Commvault substantially outperformed its revenue guidance of $245 million by reporting a 21 percent year-over-year rise to $262 million in its third fiscal 2025 quarter, ending December 31.
The news had the company’s stock price seesawing wildly, starting the day at $163.613, falling to $142.16, recovering to $155.60, and then gently rising back to $153.16.
GAAP net income was down 35.7 percent to $11 million despite the revenue rise. The customer count rose 31 percent year-over-year to 11,500, including over 7,000 SaaS customers and 1,000 new customers in the quarter, around 200 from Clumio. Annual recurring revenue (ARR) was up 18 percent to $890 million, while subscription revenue increased strongly by 39 percent to $158.3 million, driving subscription ARR up 29 percent to $734 million. Within that, the company talked up its pure SaaS [Commvault Cloud] AR, which rose by 71 percent to $259 million.
President and CEO Sanjay Mirchandani said: “Once again, Commvault has delivered a record-breaking quarter with accelerating revenue growth … We saw a strong uptick in transaction volume, impressive growth in our land and expand business, and an acceleration in our organic growth rate … As we look to the future, we believe our unified platform which enables customers to anticipate, prepare for, and recover from inevitable attacks will be more critical than ever.”
Financial summary:
- Gross margin: 81.5 percent – down from year-ago 82 percent
- Operating cash flow: $30.1 million
- Free cash flow: $29.9 million
CFO Jen DiRico talked about “the fantastic results this quarter and year-to-date,” telling the earnings call: “The growth in subscription revenue resulted from continued SaaS momentum and significant improvement in the volume of both term software and SaaS transactions compared to the prior year. Revenue from term software transactions over $100,000 increased by 18 percent, benefiting from a 30 percent rise in volume. This included more than a dozen wins over $1 million. In addition, we saw robust growth in landing new large enterprise customers this quarter, including Equinix, AXA, Vanderbilt University Medical Center, and DenizBank Financial Services.”
She added: “We added a record number of SaaS customers this quarter. We’re pleased with this increase in volume with small and medium-sized enterprises.”
Costs went up in the quarter, according to DiRico. “Q3 operating expenses included costs associated with SHIFT in London, the onboarded Clumio employees, and our continued investments to accelerate revenue momentum, which included higher commissions and bonuses on a record sales result.”
The SaaS net dollar retention (NRR) rate was 127 percent, up from 125 percent a year ago. Adopting a cyber-resilience strategy is paying off, with Mirchandani saying: “Our cyber resilience marketing message is resonating with customers and we’re seeing record inflows and pipeline growth. And in Q3, we saw increased transaction volumes, strong close rates, accelerating customer numbers, and robust expansion activity.”
The final quarter’s outlook is for revenues of $262 million ± $2 million, a 17.3 percent year-over-year rise at the midpoint. The full FY 2025 revenue forecast is for $982.5 million ± $2.5 million, indicating a 17 percent year-over-year increase at the midpoint.
Commvault aims to achieve more than $1 billion in ARR in fiscal 2026, along with over $330 million in SaaS ARR – a >40 percent CAGR from fiscal 2024. DiRico said: “Looking forward to FY26, we are currently trending ahead of the financial targets that we originally shared, and we now expect to achieve those targets earlier than our initial plan.” Its previous guidance had been $1 billion ARR and $330 million SaaS ARR by the end of fiscal 2026.
The company is capitalizing on the opportunity to sell hybrid cloud products to SaaS customers and SaaS services to hybrid cloud customers. Such cross-selling represents a significant customer base revenue expansion opportunity for Commvault.
This is a steadily growing business that has made relevant acquisitions, like Clumio, and partnerships, and generated a profit for seven successive quarters. It’s surprising that investors don’t sit back and let it grow.
