OpenText (OTEX) Posts Record Profits While Core Revenue Stalls

On August 6, OpenText Corporation (NASDAQ: OTEX ) reported its fourth quarter and full fiscal 2026 results, and the numbers pulled in two very different directions at once. Quarterly net income more than quintupled from a year earlier, cloud revenue extended a streak stretching back more than five years, and yet total annual recurring revenue barely budged. That contrast, a profit explosion sitting next to a nearly flat core subscription base, is what investors now have to weigh heading into fiscal 2027.

GAAP net income attributable to OpenText jumped to $156 million in the fourth quarter, up 439.9% from a year earlier, while diluted EPS climbed to $0.64, a gain of 481.8%. That wasn't a one-quarter fluke. For the full fiscal year, net income rose 47.5% to $643 million, a 12.3% margin, and gross margin expanded as well, with GAAP-based gross margin reaching 75.0% in the quarter versus 72.3% a year earlier. Adjusted EBITDA margin held steady at 37.6% for the quarter and 36.3% for the full year.

Cloud remained the engine underneath that. Cloud revenue rose 6.0% year over year to $503 million in the quarter, the 22nd consecutive quarter of organic cloud growth, and enterprise cloud bookings jumped 24.1% to $295 million. For the full year, cloud revenue grew 5.5% to nearly $1.96 billion, and enterprise cloud bookings climbed 22.5% to $947 million.

Management also leaned into capital returns and portfolio discipline. OpenText returned a record $677 million to shareholders in fiscal 2026, split between $268 million in dividends and $409 million in buybacks, then raised its dividend 5% and renewed authorization to repurchase up to 23,846,439 shares over the next year. The company also sold non-core Vertica for $150 million to Rocket Software and committed €105 million to a Cork and Galway expansion, adding 400 jobs focused on agentic AI and sovereign cloud in Europe.

Customer support revenue, OpenText's largest and steadiest line, fell 4.6% to $553.8 million in the quarter and slipped 2.0% for the full year. That drag pulled total annual recurring revenue growth down to just 0.2% in the quarter and 1.3% for the year, a far cry from the double-digit cloud gains. Professional services and other revenue fell too, down 6.5% in the quarter and 8.6% for the year, showing the legacy and services side of the business is shrinking even as cloud expands.

License revenue jumped 24.4% in the quarter and 8.4% for the year, but license sales are typically tied to individual large contracts rather than a recurring subscription base, so one strong quarter doesn't guarantee the next looks the same. Free cash flow also slipped 1.6% in the quarter to $122 million even as operating cash flow rose 17.5%, meaning cash conversion didn't keep pace with the headline profit jump. CEO Ayman Antoun described fiscal 2027 as "our foundation year," language that points to steady execution rather than a growth breakout.