0001070235-25-000176
SEC filingQNX revenue beat drove Q2 FY26 upside; adjusted EBITDA surged to $25.9M, exceeding guidance.
BlackBerry reported Q2 FY26 revenue of $129.6M, up 2.7% YoY from $126.2M, driven by a strong QNX performance that more than offset a decline in Secure Communications. Gross margin improved 430 bps to 74.5%, reflecting a favorable mix shift toward higher-margin QNX and Secusmart software. Operating income swung to $11.5M from $2.2M a year ago, while net income reached $13.3M ($0.02 EPS) compared to a net loss of $19.7M ($0.03 loss per share) in Q2 FY25. The prior-year period included a $23.2M loss from discontinued operations (Cylance) that did not recur. On an adjusted basis, net income was $24.2M ($0.04 adjusted EPS), versus an adjusted net loss of $2.6M ($0.00 adjusted loss per share) in the prior year. Adjusted EBITDA more than doubled to $25.9M, well above the company's guidance range of $8-14M, driven by QNX and Secure Communications exceeding expectations.
QNX was the standout segment, with revenue of $63.1M (+15.4% YoY), driven by a $3.6M increase in royalty revenue, $2.7M from BlackBerry Radar, and $2.6M from development seat revenue. QNX adjusted EBITDA surged to $20.5M, far exceeding the guided $10-13M range, aided by SIF claims. Secure Communications revenue fell 9.9% to $59.9M, primarily due to a $5.6M decline in Secusmart product revenue and a $1.0M drop in UEM product revenue. However, Secure Communications adjusted EBITDA rose to $9.7M (above the $3-6M guidance), benefiting from lower salaries and a recovery in credit loss provisions. Licensing revenue increased 32% to $6.6M, with adjusted EBITDA of $5.6M, in line with expectations. Segment mix shifted further toward QNX, which now represents 48.7% of total revenue (up from 43.3% a year ago), while Secure Communications' share fell to 46.2% from 52.7%.
Management raised its full-year fiscal 2026 guidance across all key metrics. Total revenue is now expected in the range of $519-541M (up from $508-538M), with QNX revenue guided to $256-270M (up from $250-270M) and Secure Communications revenue to $239-247M (up from $234-244M). Adjusted EBITDA guidance was raised to $82-101M (from $72-87M), and non-GAAP EPS to $0.11-0.15 (from $0.08-0.10). Operating cash flow is now expected to be $35-40M (up from ~$35M). For Q3 FY26, the company expects revenue of $132-140M, adjusted EBITDA of $20-28M, and non-GAAP EPS of $0.02-0.04. Management noted that QNX's strong first-half performance and SIF claims were key drivers of the upgrade, but cautioned that no additional SIF benefits are expected in the second half. The company continues to expect Licensing revenue of ~$6M per quarter and adjusted Corporate operating costs excluding amortization of ~$10M per quarter.
BlackBerry ended August 31, 2025 with $276.4M in cash and cash equivalents, $14.1M in short-term investments, $58.8M in long-term investments, and $14.2M in restricted cash, totaling $363.5M in cash and investments. The company maintains a net cash position with total debt of $195.9M against cash equivalents of $276.4M. Deferred revenue stood at $135.2M, down from $167.1M at February 28, 2025, reflecting revenue recognition. Shareholders' equity increased slightly to $725.1M from $719.9M, driven by net income and OCI partially offset by share repurchases.
The company disclosed $14.1M in collateralized letters of credit and a performance bond supporting a government contract. Under contingencies, BlackBerry recognized $29.0M in funds from QNX claims under the Strategic Innovation Fund, repayable if terms are not met, though deemed not probable. A litigation settlement of $2.8M (CAD $4.0M) for the Parker class action was approved in July 2025. No other material purchase commitments were disclosed.
During the six months ended August 31, 2025, BlackBerry repurchased 7.6M common shares for $30.0M under a new NCIB program authorized on May 8, 2025, for up to 27.9M shares (4.7% of float). The company spent $1.7M on property, plant, and equipment (0.68% of revenue). No dividends were paid. The long-term notes had a carrying value of $195.9M, with $3.0M interest expense in H1. No new debt was issued.
BlackBerry reports three segments: QNX, Secure Communications, and Licensing. For H1 FY2026, QNX revenue grew 11.8% YoY to $120.6M, Secure Communications declined 8.6% to $119.4M, and Licensing was flat at $11.3M. Segment adjusted gross margins were $98.7M, $81.1M, and $8.2M respectively. Geographically, North America contributed 46.6% of total revenue (including all Licensing), EMEA 32.8%, and other regions 20.6%.
For the six months ended August 31, 2025, BlackBerry reported net income of $15.2M, a significant improvement from a net loss of $61.1M in the prior-year period. However, operating cash flow remained negative at -$14.1M, though it improved from -$31.1M year-over-year. The divergence between net income and operating cash flow is primarily due to non-cash charges (amortization $10.3M, stock-based compensation $11.6M, impairment $0.6M) and a net working capital outflow of $34.8M, driven by decreases in deferred revenue (-$31.9M), accrued liabilities (-$38.5M), and accounts payable (-$27.1M), partially offset by a large reduction in accounts receivable ($48.7M).
Capital expenditures (PP&E) were modest at $1.7M, with an additional $2.6M for intangible assets. Free cash flow is not explicitly stated but would be approximately -$15.8M (CFO - capex). Investing activities generated $52.8M net, largely from net sales of short-term investments ($57.0M). Financing activities used $28.8M, driven by $30.0M in share repurchases, partially offset by $1.2M in share issuance. No dividends were paid.
Key anomalies include the large swing in accounts receivable (positive $48.7M) and the significant deferred revenue decline, which may indicate revenue recognition timing or contract changes. The income taxes payable line also showed a $11.7M outflow, suggesting a one-time tax payment.