Last Update 06 Dec 25

CVLT: Shorter Contracts Will Shape Margins Yet Support Attractive Upside Potential

Analysts have trimmed their price target on Commvault Systems by $50 to $167, reflecting concerns that shorter term contract durations and the resulting pressure on margins could weigh on the shares in the near term, despite an otherwise solid quarter.

Analyst Commentary

Street research following the latest quarterly results highlights a mixed but generally constructive view on Commvault Systems, with the reduced price target reflecting a recalibration of expectations rather than a fundamental shift in the long term thesis.

Bullish Takeaways

Bullish analysts note that the quarter was largely positive operationally, reinforcing confidence in the company’s execution and underlying demand for its data protection offerings.
The updated price target still implies meaningful upside from current levels, suggesting that the stock remains reasonably valued relative to its growth profile and market position.
Steady performance across core products is viewed as evidence that the business can sustain midterm growth, supporting a long term investment case despite near term volatility.
Maintaining a neutral sector rating, rather than downgrading the stock, signals that analysts see room for performance to improve as margin headwinds are addressed.

Bearish Takeaways

Bearish analysts are focused on shorter term contract durations, which introduce more frequent renewal risk and can complicate revenue visibility and forecasting.
The lower margin outlook tied to these contract dynamics is expected to pressure profitability, which may cap valuation multiples in the near term.
The magnitude of the price target cut signals reduced conviction in near term upside, with expectations reset closer to current trading levels.
Concerns that margin compression could persist if contract structures do not normalize may keep some investors on the sidelines until there is clearer evidence of stabilization.

What's in the News

RBC Capital lowered its Commvault price target to $167 from $217 while maintaining a Sector Perform rating, citing shorter term contracts and a weaker margin outlook following an otherwise solid Q2. (RBC research note)
Commvault announced that CFO Jen DiRico will depart at year end, with CEO Sanjay Mirchandani overseeing a new Office of the CFO alongside senior finance leaders during the search for her successor. (Company announcement)
The company issued updated guidance for fiscal 2026, projecting total revenue of $1.161 billion to $1.165 billion and subscription revenue of $753 million to $757 million, alongside Q3 FY26 revenue guidance of $298 million to $300 million. (Company guidance)
Commvault completed a major share repurchase tranche, buying back more than 7 million shares since 2022 for $646 million, equal to roughly 15.9 percent of shares outstanding. (Company buyback update)
Commvault unveiled its Commvault Cloud Unity platform release, a next generation AI enabled offering that unifies data security, cyber recovery, and identity resilience across cloud, SaaS, on premises, and hybrid environments. (Company product announcement)

Valuation Changes

Fair Value Estimate is unchanged at approximately $193.70 per share, signaling no material revision to the intrinsic value assessment.
The Discount Rate has risen slightly from about 8.88 percent to 8.95 percent, reflecting a modestly higher required return in the valuation model.
Revenue Growth is effectively unchanged at roughly 12.06 percent, indicating stable expectations for top line expansion.
The Net Profit Margin is effectively flat at about 9.01 percent, suggesting no notable shift in long term profitability assumptions.
The Future P/E has risen marginally from roughly 79.17x to 79.31x, implying a slightly higher multiple applied to forward earnings in the updated analysis.

Accelerating demand for advanced cyber resilience and compliance-ready data management is driving expanded enterprise adoption and recurring revenue growth.
Increasing SaaS platform success, strategic partnerships, and a shift to subscription-based models are improving revenue quality, market reach, and long-term earnings stability.
Heavy reliance on expanding existing customer subscriptions and lumpy large deals, alongside evolving revenue models and integration risks, could challenge Commvault's future growth, margin stability, and market position.

Catalysts

About Commvault Systems

Provides a cyber resilience platform for protecting and recovering data and cloud-native applications in the Americas and internationally.What are the underlying business or industry changes driving this perspective?

