was $305 million, down 18.4% year-over-year, though McGourlay noted year-to-date cash flow of $686 million was the highest Q3 year-to-date in company history. Rai added year-to-date free cash flow was up to $686 million from $563 million in the same period last year.
Client wins, product updates, and AI discussion
McGourlay cited several client examples across product areas, including Michelin in Business Network, Hargassner in Content, HPE Aruba Networking in Cybersecurity, and Aydem Energy in IT operations management (ITOM). He also pointed to a recent announcement that select enterprise data and AI solutions will be available on the AWS Sovereign Cloud, aimed at regulated European Union clients with data residency and sovereignty requirements. McGourlay said the move extends hybrid deployment options in Europe and reinforces positioning in secure content management for AI, while noting near-term financial impact is “likely limited.”
On AI commercialization, Rai said the company does not typically provide attach-rate granularity for bookings tied to AI. McGourlay added that the company is seeing “an increase in both the deals and the size of deals that are closing,” including “larger deals being closed with our Aviator,” and noted a seven-figure deal in the quarter that included Aviator. He said the pipeline shows “similar trends” with a higher number of deals including Aviator.
Antoun also addressed OpenText’s internal use of AI, describing the company as “client zero.” He said the organization is running on OpenText products, with “70 of our offerings” deployed internally and “a large number of AI agents” infused across the enterprise. Antoun said OpenText has “committed to over the next 10 years to save $1 billion” as a result of this approach, and shared operational metrics he described as early indicators: time to restore incidents “is up 50%” and the number of incidents “down almost 20%,” attributing the changes to agentic AI capabilities.
Outlook maintained for revenue, while cloud, bookings, and free cash flow guides rise
Rai said OpenText’s fiscal 2026 outlook for total revenue growth remained unchanged at 1% to 2% year-over-year, which he said reflects divestitures and approximately $30 million of related revenue. McGourlay reiterated there was no change to the revenue target on an adjusted basis and referenced the $30 million impact from divestitures.
At the same time, Rai raised several operating outlook ranges for fiscal 2026 based on performance and demand trends:
- Cloud revenue growth raised to 4% to 5% year-over-year (from 3% to 4%).
- Enterprise cloud bookings growth raised to 16% to 20% year-over-year (from 12% to 16%), which Rai said reflects client interest in cloud offerings “especially for content.”
- Free cash flow growth raised to 22% to 25% year-over-year (from 17% to 20%).
Rai also pointed to early signs in cloud RPO trends, stating cloud current RPO was up 5% year-over-year and cloud long-term RPO was up 19% year-over-year.
Capital allocation: buybacks, dividends, and disciplined divestitures
Rai said OpenText increased its share buyback program earlier in the year from $300 million to $500 million for fiscal 2026. He said the company repurchased and canceled 9.7 million shares in Q3 and reduced its share count by 6.7% year-over-year to 242.2 million shares outstanding. Rai said the company is maintaining its dividend policy.
Antoun told analysts that capital allocation discussions are regular board agenda items and listed areas considered by management and the board, including debt reduction, dividends, share repurchases, and organic growth investments spanning product, go-to-market, and ecosystem initiatives.
Executive Chair Tom Jenkins said the company expects the Vertica divestiture to close “shortly” and that OpenText remains in the process of reshaping its portfolio. However, he cautioned that geopolitical and macro uncertainty has created “a more selective buyer environment,” and said the company is “disciplined sellers” that will not pursue “fire sales.” Jenkins added that non-core businesses continue to contribute to margin and cash flow as the company waits for improved market stability, and characterized the divestiture pace as limited by implementation logistics.
Closing the call, Antoun said he was “incredibly excited and equally confident” about the path ahead and looked forward to further engagement with investors in the coming weeks.
About Open Text NASDAQ: OTEX
Open Text Corporation is a Canadian enterprise information management (EIM) software company that develops solutions for organizations seeking to manage, protect and extract insight from their unstructured and structured data. The company's platform encompasses document management, records management, digital asset management and archiving, enabling companies to govern information across its lifecycle.
Open Text's product suite includes content services, business process management, customer experience management, analytics and security products.
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