CVLT — FY2026 Annual Financial Report Analysis

Commvault's fiscal 2026 (the 12 months to March 31, 2026) revenue rose 19% to $1,183.7 million. Almost all of the increase came from subscriptions: software rented on time-limited licences, plus cloud-hosted "SaaS" (software-as-a-service, which Commvault runs for the customer). SaaS revenue grew 52% to $333.0 million. Profit did not grow with sales. GAAP operating income (the profit left from running the business, before interest and tax) was flat at $74.0 million, because restructuring charges more than tripled to $32.2 million and sales and marketing spending rose $85.6 million. Net income fell 7% to $70.7 million and diluted EPS fell 6% to $1.58, mostly because the tax rate jumped from about 6% to about 23%.

At a glance

• $400.2 million SaaS ARR, up 42%. ARR (annualized recurring revenue) is what a year of the company's active recurring contracts is worth. The cloud business is now over a third of Commvault's $1,121.6 million total ARR, up from 30% a year earlier.
• 6.3% GAAP operating margin vs 20.1% "non-GAAP". The gap is mostly $118.9 million of stock-based pay plus $32.2 million of restructuring, both of which management leaves out of its own profit measure.
• $244.7 million operating cash flow, 3.5 times net income. The cash came from customers paying up front (deferred revenue rose $136.4 million) and from stock pay, which is a cost but not a cash outflow.

Results

Where the growth came from

Commvault is selling less software outright and more on subscription. Of the $188.1 million revenue increase, $113.7 million came from SaaS and $64.9 million from term-based licences. Perpetual licences (a one-time purchase that never expires) fell $12.4 million, or 22%. The 10-K puts SaaS growth down to "higher SaaS bookings from new customers and expansion within our existing customer installed base, including greater multi-product usage". For term licences, it says deals above $0.1 million rose 19%: deal volume was up 16% and average deal size up 2%. Subscriptions were 65% of revenue, against 59% a year earlier.

Growth outside the Americas was faster (International +24%, Americas +16%), but part of that was currency. Commvault says that at fiscal 2025 exchange rates, revenue would have been $29.5 million lower. That puts underlying growth at about 16% rather than 19%. On the same basis, ARR grew 18% rather than the reported 21%.

One number to watch: SaaS net dollar retention fell to 122% from 127%. The metric takes the cloud customers Commvault had a year ago and compares what they pay now with what they paid then. 122% means they spend 22% more after upgrades, cancellations and downgrades. That is still a strong figure, but existing cloud customers are expanding more slowly than before. The fourth quarter also slowed: revenue grew 13% to $311.7 million, term-licence revenue just 6%, and SaaS 43%, down from 69% in the same quarter a year earlier.

Why profit stood still

Gross margin held at about 81%. SaaS gross margin stayed at 64% even as SaaS revenue grew by half. The cost of SaaS revenue rose $39.0 million, mainly hosting infrastructure. Operating expenses are what cancelled out the revenue growth:

• Sales and marketing +$85.6 million (+20%), to 44% of revenue: $54.1 million more employee pay (new hires, plus higher commissions on higher sales) and $17.0 million more for marketing, events and travel.
• Restructuring $32.2 million vs $10.0 million. The two job-cut plans started in fiscal 2026 should finish in fiscal 2027, with about $2.0 million more cost to come.
• General and administrative +$24.3 million (+18%), including $11.6 million more for consultants, accounting and compliance, and $1.8 million for its response to "a non-routine security matter".

Excluding restructuring, operating income would have been about $106 million against $84 million, roughly 27% growth. Restructuring is what kept the reported figure flat.