Surging demand for enterprise data protection and recovery fueled by accelerating cyber threats, with Commvault's enhanced cyber resilience platform (including Cleanroom Recovery, Air Gap Protect, and the upcoming Satori Cyber acquisition) driving new customer adoption and increased wallet share-likely supporting sustained double-digit revenue and ARR growth.
Tightening global data privacy and compliance requirements are increasing demand for compliant, robust data management-Commvault's successful customer wins in highly regulated sectors (e.g., aerospace, insurance, government) position the company to benefit from elevated compliance-driven enterprise spending, which should help underpin revenue and recurring ARR expansion.
Rapid expansion and successful cross-sell/upsell momentum within the SaaS (Metallic) platform-evidenced by 63% SaaS ARR growth, a 45% increase in multi-product customers, and 125% SaaS net dollar retention-point to continued improvement in the quality and predictability of future revenues, directly supporting margin expansion and higher earnings visibility.
Strengthened partnerships with global cloud providers, leading cybersecurity vendors, and system integrators (e.g., Deloitte, CrowdStrike, HPE, Kyndryl, hyperscaler marketplaces) are significantly expanding market reach and lowering acquisition costs, likely increasing net new customer growth and improving net margins over time.
The transition to a recurring SaaS/subscription model-now 85% of total ARR and climbing-is transforming the revenue mix toward higher-quality, more predictable streams and reducing reliance on perpetual/legacy licensing, supporting long-term topline growth and greater earnings consistency.

Commvault Systems Earnings and Revenue Growth

Commvault Systems Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Commvault Systems's revenue will grow by 12.2% annually over the next 3 years.
Analysts assume that profit margins will increase from 7.7% today to 11.6% in 3 years time.
Analysts expect earnings to reach $173.1 million (and earnings per share of $3.97) by about September 2028, up from $81.1 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $144 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 70.4x on those 2028 earnings, down from 101.6x today. This future PE is greater than the current PE for the US Software industry at 36.2x.
Analysts expect the number of shares outstanding to grow by 1.68% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.4%, as per the Simply Wall St company report.

Commvault Systems Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The sustained transition from traditional software licensing to a recurring subscription/SaaS-based revenue model, while driving topline growth, is noted to have a different margin profile; management guided for gross margins in the low-80% range (reflecting SaaS mix) and acknowledged that the Satori Cyber acquisition will be modestly dilutive to margins for several quarters, indicating ongoing risk of margin compression and potentially impacting overall earnings and net margin.
The strong near-term growth in subscription ARR and large "land and expand" deals may mask longer-term risk that much of Commvault's revenue momentum is coming from existing customers expanding subscriptions, rather than new logo growth, leading to possible future deceleration in net new ARR as this lever matures-potentially restricting long-term revenue growth rates.
The business's positive results are partly driven by an exceptionally robust term software quarter, including large deals closing in the final week, raising concerns about revenue linearity and deal timing. This reliance on large, lumpy deals can introduce volatility in quarterly results and impact the predictability of both revenues and earnings.
Long-term, the text's optimism about cross-selling and platform expansion depends on Commvault's ability to successfully integrate and monetize a growing number of products and recent acquisitions (e.g., Satori Cyber), which, if less successful than projected, could increase R&D and integration costs without proportionate revenue or customer gains-pressuring profitability and cash flows.
While management frequently touts market leadership and competitive displacement, they also acknowledge that the core on-premises software market is growing only at low single digits. If industry secular trends such as cloud migration and vendor consolidation accelerate, Commvault risks losing share to hyperscale platforms or fully integrated data management suites, which could structurally limit its long-term addressable market and revenue growth potential.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $208.089 for Commvault Systems based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $225.0, and the most bearish reporting a price target of just $176.8.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.5 billion, earnings will come to $173.1 million, and it would be trading on a PE ratio of 70.4x, assuming you use a discount rate of 8.4%.
Given the current share price of $185.22, the analyst price target of $208.09 is 11.0% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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