CommVault Systems Q3 Earnings Call Highlights

CommVault Systems (NASDAQ:CVLT) executives told investors the company delivered a “solid quarter” in fiscal third-quarter 2026, citing continued demand for next-generation cyber resilience in hybrid and multi-cloud environments and strong subscription customer additions. Management also highlighted recent product releases and partnerships aimed at unifying data security, identity resilience, and recovery capabilities on a single platform.

Quarter highlights: subscription growth and customer additions

CEO Sanjay Mirchandani said the company reinforced its position as an innovation leader during the quarter, including receiving its 1,600th lifetime patent. On the business side, he pointed to record “land and expand” performance, including the addition of about 700 new subscription customers.

Chief Accounting Officer Danielle Abrahamson reported that total revenue rose 19% year over year to $314 million on a non-GAAP basis. Subscription revenue increased 30% to $206 million, aided by a 44% jump in SaaS revenue. Term software revenue grew 22% to $119 million.

Abrahamson said results were strong across geographies and customer sizes, with particular strength in large enterprise. She noted growth in term software transactions over $100,000 and an increase year over year in both the volume and dollar value of $1 million software deals. The company ended the quarter with more than 14,000 subscription customers and a SaaS customer base exceeding 9,000 customers.

ARR and retention: mix shift toward SaaS

Management emphasized annual recurring revenue (ARR) as a key health indicator. Subscription ARR increased 28% to $941 million, driven by SaaS ARR growth of 40% to $364 million. Total ARR rose 22% to $1.085 billion. Abrahamson added that subscription ARR represented 87% of total ARR, up from 83% a year ago.

The company reported SaaS net dollar retention of 121%. During Q&A, Abrahamson addressed questions about a sequential decline in the SaaS net retention metric, attributing it to several factors discussed on the call:

• A growing SaaS customer base (now over 9,000 customers), which can make percentage-based retention harder to lift at the same absolute expansion levels.
• A “strong new SaaS customer quarter,” with new-customer dollars not included in the retention cohort calculation.
• A “modest” mix shift in product capabilities among certain early adopter customers.

She said the company was not seeing an uptick in churn, framing the change as part of “natural maturity” in the business.

Executives also fielded multiple questions about net new ARR coming in below a prior “mid-40s” expectation discussed on the previous call. Abrahamson and Mirchandani said the quarter included a higher mix of SaaS net new ARR (70% in Q3 versus 61% in the prior quarter), and that SaaS land deals typically come at lower average selling prices than term software transactions. They also said some large term software deals were signed at longer durations, which can modestly dilute ARR math. Abrahamson said the company had assumed term duration would be consistent with Q2, but longer-duration software land deals created pressure on term net new ARR.

Unity platform, ResOps message, and product momentum

Mirchandani highlighted the Commvault Cloud Unity Platform release, introduced at the company’s Shift event in November. He described Unity as bringing together data security, identity resilience, and cyber recovery into a single platform, enabled by the company’s “Metallic AI fabric.” He positioned the release around a concept the company calls “ResOps,” which he defined as unifying operations, security, and infrastructure to better plan for and recover from disruptions or cyberattacks.

Within the platform, Mirchandani discussed three pillars:

• Data security: He cited capabilities including multi-point threat scan, synthetic recovery, and clean room recovery, aimed at securing data at the source and enabling more precise recovery. He referenced UNC Health as an example of a customer scaling security with data growth through Commvault’s threat scan and risk analysis capabilities.
• Identity resilience: Mirchandani cited CrowdStrike’s estimate that about 80% of breaches involve compromised identities. He said Commvault’s identity resilience capabilities support tracking and mitigating changes across systems such as Active Directory, Entra ID, and Okta. He noted that in Q3, “hundreds of customers” embraced identity resilience, and ARR from the company’s Active Directory offering more than doubled year over year, becoming one of its largest SaaS offerings within two years.
• Recovery at scale: The CEO pointed to accelerated momentum in cloud-native offerings, including Clumio, and said Clumio was selected by Clarity to safeguard sensitive AI data. He also said the company achieved AWS resilience competency in the recovery category and was named the 2025 AWS Global Storage Partner of the Year. The company also announced a partnership with Pinecone to support resilience for vector databases across AWS, Azure, and Google Cloud, targeted for general availability in calendar Q2 2026.

Mirchandani added that Commvault is pursuing cloud sovereignty initiatives and said it was named a launch partner for the AWS European Sovereign Cloud, with plans to provide a “secure solution” for European organizations that is purpose-built for cloud.

Margins, cash flow, buybacks, and cost optimization

On profitability, Abrahamson reported Q3 gross margin of 81.5%, up 100 basis points sequentially, driven by a higher mix of software sales, along with “improved economies of scale and product efficiencies” expected to continue into Q4. Operating expenses were $193 million, or 62% of revenue, reflecting higher commissions and bonuses tied to sales performance and ongoing growth initiatives.

Non-GAAP EBIT was $61 million, for a margin of 19.6%. Both Mirchandani and Abrahamson said the company achieved a “rule of 40” balance in Q3; Abrahamson said year-to-date the company is operating at a rule of 41.

Free cash flow was $2 million in Q3 and $105 million year-to-date. Abrahamson said Q3 free cash flow was pressured by the timing of collections—more than 60% of deals closed in the last few weeks of the quarter—and by an additional payroll cycle in the U.S. and Canada. She said the dynamic is not uncommon in Q3 and expected it to normalize in Q4.

The company repurchased $41 million of stock during the quarter, bringing year-to-date repurchases to $187 million, and ended Q3 with approximately 45 million diluted shares outstanding. Abrahamson also said the board approved recommitting the share repurchase authorization back to $250 million.

Abrahamson said the company initiated a cost optimization program at the end of Q3 to align its cost structure to business needs. During Q&A, management said the program was company-wide and included a voluntary retirement program, and that it was not focused on cutting R&D.

Guidance: raised full-year revenue outlook

For fiscal Q4 2026, Commvault expects subscription revenue of $203 million to $207 million and total revenue of $305 million to $308 million. It expects Q4 gross margin of about 81% and non-GAAP EBIT margin of approximately 19%. Abrahamson noted that Q4 of fiscal 2025 benefited from several multiyear strategic land transactions.

For fiscal year 2026, the company raised guidance for subscription revenue to $764 million to $768 million and total revenue to $1.177 billion to $1.18 billion. The company expects full-year gross margin of 81% to 81.5% and raised non-GAAP EBIT margin guidance to 19% to 20%. It also projected full-year free cash flow of $215 million to $220 million, reflecting $12 million to $15 million in one-time payments tied to the cost optimization program.

In closing remarks, Mirchandani said the company is seeing “record customer engagement and adoption” and positioned Commvault Cloud Unity as a platform designed for resilience needs in an AI-driven world.

About CommVault Systems (NASDAQ:CVLT)

Commvault Systems, Inc is a global provider of data protection and information management software designed to help organizations manage, protect, and activate data across on-premises and cloud environments. Founded in 1996 and headquartered in Tinton Falls, New Jersey, Commvault offers a suite of integrated products and services that enable enterprises to back up, recover, archive, and analyze data. Its flagship solutions include Commvault Complete Data Protection, Commvault HyperScale, and the SaaS-based Metallic portfolio, which deliver scalable and automated data management capabilities across hybrid infrastructure environments.

Commvault’s platform is built on a unified architecture that allows customers to streamline operations, reduce complexity, and ensure data resiliency.