OTEX · Open Text
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $27.95
Note written ·
Price against the kill line
11.1% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $27.95, on record since 11 November 2026. The shares are up 4.9% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $27.95, which would put the shares above their late-October highs and show them leading the S&P 500. A second-quarter fiscal 2027 revenue result above the $1.290 billion top of guidance, or a raised fiscal 2027 revenue outlook, would also show the shares leading.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Technology
Quarter to 30 September 2026, filed 5 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 1,237
- Revenue, change on a year (%)
- −4.0
- Gross margin (%)
- 73.2
- Operating margin (%)
- 20.3
- Free cash flow, four quarters ($M)
- 845
- Net cash, cash less debt ($M)
- −4,783
- Price to earnings (×)
- 9.2
- Enterprise value to sales (×)
- 2.1
All filed numbers
What Open Text reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 1,237 | −4.0 | 73.2 | 20.3 |
| first filed | 1,349 | +2.9 | 75.0 | 23.7 |
| first filed | 1,283 | +2.2 | 73.1 | 15.7 |
| first filed | 1,327 | −0.6 | 74.0 | 22.0 |
| first filed | 1,288 | +1.5 | 72.8 | 21.0 |
| first filed | 1,311 | −3.8 | 72.3 | 13.9 |
| Pre-tax income ($M) | 199 |
| Net income ($M) four quarters: 652 | 155 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | −4.6 |
| Operating cash flow ($M) | 1,031 |
| Capital spending ($M) | 187 |
| Free cash flow ($M) | 845 |
| Cash and short-term investments ($M) | 983 |
| Debt ($M) long-term debt | 5,766 |
| Net cash, cash less debt ($M) | −4,783 |
| Deferred revenue ($M) −2.1% on a year | 1,530 |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | 663 |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 4,109 |
| Market value ($M) | 6,005 |
| Enterprise value, market value plus net debt ($M) | 10,788 |
| Enterprise value to sales (×) | 2.1 |
| Enterprise value to operating income (×) | 10.1 |
| Price to earnings (×) | 9.2 |
| Price to book value (×) | 1.5 |
| Free-cash-flow yield (%) | 14.1 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 3.7% of shares outstanding sold short, 6.2 days of average trading to cover, −3.2% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $0 |
| 12 monthsfrom | $0 | $0 |
The thesis
Open Text Corporation is more likely to lag the S&P 500 over the next three months. Revenue is shrinking, the second-quarter guide is light, and the 10 February 2027 Investor Day framework decides whether the decline levels off.
The company reported fiscal first-quarter 2027 revenue of $1,236.6 million on 5 November 2026, down 4.0% from $1,288.1 million a year earlier. That was inside its own $1.220–1.250 billion range and $4 million under the $1.241 billion analyst estimate, according to company news. It affirmed fiscal 2027 revenue guidance of $5.135–5.185 billion, which sits below fiscal 2026 revenue of $5.246 billion. Profit was the strong part: adjusted earnings per share were $1.05 against a $0.92 estimate, and adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation, as adjusted by the company) was $442.4 million, a 35.8% margin.
The shares closed at $26.12 on 5 November 2026 and $24.85 on 6 November 2026, then held between $24.56 and $24.96 through the close of $24.81 on 12 November 2026. The market has priced the profit beat and the affirmed plan, and has paid nothing extra for them.
Bullish and bearish views on Open Text Corporation
The bull case on Open Text Corporation (OTEX), in brief: profit beat the guided range. The bear case: revenue is shrinking.
Bull case
- Profit beat the guided range. First-quarter adjusted EBITDA margin was 35.8% against the 32–33% range management gave in August, and adjusted EPS of $1.05 beat the $0.92 estimate (5 November 2026 results release). Management has said fiscal 2027 margin will fall as it funds $100–200 million of reinvestment, so the quarter shows that spending had not yet reached results.
- Cash flow rose. Free cash flow was $138.5 million, up 36.8% from $101.2 million a year earlier, on operating cash flow of $172.3 million (5 November 2026 release). Net leverage was 2.55 times at the end of the quarter.
- Core cloud is growing at double digits. Core cloud revenue was $339 million, up 11.2%, and total cloud revenue was $505.5 million, up 4.3% (5 November 2026 release). Cloud is the part of the business that has to offset the legacy decline.
- Annual guidance was affirmed. Company news on 5 November 2026 shows fiscal 2027 sales guidance of $5.135–5.185 billion kept, against a $5.157 billion analyst estimate.
- Barclays raised its target. Barclays kept an Equal-Weight rating and raised its price target on Open Text to $29 on 6 November 2026.