What the headline numbers hide

• Pre-tax profit growth came from interest on cash, not from operations. Pre-tax income rose $11.1 million to $92.1 million. Interest income alone rose $15.2 million to $21.8 million, thanks to a larger cash pile. In September 2025 Commvault sold $900 million of 0% convertible notes, bonds that can later be swapped for shares. That lifted cash to $900.0 million from $302.1 million.
• The tax rate explains the fall in net income. Tax expense rose to $21.5 million (about 23% of pre-tax income) from $4.9 million (about 6%). The 10-K attributes the change "primarily" to items related to stock-based compensation. Profit after tax would have risen at last year's rate, so a "falling profit" headline overstates the deterioration.
• The gap between GAAP and adjusted profit is wide, and most of it is a recurring cost. Management's non-GAAP EPS of $4.35 is 2.75 times GAAP EPS of $1.58. The biggest adjustment is $118.9 million of stock-based compensation ($2.66 per share), which, as the company itself acknowledges, "will continue to be for the foreseeable future, a significant recurring expense". Including the stock-based pay tied to restructuring, the cash flow statement shows $123.4 million, about 10% of revenue.
• Cash conversion is strong but leans on up-front billing. Operating cash flow of $244.7 million came largely from adding back $123.4 million of non-cash stock pay and a $136.4 million rise in deferred revenue (cash billed before the service is delivered). Free cash flow was $237.2 million.
• Receivables grew faster than sales. Trade receivables, the money customers owe, rose 31% to $330.5 million, against 19% revenue growth. Some of that fits with larger term deals billed at quarter-end. Total deferred revenue also rose 24% to $778.7 million, which suggests bookings outpaced recognized revenue rather than collection getting worse. Still, it is worth checking next year.
• Buybacks flattered per-share figures and emptied the balance sheet's equity. Commvault repurchased $446.1 million of stock (4.2 million shares at an average $106.91), including $117.7 million funded by the notes, and spent another $99.6 million on "capped calls" that limit dilution if the notes convert. Shares outstanding fell 6.5% to 41.3 million. Stockholders' equity dropped to $7.5 million from $325.1 million. This mostly reflects the buybacks, not losses, but the company now has $880.9 million of convertible debt on the books where it previously had none.
• Fiscal 2027 figures are not directly comparable. From fiscal 2027, Commvault counts support on term licences as subscription revenue and includes enterprise support in subscription ARR. On that basis, fiscal 2026 subscription revenue becomes $970.5 million and subscription ARR $1,014.7 million.

Takeaway: Commvault's sales are moving to recurring cloud subscriptions quickly (SaaS ARR +42%), but fiscal 2026 did not turn that into higher earnings. Operating profit was flat once restructuring and sales hiring were paid for, and the small rise in pre-tax profit came from interest on borrowed cash. Fiscal 2027 needs operating leverage (costs growing more slowly than revenue), not just revenue growth.

Outlook

In April management guided fiscal 2027 total revenue to $1,300–1,310 million, growth of about 10–11%, roughly half fiscal 2026's pace. That likely reflects, in part, less up-front term-licence revenue as the mix shifts to SaaS, which is recognized gradually. On the new recast basis, subscription revenue is guided to $1,115–1,125 million (about 15–16% growth on the recast $970.5 million) and subscription ARR to $1,200–1,210 million (about 18–19% growth). The guided non-GAAP operating margin is about 20.5%, against 20.1%, and free cash flow $250–260 million. Commvault also expects a one-off $5–10 million fee in the first half, tied to pricing and packaging initiatives, which it will exclude from non-GAAP results.

The first quarter of fiscal 2027 (to June 30, 2026), reported in July, looked on track: recast subscription revenue rose 16% to $267 million and subscription ARR rose 22% to $1,054 million. Management nudged full-year subscription revenue guidance up to $1,119–1,129 million, raised its margin target to about 21%, and kept free cash flow at $250–260 million. Our read: the subscription and SaaS trend is intact. What we have not yet seen in GAAP numbers is the payoff. Once fiscal 2026's restructuring charges drop out, GAAP operating margin should rise visibly from 6.3%. If it doesn't, sales and marketing costs are still growing as fast as revenue. Also watch SaaS net dollar retention: a further decline from 122% would mean the cloud business is relying more on winning new customers than on existing ones spending more.