Expanding Margins And Cloud Momentum Will Drive Future Outperformance

Key Takeaways

• 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

Provides a cyber resilience platform for protecting and recovering data and cloud-native applications in the Americas and internationally.

• 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 Future Earnings and Revenue Growth

Assumptions

• 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

• 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

• 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.