CVLT Q1 Earnings Call: Cloud Security and SaaS Upsell Drive Outperformance, Guidance Points to Sustained Growth

Data backup provider Commvault (NASDAQ:CVLT) reported revenue ahead of Wall Street's expectations in Q1 CY2025, with sales up 23.2% year on year to $275 million. The company expects next quarter's revenue to be around $268 million, close to analysts' estimates. Its non-GAAP profit of $1.03 per share was 10.7% above analysts' consensus estimates.
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Revenue: $275 million vs analyst estimates of $262.4 million (23.2% year-on-year growth, 4.8% beat)
Adjusted EPS: $1.03 vs analyst estimates of $0.93 (10.7% beat)
Adjusted Operating Income: $59.1 million vs analyst estimates of $53.97 million (21.5% margin, 9.5% beat)
Management's revenue guidance for the upcoming financial year 2026 is $1.14 billion at the midpoint, beating analyst estimates by 2.8% and implying 14% growth (vs 18.4% in FY2025)
Operating Margin: 9.7%, up from 8.1% in the same quarter last year
Free Cash Flow Margin: 27.7%, up from 11.4% in the previous quarter
Annual Recurring Revenue: $930.1 million at quarter end, up 20.8% year on year
Billings: $313 million at quarter end, up 28% year on year
Market Capitalization: $7.77 billion
Commvault's first quarter results exceeded Wall Street expectations, as management credited strong customer demand for cyber resilience and rapid adoption of its SaaS-based data protection offerings. CEO Sanjay Mirchandani attributed the quarter's momentum to growing concerns around ransomware and compliance, with products like Active Directory Recovery and Clean Room winning large enterprise customers and driving higher subscription revenue. He noted, "Organizations are increasingly turning to Commvault to keep their business continuous," highlighting recent wins in regulated industries and cloud-first environments.
For its forward-looking guidance, leadership emphasized continued investment in product expansion and cloud integrations to capture what it sees as a $24 billion market opportunity. CFO Jen DiRico explained the company's margin outlook and investment strategy as a balance between maintaining profitability and accelerating growth, stating that Commvault will "continue to invest behind the opportunity while also being thoughtful around our overall profitability." Management is monitoring macroeconomic conditions, but remains confident that demand for cyber resilience and cloud security will drive double-digit growth for the year.
Commvault's management focused on customer adoption of its cyber resilience platform, product innovation, and expanding partner relationships as the main contributors to the quarter's results and outlook.
Cyber resilience demand: Growing threats like ransomware and stricter regulations are making cyber resilience a top priority for customers, especially in financial services and healthcare. Commvault's solutions were cited in wins with major banks and multinational corporations seeking to consolidate and simplify their data protection.
Product innovation and launches: The company introduced new capabilities, such as Active Directory forest-level recovery and Cloud Rewind, enabling faster recovery from cyberattacks and cloud data loss. Management highlighted the importance of these features for recovering critical business operations quickly, particularly as enterprises adopt more AI-driven workloads.
SaaS and subscription momentum: Commvault's SaaS offerings—especially Active Directory, Clean Room, and Threat Scan—drove a significant share of new and upsell business. Subscription annual recurring revenue (ARR) grew sharply, and roughly 30% of SaaS customers now use multiple products, supporting management's cross-sell strategy.
Partner ecosystem expansion: Collaborations with technology and cloud partners like AWS, Hitachi, and HPE accelerated international growth and enabled Commvault to win business by supporting compliance requirements such as GDPR and DORA. Marketplace transactions increased notably year over year.
Hybrid and cloud-first strategy: Management emphasized Commvault's ability to deliver both on-premise and cloud-native protection, giving enterprises flexibility. Investments in hybrid and multi-cloud architecture were presented as competitive differentiators, helping to win customers migrating complex workloads to the cloud.
Management's outlook for the coming quarters centers on sustained demand for cyber resilience solutions, continued product innovation, and prudent investment in growth initiatives.
Cloud and cyber security tailwinds: The ongoing rise in cyberattacks, stricter compliance mandates, and enterprise adoption of hybrid and multi-cloud environments are expected to fuel continued demand for Commvault's offerings.
Expansion of multiproduct adoption: Management aims to increase the percentage of SaaS customers using multiple offerings, leveraging cross-sell and upsell opportunities with newer modules like Threat Scan and Clean Room, which they believe will drive higher net retention.
Balanced investment approach: While targeting double-digit revenue growth, Commvault plans to maintain margins through disciplined investment in R&D, sales, and partner enablement. Management noted the different margin profile of SaaS offerings and intends to balance growth with profitability.
Eric Heath (KeyBanc Capital Markets): Asked how macroeconomic uncertainty is affecting customer demand and sales cycles; management replied that cyber resilience remains a priority and that no significant changes in customer buying patterns have emerged.
Eric Heath (KeyBanc Capital Markets): Sought clarity on operating margin outlook and investment strategy; CFO Jen DiRico explained the flat margin guidance as a balance between seizing growth opportunities and maintaining profitability.
Aaron Rakers (Wells Fargo): Requested detail on the integration and contribution of recent acquisitions; management emphasized that acquired products are now fully integrated and provide unique capabilities, especially for cloud-scale data recovery.
Aaron Rakers (Wells Fargo): Inquired about progress in multiproduct SaaS adoption; leadership stated that the absolute number of customers using multiple products is rising, with net dollar retention remaining high.
Param Singh (Oppenheimer): Asked about changes in the competitive landscape following industry consolidation; management responded that Commvault's focus on resilience and hybrid architecture is driving share gains, particularly in high-growth SaaS segments.
Looking ahead, the StockStory team will be monitoring (1) the pace at which Commvault expands multiproduct adoption among SaaS customers, (2) the impact of new product launches and integrations on customer wins in regulated and international markets, and (3) the company's ability to sustain high net retention and ARR growth as the competitive landscape evolves. Execution on cross-sell initiatives and continued partner ecosystem expansion will also serve as key indicators of future performance.
Commvault Systems currently trades at a forward price-to-sales ratio of 7×. At this valuation, is it a buy or sell post earnings? See for yourself in our free research report.
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