BB
BlackBerry
TL;DR
BlackBerry is executing a profitable turnaround, with QNX's royalty model, Secure Comms' stability, and IVY's potential positioning it for multi-year upside in software-defined vehicles and government contracts anchored by geopolitical trust.
BlackBerry's Q2 FY2026 earnings showcased a robust turnaround, with beats across revenue, margins, and EBITDA (non-GAAP EPS $0.04 vs. $0.01 est.), plus raised guidance signaling sustainable profitability despite Secure Comms YoY decline. QNX and Secure Communications divisions are firing on all cylinders, with QNX up 15.4% YoY, driving operating leverage while management deploys buybacks to capitalize on undervaluation. This isn't just stabilization—it's a pivot to scalable growth in embedded software, secure comms, and emerging platforms like IVY for vehicle data monetization.
Investment Outlook
BullishAsymmetric Trade Idea
vs. spot on Sep 28, 2025
days
6/10
Post-earnings momentum from raised guidance, Q3 cash flow beat, and IVY commercialization milestones drives re-rating; QNX design wins and Cylance cash inflow catalyze 50% upside by Q1 2026 earnings.
Investment Thesis
BlackBerry's shift to high-margin software divisions is finally yielding results, transforming it from a legacy hardware player into a lean, cash-generative enterprise with deep moats in automotive, secure communications, and geopolitical niches.
Once synonymous with smartphones, BlackBerry has spent years shedding unprofitable segments like Cylance and refocusing on QNX embedded software and Secure Communications. The Q2 FY2026 results mark an inflection point: revenue beat guidance at $129.6M, gross margins hit 75%, and adjusted EBITDA surged 72% YoY to $25.9M, with non-GAAP EPS of $0.04 beating estimates. This comes amid cost cuts (OpEx down 5% YoY) and strategic investments in QNX's growth engines and IVY platform for vehicle data. Now, with positive cash flow, raised FY2026 guidance ($519M–$541M revenue, $82M–$101M EBITDA), a $865M QNX royalty backlog, and government deals providing sovereign trust barriers, the company is poised to reward patient investors as royalties scale, IVY unlocks recurring auto data revenue, and geopolitical anchors stabilize Secure Comms. The 'now' moment is critical: restructuring headwinds are behind, and industry tailwinds like software-defined vehicles and digital sovereignty are accelerating, though Android competition looms.
Investment Debates
QNX Growth Sustainability
CRITICALQNX revenue grew 15% YoY to $63.1M with 83% gross margins; Rule of 40 score of 47; partnerships with Qualcomm, NVIDIA; 50% pipeline outside auto.
Bull
Royalty Ramp Accelerating
QNX's elite margins and design wins in DCU programs signal a royalty inflection as vehicles shift to software-defined architectures, potentially doubling revenue in 3-5 years via ecosystem lock-in.
Bear
Auto Cycle Vulnerability
Embedded software is tied to auto OEMs facing EV slowdowns; competition from open-source like Linux could erode pricing power, capping growth below 10% annually if royalties delay.
QNX Growth Sustainability
CRITICALQNX revenue grew 15% YoY to $63.1M with 83% gross margins; Rule of 40 score of 47; partnerships with Qualcomm, NVIDIA; 50% pipeline outside auto.
Bull
Royalty Ramp Accelerating
QNX's elite margins and design wins in DCU programs signal a royalty inflection as vehicles shift to software-defined architectures, potentially doubling revenue in 3-5 years via ecosystem lock-in.
Bear
Auto Cycle Vulnerability
Embedded software is tied to auto OEMs facing EV slowdowns; competition from open-source like Linux could erode pricing power, capping growth below 10% annually if royalties delay.
Secure Comms Stability
HIGHRevenue $59.9M beat; ARR $213M (+$4M QoQ); raised FY guidance $239M–$247M; 16% EBITDA margin; key gov deals (German 5-year, U.S. State Dept).
Bull
Recurring Revenue Anchor
Improved retention and platform expansions (iOS support) turn Secure Comms into a predictable cash cow, funding QNX while government stickiness ensures mid-teens margins long-term.
Bear
Lumpy Hardware Drag
Secusmart hardware mix dilutes margins (66% vs. software highs); long sales cycles expose to budget cuts, risking ARR stagnation if churn rises amid cyber alternatives.
Secure Comms Stability
HIGHRevenue $59.9M beat; ARR $213M (+$4M QoQ); raised FY guidance $239M–$247M; 16% EBITDA margin; key gov deals (German 5-year, U.S. State Dept).
Bull
Recurring Revenue Anchor
Improved retention and platform expansions (iOS support) turn Secure Comms into a predictable cash cow, funding QNX while government stickiness ensures mid-teens margins long-term.
