- Commvault Systems, Inc CVLT negatively preannounced Q3 results, missing KeyBanc analyst Thomas Blakey's revenue estimate, resulting in a miss to EPS estimate, primarily due to weakening buying patterns and close rate execution in the last few weeks of December.
- Weakness centered in the Americas, with software and product revenue declining 20%.
- Overall, Software and Products' preliminary results for Q3 came below the analyst's estimate, with Services revenue essentially in line with Blakey's estimate driven by continued strength in Commvault's cloud-based SaaS solution Metallic.
- The strength in Metallic led to higher-than-expected ARR with Subscription and Metallic ARR +45% Y/Y vs. Blakey's 40% estimate, compared to 44% in the prior quarter.
- Blakey reiterated the Sector Weight rating on CVLT shares as the analyst continues to monitor the maintenance to subscription transition, Metallic's impact on gross margins, and now adding nearer-term execution on close rates.
- Commvault will report Q3 results before the market opens on January 31.
- RBC Capital analyst Dan Bergstrom had a Sector Perform and reduced the price target to $63 from $66 on lower estimates.
- The preliminary Q3 numbers missed the analyst's expectations primarily due to a drop in Americas software business in December.
- While the commentary was limited, the company cited slower-than-expected buying patterns and close rate execution as behind the order slowdown.
- Despite this, the company remained confident in its strategy and noted a willingness to adjust the cost structure to changes in demand.
- The analyst reduced estimates for Q3 and in the future and would look to better fine-tune forward estimates with full Q3 results, likely on January 31.
- Piper Sandler analyst James Fish maintained a Neutral and lowered the price target from $70 to $60.
- Wells Fargo analyst had an Overweight with a $75 price target.
- The preliminary results reflected deal closure rate pressures, given incremental macro-driven customer concerns and some company-specific execution challenges.
- Commvault noted that combined subscription and Metallic ARR now account for 70% of total ARR, up from 66% in Q2.
- Price Action: CVLT shares traded lower by 14.66% at $55.25 on the last check Wednesday.
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