BlackBerry rallies 22% after Q1 beat as QNX and Secure Comms drive growth

BlackBerry reported Q1 revenue of $153 million, beating its own guidance, as shares surged 22% on the results.

"The results mark BlackBerry's strongest earnings outperformance in about a year and show the company is moving beyond its turnaround phase into revenue growth," RBC Capital Markets analyst Paul Treiber said. Treiber doubled his price target on the stock to $9 from $4.50.

Revenue of $152.9 million came in 9.4% above the $139.8 million consensus and rose 26% from a year earlier, the company said. Adjusted earnings per share of 4 cents topped the 3-cent estimate. Adjusted EBITDA more than doubled, growing 144% year over year, marking the fifth consecutive quarter of positive GAAP net income.

QNX, BlackBerry's real-time operating system, drove development license revenue to an eight-quarter high, with the platform now embedded in more than 275 million vehicles. Secure Communications generated $74 million in revenue, up 24%, with annual recurring revenue stabilizing at $220 million and a net retention rate of 92%. The company generated roughly $5 million in operating cash flow, its first positive first-quarter operating cash flow in nearly a decade excluding patent sales.

BlackBerry raised its full-year guidance, now expecting revenue of $594 million to $621 million and adjusted EBITDA of $119 million to $139 million. Management forecast about $100 million in operating cash flow for the year, nearly double prior levels, with roughly 90% of incremental revenue flowing through to adjusted EBITDA. The company bought back 2.6 million shares for about $10 million during the quarter and expanded its buyback program by authorizing up to 27 million additional shares.

Several analysts raised their price targets following the report. CIBC lifted its target to $13 from $10, TD Securities raised its to $8 from $5, and Canaccord increased its to $10.30 from $8.20, citing faster-than-expected profitability gains and operating leverage. The average analyst price target stands at $12.48, according to Koyfin data.

The guidance raise signals management expects momentum to accelerate across both QNX and Secure Communications. Investors will watch the company's next quarterly report for continued progress on operating cash flow and QNX royalty growth from new design wins tied to the SDP 8 platform.

This article is for informational purposes only and does not constitute investment advice.