Bear
Lumpy Hardware Drag
Secusmart hardware mix dilutes margins (66% vs. software highs); long sales cycles expose to budget cuts, risking ARR stagnation if churn rises amid cyber alternatives.
Cash Flow Trajectory
MEDIUMPositive OCF $3.4M and FCF $2.6M despite $19M tax; FY26 OCF guidance $35M–$40M + $38M Cylance proceeds; $363.5M cash; $20M buybacks.
Bull
Buyback Accretion Boost
Post-restructuring, cash generation supports aggressive repurchases at undervalued levels, enhancing EPS and signaling management confidence in 20%+ FCF yields.
Bear
One-Offs Mask Weakness
Tax and Cylance payments inflate positivity; underlying ops may not sustain without new wins, leaving balance sheet vulnerable to FX or investment overruns.
Cash Flow Trajectory
MEDIUMPositive OCF $3.4M and FCF $2.6M despite $19M tax; FY26 OCF guidance $35M–$40M + $38M Cylance proceeds; $363.5M cash; $20M buybacks.
Bull
Buyback Accretion Boost
Post-restructuring, cash generation supports aggressive repurchases at undervalued levels, enhancing EPS and signaling management confidence in 20%+ FCF yields.
Bear
One-Offs Mask Weakness
Tax and Cylance payments inflate positivity; underlying ops may not sustain without new wins, leaving balance sheet vulnerable to FX or investment overruns.
Overall Turnaround Execution
HIGHTotal revenue $129.6M beat; EBITDA +72% to $25.9M; raised FY revenue midpoint +$7M, EBITDA +$12M; EPS $0.11–$0.15.
Bull
Operating Leverage Unlocked
Margin expansion and cost discipline prove the new model scales profitably, with guidance raises validating a path to $100M+ EBITDA by FY2027.
Bear
Guidance Too Optimistic
Beats driven by low expectations; macro headwinds in auto and gov spending could miss raised bars, reverting to flat growth and margin compression.
Overall Turnaround Execution
HIGHTotal revenue $129.6M beat; EBITDA +72% to $25.9M; raised FY revenue midpoint +$7M, EBITDA +$12M; EPS $0.11–$0.15.
Bull
Operating Leverage Unlocked
Margin expansion and cost discipline prove the new model scales profitably, with guidance raises validating a path to $100M+ EBITDA by FY2027.
Bear
Guidance Too Optimistic
Beats driven by low expectations; macro headwinds in auto and gov spending could miss raised bars, reverting to flat growth and margin compression.
Geopolitical Moat
CRITICALMulti-year Canadian government contract in Oct 2023 for BlackBerry Cloud, UEM, and SecuSUITE; NATO/Common Criteria certifications; wins with German gov, US State Dept.
Bull
Sovereign Trust Barrier
Elite certifications and Canadian HQ create a protected niche immune to US tech giants, ensuring high-margin, recurring government revenue as digital sovereignty rises.
Bear
Limited Commercial Scale
Government deals are stable but small-scale; they can't offset cybersecurity revenue declines (down 9.9% YoY to $59.9M in Q2 FY2026) in a market dominated by Microsoft and CrowdStrike.
Geopolitical Moat
CRITICALMulti-year Canadian government contract in Oct 2023 for BlackBerry Cloud, UEM, and SecuSUITE; NATO/Common Criteria certifications; wins with German gov, US State Dept.
Bull
Sovereign Trust Barrier
Elite certifications and Canadian HQ create a protected niche immune to US tech giants, ensuring high-margin, recurring government revenue as digital sovereignty rises.
Bear
Limited Commercial Scale
Government deals are stable but small-scale; they can't offset cybersecurity revenue declines (down 9.9% YoY to $59.9M in Q2 FY2026) in a market dominated by Microsoft and CrowdStrike.
IVY Growth Potential
HIGHCo-developed with AWS; aims for vehicle data monetization; early commercialization stage; total addressable market in auto data untapped.
Bull
Recurring Revenue Shift
IVY moves from one-time royalties to platform fees, tapping huge auto data TAM; partnerships could drive explosive adoption if executed well.
Bear
Unproven Execution Risk
Historical stumbles and early stage mean IVY may fail to scale; competition from Google could sideline it before meaningful revenue materializes.
IVY Growth Potential
HIGHCo-developed with AWS; aims for vehicle data monetization; early commercialization stage; total addressable market in auto data untapped.
Bull
Recurring Revenue Shift
IVY moves from one-time royalties to platform fees, tapping huge auto data TAM; partnerships could drive explosive adoption if executed well.
