Open Text (OTEX) Q2 2025 earnings summary

Executive summary

• Q2 FY25 revenue was $1.335B, down 13.1% year-over-year, or 4.9% excluding AMC divestiture; cloud revenues grew 2.7% to $462M, and annual recurring revenue (ARR) was $1.053B, down 8.1% year-over-year.

• Adjusted EBITDA reached $501M (37.6% margin), with free cash flow at $307M and adjusted EPS at $1.11; GAAP net income surged to $229.9M ($0.87 EPS).

• Completed AMC divestiture and transition, shifting focus from margin to growth, with new Titanium X platform and cloud, security, and AI integration on track for Q4.

• Record enterprise cloud bookings of $250M in Q2, up 6.1% year-over-year, with major SaaS wins across key verticals.

• Announced new RPO and Cloud cRPO disclosures for enhanced transparency and tracking of cloud growth.

Financial highlights

• GAAP gross margin was 73.3% (down from 73.6% YoY); non-GAAP gross margin was 77.2% (down from 78.6% YoY); adjusted EBITDA margin was 37.6%.

• Non-GAAP EPS for Q2 FY25 was $1.11, down 10.5% year-over-year; GAAP diluted EPS was $0.87.

• Operating cash flow was $348M; free cash flow was $307M, up 0.4% year-over-year.

• Cash and cash equivalents at quarter-end were $1.12B.

• 2.2M shares repurchased and retired for $66M–$67.1M in Q2.

Outlook and guidance

• FY25 revenue guidance revised down by $130M to $5.17B–$5.27B, mainly due to FX, DXC, and ITOM/ADM performance; cloud revenue and Adjusted EBITDA % targets unchanged.

• Free cash flow outlook raised to $600M–$650M for FY25; capital return expected to exceed $570M.

• Q3 revenue expected at $1.26B–$1.3B; ARR at $1.025B–$1.045B; Adjusted EBITDA margin 29–30%.

• Titanium X (Cloud Editions 25.2) platform expected to launch in Q4, supporting cloud, security, and AI integration.

• Expect return to organic revenue growth in Q4 FY25.