Open Text Q2 Margin Compression Challenges Bullish Earnings Growth Narrative

Open Text (NasdaqGS:OTEX) has just posted Q2 2026 results, with revenue of US$1.3 billion and basic EPS of US$0.67, setting the tone for how investors weigh the latest quarter against recent history. The company has seen quarterly revenue move between US$1.25 billion and US$1.33 billion over the last six reported periods, while basic EPS has ranged from US$0.11 to US$0.87. This puts the latest quarter somewhere in the middle of its recent earnings power, with margins continuing to be a key focus for the story.

See our full analysis for Open Text.

With the headline numbers on the table, the next step is to see how this earnings print lines up with the widely followed bull and bear narratives around Open Text, and where the margin picture supports or challenges those views.

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Q2 profit sits at US$168 million

• Net income excluding extra items came in at US$168.1 million in Q2 2026, compared with US$146.6 million in Q1 2026 and US$28.8 million in Q4 2025, showing how the past few quarters have ranged widely even while revenue has stayed around US$1.3b.
• What is interesting for the bullish view that focuses on earnings growth is that Q2 basic EPS of US$0.67 and trailing 12 month EPS of US$1.70 sit alongside a trailing net profit margin of 8.4%, which is lower than last year’s 12.2%. This leads to two contrasting points:
  • Supporters who point to forecast earnings growth of about 22.5% a year get some backing from the rebound in quarterly net income from US$28.8 million in Q4 2025 to US$168.1 million in Q2 2026.
  • At the same time, the drop in trailing margin from 12.2% to 8.4% shows that higher profit forecasts need to be weighed against pressure on profitability in the recent year.

To see how this mix of earnings growth forecasts and margin pressure fits into the wider story for Open Text, many investors turn to a full narrative review of the company, its risks, and its valuation, which is captured in 📊 Read the full Open Text Consensus Narrative..

Margins at 8.4% with slower revenue outlook

• Trailing 12 month revenue sits at US$5.2b alongside a net profit of US$436.3 million, giving that 8.4% net margin, while revenue is forecast to grow around 1.1% a year compared with the US market forecast of 10.2% a year.
• Bears often focus on profitability quality, and the combination of an 8.4% trailing margin and modest 1.1% revenue growth forecast gives them material points to work with:
  • The margin shift from 12.2% to 8.4% over the last year means recent profitability is lower than it was, even though trailing earnings are described as high quality.
  • With revenue growth projected at 1.1% a year, the idea that profit growth will lean heavily on margin resilience rather than strong top line expansion is front and center for more cautious investors.

US$25.07 share price versus DCF fair value

• The shares trade at US$25.07, which is below the quoted DCF fair value of US$72.45 and at a P/E of 14.4x compared with 23.6x for peers and 26.9x for the US Software industry, while also offering a 4.39% dividend yield.
• Supporters of a bullish case often highlight this valuation gap, and the current numbers give them several concrete anchors:
  • The wide difference between the US$25.07 share price and the US$72.45 DCF fair value, together with the lower 14.4x P/E versus peer and industry P/Es, is consistent with the idea that the stock screens as relatively inexpensive on earnings and cash flow models.
  • On top of that, a 4.39% dividend yield provides a cash return that bullish investors may see as a compensating factor while they wait for any reassessment of the valuation gap, even as they stay mindful of the flagged risk that debt is not well covered by operating cash flow.

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on Open Text's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

Open Text’s weaker 8.4% net margin, lower than last year’s 12.2%, and modest 1.1% revenue growth forecast may leave income focused investors wanting more.

If that combination feels a bit tight for your goals, check out 14 dividend fortresses today to zero in on companies built around stronger income profiles.

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.

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