Commvault beats guidance as revenue growth slows

Commvault beat its revenue guidance in its latest quarterly results but profitability was down due to restructuring costs, and revenue growth is deccelerating.

Revenues in the fourth quarter ended March 31, were $312 million, up 13 percent year-on-year and beating its guidance, but down 0.7 percent from its record last quarter. There was a GAAP profit of $15 million, down 51 percent from a year ago and also down 16.7 percent from the last quarter.

Full fy2026 revenues were a record $1.2 billion, up 21 percent from a year ago, with GAAP profit of $71 million, down 6.6 percent from last year. Profitability seems to be a problem.

CEO Sanjay Mirchandani said: “We had a strong finish to the fiscal year, delivering results at or above our guided metrics, while continuing to build momentum across the business. … We are growing at scale while also generating strong profits and cash flow. We believe this combination reflects the health of the industry, the strength of our platform, and the durability of our model.”

Garry Merrill was promoted from Chief Commercial Officer to CFO this month, replacing the departed Jennifer DiRico. Merrill was previously Commvault’s CFO from 2022 to 2024. Geof Haydon has been appointed President of Customer and Field Operations. He was previously a board member and had a Dell, RSA and EMC background before becoming a CEO at Open Systems and then the spun-out cyber-security business Ontinue.

Financial summary:

• Gross margin: 81.4 percent vs prior quarter’s 81.5 percent
• Operating cash flow: $132 million vs $4 million last quarter
• Free cash flow: a record $132 million vs $2 million in prior quarter and up 73 percent Y/Y
• Cash and cash equivalents: $900 million vs $1.026 billion in prior quarter

Total annual recurring revenue (ARR) was $1.22 billion, up 21 percent annually, while subscription ARR of $989 million was up 27 percent. Within tat, SaaS ARR was $400 million, an increase of 42 percent Y/Y.

Commvault believes that subscription ARR is the best measure of its growth. The subscription customer count rose 600 since last quarter to14,700; a 20 percent Y/Y increase. 

Merrill said in the earnings call: “We've added about 2,500 new subscription customers in the past 12 months.” 

Commvault has a strategy of increasing multi-product adoption by its customers, for example with new identity offerings, and the percentage of Commvault-managed SaaS customers using more than one offering increased to 48 percent, a 500-basis point (5 percent) improvement annually. Mirchandani said: “Identity resilience and security, as an example, represented 33 percent of our net new ARR last quarter.”

Commvault restructured its business twice in fiscal 2026, and this involved “workforce reductions, technology transitions, office lease closures, and the exit of operations in certain jurisdictions.” This involved costs; “severance and associated employee termination costs, stock‑based compensation expense resulting from modification events, and office closure and exit charges.” Both restructuring plans should be substantially complete in fiscal 2027. 

William Blair analyst Jason Ader commented: “The company exited the year with accelerating subscription momentum, record quarterly free cash flow, and growing multi-product adoption. Management highlighted stable core business trends alongside continued traction in data security/identity resilience.” 

He sees: “green shoots for the bulls as Commvault looks to put recent execution missteps firmly in the rearview mirror, with CFO Gary Merrill providing stability and instilling confidence in the path forward. That said, both ARR and revenue guidance reflect material deceleration in the business, which could continue to hold the stock back.”

Merrill said: ”We are entering fiscal year 2027 with strong momentum. With our subscription transformation largely complete, our financial priorities are to scale subscription ARR, expand margins and increase free cash flow.” He added: ”There is meaningful potential to acquire new customers and expand with our installed base through increased multi-product adoption.”

Commvault believes that AI-driven data growth and cyber-threats across a customer's on-premises and cloud environments are key to its growth. Merrill said: "Our value prop is the hybrid, the hybrid, and managing those workloads on-premise or across multiple clouds. So what you see in our subscription ARR, whether it shows up in software or in SaaS, it's our hybrid approach that's giving us a competitive advantage."

Next quarter’s mid-point revenue guidance is $310 million, +/- $1 million, up 10 percent Y/Y, but down sequentially for the second quarter in a row. Subscription revenue guidance is $264 million+/- $1 million; up 45 percent Y/Y. Subscription revenue needs to grow faster to get overall revenue growing again sequentially.

Full fy2027 revenue guidance is $1.35 billion +/- $50 million, a 14 percent increase at the mid-point.

Comment

Veeam has just been crowned number 1 in data protection market share by IDC, capturing 13.6 percent market share in 2025's second half, an increase from 13.2 percent in in the previous quarter. IDC also reports that Veeam delivered 11.5 percent sequential growth in 2025's second half,  outpacing the market average of 8.8 percent. 

We expect Rubrik to deliver $366 million revenues when it reports its next quarter's earnings (Q1 fy2027), a 31.4 percent increase and strongly outpacing Commvault's revenue growth. Of course, Rubrik is not profitable, unlike Commvault. 

Bootnote

Commvault’s total ARR includes recurring subscription offerings, customer support associated with perpetual and term licenses, enhanced customer support contracts, and managed service offerings. Subscription ARR represents the portion of annual recurring revenue attributable to term-based licenses, maintenance and support services associated with term license arrangements, SaaS subscriptions, and consumption-based arrangements.