Key Highlights

  • Subscription revenue rose 21% to USD 269 million, including SaaS revenue of USD 106 million, up 33%.
  • Subscription annualized recurring revenue reached USD 1.104 billion, up 20%, with SaaS ARR up 35% to USD 454 million.
  • Non-GAAP operating margin was 21.9%, up 330 basis points, and free cash flow was USD 71 million.
  • Management raised the midpoint of fiscal 2027 subscription ARR guidance to USD 1.210 billion and lifted free cash flow guidance.

Subscription Growth Outpaces Legacy Decline

Commvault (NASDAQ:CVLT) reported fiscal second-quarter 2027 results for the period ended Sept. 30 on Tuesday. Total revenue was USD 312.4 million, up 13%, while subscription revenue rose 21% to USD 269 million as perpetual software continued to shrink. Perpetual license revenue fell 40% and perpetual support fell 23%, a decline management called a deliberate shift away from legacy maintenance.

Subscription annualized recurring revenue reached USD 1.104 billion, up 20%, with constant-currency net new subscription ARR of USD 51 million. SaaS ARR rose 35% to USD 454 million. Subscription net dollar retention was 113%, and more than 500 new subscription customers were added, up 17%. Of managed SaaS customers, 53% use two or more offerings against 45% a year ago.

Chief Executive Sanjay Mirchandani tied demand to enterprise concern over resilience as artificial intelligence raises both innovation and risk. Identity resilience ARR nearly doubled, and cloud-centric offerings grew 50% including Clumio.

Margins, Cash and Buybacks

GAAP net income was USD 29.1 million, or USD 0.69 per diluted share, against USD 14.7 million and USD 0.33. Income from operations was USD 30 million, a 9.7% margin. Non-GAAP EBIT was USD 68 million, a 21.9% margin, which management said exceeded guided metrics on go-to-market execution and cost discipline.

Non-GAAP gross margin was 81.6%, up 110 basis points, and SaaS gross margin was 70%, up 650 basis points on product optimization and hyperscale partner agreements. Operating expenses were USD 185 million, or 59% of revenue against 61%.

Operating cash flow was USD 75 million and free cash flow USD 71 million. The company bought back about 808,000 shares for USD 109 million and held USD 897 million of cash at quarter end.

Guidance

For the third quarter, management guided to subscription revenue of USD 293 million to USD 297 million, about 15% growth, and a non-GAAP EBIT margin of 20.5% to 21.0%, which includes the cost of its annual user conference.

For fiscal 2027, subscription revenue is guided to USD 1.127 billion to USD 1.133 billion, about 16% growth at the midpoint, and subscription ARR to USD 1.205 billion to USD 1.215 billion. Free cash flow is guided to USD 255 million to USD 265 million, non-GAAP EBIT margin to 21.0% to 21.5%, and total revenue to USD 1.30 billion to USD 1.31 billion. Management also aims for SaaS ARR above USD 500 million by year end.

Recent product items included an Active Directory recovery feature intended to cut clean recovery from hours to minutes, FedRAMP High authorization for managed service providers, and a Threat Scan integration with Google Threat Intelligence. The federal business is now majority cloud-based, with over half of second-quarter bookings in SaaS and cloud.

Subscription Markers to Follow

Tracking points include SaaS ARR against the USD 500 million year-end aim, net dollar retention relative to 113%, and the third-quarter margin against the 20.5% to 21.0% range.

Further items are perpetual revenue declines against subscription growth, share repurchase pace relative to USD 109 million, and free cash flow against the USD 255 million to USD 265 million range.