Cognyte Lifts Outlook After Q3 Revenue Grows 13.2%: Margin Expansion and Cash Flow Stand Out
Solid Revenue Growth Fuels Optimism for Fiscal 2026
Cognyte delivered a strong set of third quarter results, underscored by 13.2% year-over-year revenue growth to $100.74 million for the period ended October 31, 2025. The performance was powered by accelerating demand for its AI-driven investigative analytics, with management citing continued market momentum and focused execution as key drivers.
Encouraged by this performance, the company raised its outlook for fiscal 2026, now expecting full-year revenue to reach $400 million (midpoint), reflecting about 14% annual growth. Adjusted EBITDA is projected at approximately $47 million, implying a 60% jump year-over-year and ongoing margin improvement.
Profitability Metrics and Margins Continue to Improve
The quarter saw a turnaround on the operating front: GAAP operating income hit $3.2 million, swinging from a $2.15 million loss a year ago, while non-GAAP operating income surged to $9.04 million from $3.44 million. Notably, adjusted EBITDA leaped to $11.91 million—a pace well ahead of top-line growth.
Cognyte's ability to scale efficiently showed up in expanding margins as well. Non-GAAP gross margin for the quarter stood at 73.1%, up 2.97 percentage points from last year. Adjusted EBITDA margin hit 11.8% versus 7.4% in Q3 FY25, signaling disciplined cost control and higher operating leverage as revenue rises.
| Q3 Metric | Q3 FY26 | Q3 FY25 | YoY Change |
|---|---|---|---|
| Revenue | $100.74M | $89.00M | +13.2% |
| Non-GAAP Op. Income | $9.04M | $3.44M | +163% |
| Adj. EBITDA | $11.91M | $6.56M | +81.6% |
| Non-GAAP Gross Margin | 73.1% | 70.1% | +2.97 pts |
Software and Recurring Revenue Power the Model
Software revenue proved a major highlight, jumping 39.6% year-over-year for the quarter to $41.89 million. Total software and software services revenue climbed 17.9%. Recurring revenue also edged higher, accounting for 47.1% of total revenue—a metric that supports future earnings visibility.
| Segment | Q3 FY26 | YoY Change |
|---|---|---|
| Software Revenue | $41.89M | +39.6% |
| Total Software & Services | $88.74M | +17.9% |
| Recurring Revenue | $47.5M | +1.2% |
| Recurring Revenue % of Total | 47.1% | +0.5 pts |
Strong Cash Generation and a Fortress Balance Sheet
Net cash from operating activities more than doubled to $25.0 million for the quarter, helping boost cash on hand to $106.6 million with zero debt—a significant liquidity cushion as market uncertainties persist. During the period, the company repurchased 152,000 shares for $1.3 million, reflecting management's confidence in future prospects.
Backlog and Remaining Performance Obligations (RPO) both grew modestly, giving management visibility into future revenue streams: short-term RPO at quarter end stood at $358.9 million, while total RPO reached $576.6 million.
Management Commentary: Demand for AI-Driven Analytics Remains High
CEO Elad Sharon cited "leadership in AI-driven investigative analytics" as fueling recent growth, emphasizing how operational environments are demanding smarter, mission-proven solutions. CFO David Abadi added that "consistent revenue growth, margin expansion, and strong cash generation" have put Cognyte in position for "sustained, profitable growth and long-term shareholder value."
What Stands Out: Profitable Growth With Improved Visibility
Cognyte's latest results showcase its transition from top-line expansion to consistent profitability, margin improvement, and growing recurring revenue—hallmarks of a scalable software business. For investors and market-watchers, the company’s focus on AI-driven analytics and steady execution sets it apart from peers facing similar industry headwinds.
With full-year guidance raised and balance sheet strength reinforced, the next test will be how successfully Cognyte can convert its record backlog into further margin expansion and earnings power. Investors may want to keep an eye on conference call commentary for signals about upcoming customer wins or updates on recurring software momentum.
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