Bear case
- Revenue is shrinking. First-quarter revenue fell 4.0%, and annual recurring revenue fell 3.0% to $1,040 million (5 November 2026 release). The fiscal 2027 range implies a full-year decline from $5.246 billion.
- The second-quarter guide is light. Second-quarter revenue guidance of $1.260–1.290 billion sits under the $1.298 billion analyst estimate, so even the top of the range is below consensus (company news, 5 November 2026).
- Adjusted profit fell from a year earlier. Adjusted EBITDA of $442.4 million compares with $467.4 million a year earlier, a margin of 35.8% against 36.3% (5 November 2026 release). Adjusted EPS of $1.05 is below the $1.23 reported in the fourth quarter of fiscal 2026.
- Capital-return policy is open. The company has not approved an annualised dividend; the $0.280 quarterly payment was declared on 3 November 2026. Fiscal 2026 capital returns were $677 million, and repurchases in the first quarter were about $23 million per the release highlights.
- New debt costs more. The October notes carry 6.700% and 7.150% coupons, while the tendered 2028 notes carried 3.875%. Refinancing pushed maturities out without cutting interest cost.
Price setup
The shares closed at $24.81 on 12 November 2026. The 52-week intraday high is $35.26, set on 12 November 2025, and the last close is 29.6% below it. The 52-week closing low is $20.01, on 22 June 2026. The shares are up 2.1% over three months.
The last close is above both the 50-day average of $24.47 and the 200-day average of $23.41, both calculated from adjusted closes. The shares gave up the post-earnings drop from $26.12 to $24.85 between 5 November 2026 and 6 November 2026 and have not recovered it in the five sessions since.
The Barclays target of $29, dated 6 November 2026, is the only post-report analyst target on file. Targets dated before the 5 November 2026 report are out of date.
Catalysts ahead
- 4 December 2026: Record date for the $0.280 per share quarterly dividend, payable 18 December 2026. The company has not approved an annualised dividend, so each declaration is a read on its capital-return policy.
- 10 February 2027: Investor Day, where the company says it will discuss strategic priorities and the financial framework. Sets the multi-year revenue and margin path that decides whether the 4.0% revenue decline levels off.
What would change the view
A daily close above $27.95, which would put the shares above their late-October highs and show them leading the S&P 500. A second-quarter fiscal 2027 revenue result above the $1.290 billion top of guidance, or a raised fiscal 2027 revenue outlook, would also show the shares leading.
What it trades with
OpenText trades with mature enterprise-software companies whose legacy licence and maintenance revenue is shrinking while cloud grows, and with software shares that react to artificial-intelligence adoption news. It is dual-listed on Nasdaq and the Toronto Stock Exchange and reports in US dollars, so the Canadian line also moves with the US–Canadian dollar rate.
The evidence, claim by claim (7)
- Fiscal first-quarter 2027 revenue was $1,236.6 million, down 4.0% from $1,288.1 million; cloud revenue $505.5 million, up 4.3%; core cloud revenue $339 million, up 11.2%. OpenText fiscal first-quarter 2027 results release · as of
- Adjusted EBITDA was $442.4 million (35.8% margin) versus $467.4 million (36.3%) a year earlier; adjusted EPS was $1.05 versus a $0.92 estimate. OpenText fiscal first-quarter 2027 results release; company news · as of
- Free cash flow was $138.5 million, up 36.8% from $101.2 million; operating cash flow was $172.3 million; net leverage was 2.55 times. OpenText fiscal first-quarter 2027 results release · as of
- Annual recurring revenue was $1,040 million, down 3.0% from a year earlier. OpenText fiscal first-quarter 2027 results release · as of
- Fiscal 2027 revenue guidance of $5.135–5.185 billion was affirmed against a $5.157 billion estimate; second-quarter revenue guidance is $1.260–1.290 billion against a $1.298 billion estimate. Company news headlines · as of
- Barclays kept an Equal-Weight rating on Open Text and raised its price target to $29. Barclays rating note via company news · as of
- Quarterly dividend of $0.280 per share declared 3 November 2026, record date 4 December 2026, payable 18 December 2026; Investor Day set for 10 February 2027. OpenText fiscal first-quarter 2027 results release · as of
Sources
- OpenText Reports First Quarter Fiscal Year 2027 Financial Results · tradingview.com
- Open Text (OTEX) Q1 2027 Earnings Call Transcript · fool.com ·
- OpenText Q1 earnings: revenue falls 4% to $1.24B · stocktitan.net
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