Bear
Unproven Execution Risk
Historical stumbles and early stage mean IVY may fail to scale; competition from Google could sideline it before meaningful revenue materializes.
Company Overview
Operations
BlackBerry operates through QNX (embedded software for automotive/IoT, royalty-based), Secure Communications (endpoint security for governments/enterprises, subscription-heavy), and Licensing (IP royalties). Revenue mix: ~49% QNX, 46% Secure Comms, 5% Licensing; high gross margins from software leverage.
Market Position
QNX holds ~50% share in automotive safety-certified RTOS, with 255M vehicles deployed and $865M royalty backlog, expanding IoT footprint; Secure Comms leads in gov secure messaging (e.g., SecuSUITE). TAM: $10B+ embedded software, $20B+ secure comms; moats in certification and trust, but faces Linux/Android competition.
Recent Events
Q2 FY2026 earnings beat (Sep 2025): revenue $129.6M, EBITDA $25.9M, non-GAAP EPS $0.04 vs. $0.01 est.; raised FY guidance; $20M share buybacks; Cylance sale tranche expected Q4; QNX up 15.4% YoY, Secure Comms down 9.9% YoY but beat guidance; ongoing IVY development with AWS.
Governance & Forensics
Management Alignment
CEO John Giamatteo (since 2023) driving turnaround with focus on profitability; insider ownership ~1%, but buybacks (7.6M shares canceled) align with shareholders; no major red flags in forensics, clean post-Cylance divestiture.
Capital Allocation History
Past missteps (smartphone pivot, Cylance acquisition) led to losses, but recent discipline shines: $99M YoY cash increase, opportunistic buybacks at $3.97 avg, restructuring complete—shift to prudent growth funding.
Key Catalysts
H2 2025
QNX Royalty Inflection
Launch of DCU-based vehicle programs in H2 2025 ramps recurring royalties, boosting QNX revenue 20%+; watch design win conversions.
Q3-Q4 FY2026
Secure Comms Guidance Beat
Repeated raises signal H2 surprises from gov deals; ARR growth to $220M+ could add $10M+ to EBITDA, stabilizing valuation.
Q4 2025
Cylance Proceeds Inflow
$38M cash in Q4 strengthens balance sheet for buybacks/investments; potential 5-10% EPS accretion if deployed accretively.
Feb 2026
FY2026 Earnings Momentum
Q3 OCF $10M–$20M confirms cash positivity; full-year beats could re-rate multiples from 1x sales to 3x+.
H2 2026
IVY Platform Launch
Commercial rollout could unlock recurring auto data revenue, boosting valuation if major OEM adoptions follow; watch design wins and partnerships.
Valuation Scenarios
DCF based on FY2026 EBITDA guidance ($82M–$101M) at 8-12x multiple (peer avg for software turnaround); cross-check with 2-4x sales on $530M revenue midpoint; current EV ~$500M implies undervaluation if execution holds. Specific targets inferred from operating leverage; no explicit comps in source.
$2.50
$5.50
$7.50
$15.00 (5-year horizon)
Risk Factors
Automotive Cycle Slowdown
Delays QNX royalties, cutting revenue 10-15%; EBITDA margins slip to 60%, pressuring stock to $2.50.
Government Contract Volatility
Budget cuts hit Secure Comms ARR growth; lumpiness leads to guidance cuts, eroding investor confidence and multiples.
Competitive Erosion in Embedded
Open-source alternatives like Linux gain traction, capping QNX pricing; growth stalls at 5%, valuation stuck at 1x sales.
Execution on Cost Control
FX headwinds or investment overruns inflate OpEx; cash flow turns negative, halting buybacks and sparking dilution fears.
Android Automotive Competition
Erodes QNX market share and royalties, potentially halving IoT revenue by 2027 per S&P.
IVY Execution Failure
Delayed adoption squanders growth bet, trapping company in low-growth stasis.
Conclusion
BlackBerry's Q2 results validate the turnaround thesis: profitable divisions, expanding margins, and proactive capital returns signal a company finally leveraging its software assets. While risks like sector cyclicality and Android competition loom, the base case points to steady appreciation as royalties, subscriptions, and IVY potential compound, bolstered by geopolitical moats.
Hypothetical Position
Long BB shares with a 12-18 month horizon, allocating 5-10% portfolio weight; trail stops at 20% drawdown to capture upside from catalysts.
Informational only. Not financial advice. Content reflects community and AI-aggregated opinions, not personalized recommendations. Investing involves risk; do your own research. Price targets and projections are hypothetical and not guarantees. User submissions and history are provided “as is” and are not verified.
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