Commvault Systems, Inc.

What they do

Commvault sells cyber resiliency offerings covering data protection, cyber recovery, data security and governance, delivered via Commvault Cloud across on-premise, hybrid, multi-cloud and SaaS environments. The platform is packaged into three solution sets: Operational Recovery for core backup and recovery, Autonomous Recovery for automated orchestration and failover, and Cyber Recovery, which adds threat detection and clean recovery for ransomware response. Offerings are sold predominantly via subscription arrangements (SaaS and term-based), plus perpetual licenses, support and professional services, delivered as vendor-hosted SaaS, customer-managed software, appliances, or through partners and cloud and managed service providers.

Revenue drivers

• Subscription revenue (SaaS and term-based) — The primary revenue source, recognized when software is delivered for term licenses and ratably or on consumption for support and SaaS; subscription revenue was $267M in Q1 FY27, up 16% year over year, with SaaS alone crossing $100M, up 39%.
• Subscription ARR — Annualized recurring revenue from subscription arrangements reached $1,054M in Q1 FY27, up 22% year over year, indicating the scale of the recurring base relative to total revenue.
• Support revenue — Term-based and perpetual support contracts, typically one to three years for term-based and one year for perpetual support, sold as a percentage of net software purchases and recognized ratably.
• Other services — Professional services including consultation, assessment and design, installation and customer education, recognized as services are performed and variable period to period.

Recent performance

For the first quarter of fiscal 2027 ended June 30, 2026, Commvault reported subscription revenue of $267M, up 16% year over year, with SaaS revenue crossing $100M, up 39%. Subscription ARR reached $1,054M, up 22% year over year. Income from operations was $26M (8.2% operating margin), while non-GAAP EBIT was $71M (22.8% margin). Operating cash flow was $52M and free cash flow was $51M, up 71% year over year. For full fiscal 2026, revenue was $1.18B, net income $70.7M, and operating cash flow $244.7M.

Strategy

Commvault is positioning its platform around cyber resilience for AI-driven and hybrid cloud environments, emphasizing data security, identity resilience and verified clean recovery. Management highlighted a multi-year strategic partnership with Microsoft to offer Commvault's AI and cyber resilience solutions as a native ISV service on Microsoft Azure. The company continues to invest in both indirect channel relationships and its direct sales force, expecting more revenue from indirect channels over the long term. Capital return is part of the plan, with share repurchases expected at approximately 60% of free cash flow for fiscal 2027.

Risks

• Intense competition — The data protection and cyber resilience market is described as intensely competitive and fragmented, with primary competitors Rubrik, Cohesity and Veeam, plus large technology companies and cloud providers.
• Channel dependence — Approximately 90% of total revenues came through indirect distribution channels in the three months ended June 30, 2026 and 2025, and failure of channel partners to effectively sell could materially harm revenues.
• Larger competitors with greater resources — Many competitors have significantly greater financial, technical, sales and marketing resources, larger installed customer bases and greater brand recognition, and may respond faster to new technologies and customer requirements.
• Perpetual license and support mix exposure — Commvault still offers perpetual licenses and perpetual support alongside subscription offerings, and support revenue is generally recognized ratably over contract terms typically of one to three years, which can vary results period to period.

Outlook

For the second quarter of fiscal 2027, management guides subscription revenue of $264M to $268M and non-GAAP EBIT margin of approximately 20%. For the full fiscal year 2027, guidance is subscription revenue of $1,119M to $1,129M, subscription ARR of $1,200M to $1,210M, non-GAAP EBIT margin of approximately 21%, and free cash flow of $250M to $260M. Share repurchases are expected at approximately 60% of free cash flow, with diluted shares outstanding expected at approximately 42 million.