Open Text Corporation Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

Last week, you might have seen that Open Text Corporation (NASDAQ:OTEX) released its first-quarter result to the market. The early response was not positive, with shares down 9.9% to US$34.57 in the past week. It looks like a credible result overall - although revenues of US$1.3b were what the analysts expected, Open Text surprised by delivering a (statutory) profit of US$0.58 per share, an impressive 56% above what was forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

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Taking into account the latest results, Open Text's ten analysts currently expect revenues in 2026 to be US$5.22b, approximately in line with the last 12 months. Per-share earnings are expected to grow 12% to US$2.25. In the lead-up to this report, the analysts had been modelling revenues of US$5.22b and earnings per share (EPS) of US$1.94 in 2026. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the nice gain to earnings per share expectations following these results.

View our latest analysis for Open Text

There's been no major changes to the consensus price target of US$40.45, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Open Text analyst has a price target of US$50.00 per share, while the most pessimistic values it at US$35.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Open Text's revenue growth will slow down substantially, with revenues to the end of 2026 expected to display 0.8% growth on an annualised basis. This is compared to a historical growth rate of 13% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 15% annually. Factoring in the forecast slowdown in growth, it seems obvious that Open Text is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Open Text following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at US$40.45, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Open Text going out to 2028, and you can see them free on our platform here.

Plus, you should also learn about the 1 warning sign we've spotted with Open Text .

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.