CVLT: Shorter Contracts And Margin Pressure Will Create Future Upside Potential

Analysts have trimmed their fair value estimate for Commvault Systems to about $175 per share from roughly $187, reflecting a series of reduced price targets that cite slightly lower peer multiples, increased caution around security budgets, competitive concerns, and a less favorable margin outlook tied to shorter term contracts.

Analyst Commentary

Street research on Commvault Systems has centered on recalibrating price targets, with analysts weighing solid fundamental pillars against pockets of execution and competitive risk. Even as targets move lower, the tone of recent commentary blends both confidence in the franchise and caution around near term outcomes.

Bullish Takeaways

Bullish analysts see the lower fair value and price targets as more in line with peer multiples. They view this as reducing the risk of overpaying for the stock.
Following the Q2 earnings miss, one major bank described the quarter as largely positive overall, suggesting that underlying demand and execution remain intact even if certain metrics came in below expectations.
Several research notes maintain positive or neutral ratings despite lower targets. This signals that analysts still see a viable long term growth and execution story, just at a more conservative valuation.
Some analysts frame shorter term contracts as a way to keep customers engaged and flexible. This approach could help support renewal activity and pipeline visibility, even if it weighs on margins for now.

Bearish Takeaways

Bearish analysts point to modestly lower peer multiples as a key driver of reduced targets. They indicate that relative valuation support has softened compared with earlier expectations.
Caution around security budgets is a consistent theme, with concerns that customers may delay or resize deals. This could affect Commvault's revenue and deal timing.
Incremental competitive concern features prominently in recent research, with worries that stronger rivals could pressure pricing, win share, or increase the cost of sales to defend existing accounts.
Shorter term contract duration is cited as a direct headwind to margins. Some analysts expect this to stay in focus and potentially weigh on the stock over the near term as investors reassess profitability and cash flow durability.

What's in the News

Commvault issued fiscal 2026 guidance, with total revenue expected between US$1.161b and US$1.165b and subscription revenue between US$753m and US$757m, and guided Q3 fiscal 2026 revenue to US$298m to US$300m with subscription revenue of US$195m to US$197m (Key Developments).
The company completed a share repurchase tranche, buying back 7,032,883 shares, or 15.9% of the company, for US$646m under the program announced in May 2022 (Key Developments).
RBC Capital lowered its Commvault price target to US$167 from US$217 and kept a Sector Perform rating, citing focus on shorter term contracts and a less favorable margin outlook following a Q2 earnings miss (Periodicals).
Commvault launched the Commvault Cloud Unity platform release, an AI-enabled update that unifies data security, cyber recovery, and identity resilience across cloud, SaaS, on premises, and hybrid setups, with feature rollouts planned into early 2026 (Key Developments).
Commvault announced it will be a launch partner for the AWS European Sovereign Cloud, with Commvault Cloud targeted for availability in the first half of 2026 to support customers with data resilience needs in Europe (Key Developments).

Valuation Changes

Fair Value Estimate trimmed from about US$187.33 per share to roughly US$174.58 per share, reflecting a modest reset in expectations.
Discount Rate essentially unchanged, moving slightly from 8.89% to 8.88%, indicating a very small adjustment in the assumed risk profile.
Revenue Growth adjusted marginally from 12.10% to about 12.07%, signaling a very small shift in projected top line expansion.
Net Profit Margin raised slightly from 9.45% to about 9.55%, implying a small change in expected profitability on future revenue.
Future P/E brought down from roughly 72.95x to about 67.33x, pointing to a lower valuation multiple applied to expected earnings.

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.

Have other thoughts on Commvault Systems?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

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.

Expanding Margins And Cloud Momentum Will Drive Future Outperformance