BlackBerry's QNX, Secure Comms Growth Weighed Down By Tariff Uncertainties, Government Election Shifts: Analyst

RBC Capital Markets analyst Paul Treiber maintained BlackBerry Ltd. BB with a Sector Perform and lowered the price target from $4 to $3.75 on Thursday.

The fourth-quarter revenue was $142 million (-7% Y/Y ex Cylance), above consensus at $133 million. All three revenue lines slightly beat expectations.

Also Read: BlackBerry Growth Hinges On IoT, Secure Communications Despite Valuation Concerns: Analyst

Due to higher revenue, adjusted EBITDA was $21 million, above consensus at $14 million, and adjusted EPS was three cents, above consensus at two cents.

The fiscal 2026 revenue guidance for $504-534 million (-3% Y/Y mid-point ex-Cylance) was below consensus at $548 million.

The shortfall primarily reflects lower Secure Comms revenue.

BlackBerry guided fiscal 2026 adjusted EBITDA to $69-84 million, also below consensus at $89 million.

The first-quarter guidance implies fiscal 2026 is back-end loaded.

Treiber’s fiscal 2026 estimates move to $519 million revenue and $72 million adjusted EBITDA from $541 million and $73 million previously.

Even though BlackBerry has not seen any meaningful impact from tariffs on QNX or production plans for its auto OEM customers to date, the company lowered its fiscal 2026 QNX revenue outlook from $260-270 million provided at its investor day in October to $250-270 million (10% Y/Y mid-point), with the mid-point slightly above consensus at $257 million.

The QNX backlog rose only 6% year over year (versus 27% year over year fiscal 2024), as several large expected program wins have not closed yet.

Given uncertainties, new significant wins may continue to be delayed through fiscal 2026.

The fiscal 2026 Secure Comms revenue guidance for $230-240 million (-14% Y/Y mid-point ex Cylance) was short of consensus at $274 million. Even though recurring revenue is high ($208 million ARR as of the fourth quarter), the guidance reflects the lower likelihood of large license deals with government customers amidst recent elections and changes in administration.

Due to long contracts and mission-critical software, BlackBerry has not seen churn in the U.S. Federal government and believes its U.S. business would be resilient.

Even though fiscal 2026 guidance was below consensus, BlackBerry’s profitability and positive cash flow ($35 million fiscal 2026 guidance) should eventually provide a floor for valuation.

BlackBerry is trading at 3.6 times NTM EV/S, slightly below its historical average (3.8 times); on NTM EV/EBITDA, the stock trades at 25 times, below the peer group average of 31 times.

BB Price Action: BlackBerry stock is down 6.66% at $3.16 at last check Thursday.

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