BlackBerry Delivers Consecutive GAAP Profit and Expands Margins—QNX and Secure Communications Outperform Expectations
Profitability and Margin Expansion Highlight BlackBerry’s Quarter
BlackBerry (NYSE: BB) surprised on the upside for its fiscal Q2 2026, notching its second straight quarter of GAAP profitability—a turnaround from losses just a year ago. The company reported total revenue of $129.6 million, up 3% year-over-year, while GAAP net income hit $13.3 million. Importantly, adjusted EBITDA reached $25.9 million, or 20% of revenue, comfortably beating guidance.
CEO John Giamatteo underscored margin expansion, with GAAP and adjusted gross margin jumping four points year-over-year to 75%. Operating cash flow turned positive, a notable shift from outflows in the prior year.
QNX Segment Achieves "Rule of 40" as Growth and Margins Lead the Way
The QNX division stood out, posting a 15% revenue increase to $63.1 million, surpassing guidance and cementing its reputation as BlackBerry’s growth engine. The segment delivered a solid adjusted EBITDA margin of 32%—marking what management described as a "Rule of 40" quarter (growth rate plus profit margin exceeding 40%).
| Segment | Revenue ($M) | YoY Change | Adj. Gross Margin (%) | Adj. EBITDA ($M) | Adj. EBITDA Margin (%) |
|---|---|---|---|---|---|
| QNX | 63.1 | +15% | 83 | 20.5 | 32 |
| Secure Communications | 59.9 | -10% | 66 | 9.7 | 16 |
| Licensing | 6.6 | +32% | 77 | 5.6 | 85 |
The segment’s guidance is also moving higher for the year, boosted by partnerships like the new integration with NVIDIA for advanced automotive systems. This signals confidence in sustained, high-quality growth.
Secure Communications Beats Expectations Despite Top-Line Decline
BlackBerry’s Secure Communications business exceeded both revenue and EBITDA guidance even as sales declined 10% to $59.9 million. The segment grew its adjusted gross margin by 5 percentage points to 66% and posted improved key metrics: Annual recurring revenue (ARR) reached $213 million, and the dollar-based net retention rate rose sequentially to 93%.
Management cited robust client renewals and efficiency gains for the margin uptick. The outlook for Secure Communications was also raised for the rest of fiscal 2026, highlighting renewed stability after several challenging quarters.
Company Returns $20 Million to Shareholders and Improves Cash Flows
Demonstrating capital discipline, BlackBerry repurchased approximately 5 million shares during the quarter, returning $20 million to shareholders. At quarter’s end, the company held $363.5 million in cash, cash equivalents, and investments, despite funding the buyback.
Operating cash flow improved to a positive $3.4 million—marking a substantial swing from last year’s negative $16 million. Free cash flow also landed positive at $2.6 million, providing a cushion as BlackBerry targets profitable growth.
Guidance Moves Up: Higher Revenue, Margin, and Earnings Expected
Looking ahead, BlackBerry raised full-year guidance across several key metrics. Total company revenue is now forecasted between $519 and $541 million, while QNX revenue is expected to climb to $256–$270 million. Management projects total adjusted EBITDA between $82–$101 million and non-GAAP EPS in the range of $0.11 to $0.15 for the year. Operating cash flow for the full year is forecast at $35–$40 million.
| Metric | Q3 FY26 Guidance | Full FY26 Guidance |
|---|---|---|
| Total Revenue ($M) | 132–140 | 519–541 |
| QNX Revenue ($M) | 66–70 | 256–270 |
| Secure Communications Revenue ($M) | 60–64 | 239–247 |
| Licensing Revenue ($M) | ~6 | ~24 |
| Total Adj. EBITDA ($M) | 20–28 | 82–101 |
| Non-GAAP Basic EPS ($) | 0.02–0.04 | 0.11–0.15 |
| Operating Cash Flow ($M) | 10–20 | 35–40 |
Key Takeaways for Investors
BlackBerry’s focus on core growth segments, expanding margins, and cost control is producing tangible results—marked by sustained GAAP profitability, improving cash flows, and renewed guidance momentum. While challenges remain, particularly in Secure Communications’ top-line trajectory, operational improvements and business mix shifts are steering the company into a more stable phase.
As BlackBerry leans into partnerships and innovation (notably in auto and cybersecurity), investors may want to watch QNX and Secure Communications metrics as leading indicators of ongoing business transformation.
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