Commvault passes $1 billion ARR milestone early

Data protector and security biz Commvault notched up a ninth consecutive growth quarter as its subscription business found more customers wanting to use it.

Revenues in its second fiscal 2026 quarter, ended Sep 30, 2025, were $276 million, beating its $273.34 forecast and 18.3 percent more than a year ago. There was a GAAP profit of $15 million, 5.4 percent ( $600K) less than a year ago, although total annual recurring revenues (ARR) were $1.043 billion, 22 percent up year/year.

Sanjay Mirchandani, President and CEO, said: “Commvault delivered a strong quarter fueled by solid ARR and SaaS growth that accelerated a key milestone for the company – achieving $1 billion in total ARR – two quarters earlier than projected.” The projected target date was March 2026.

Financialsummary:

• Gross margin: 80.1% – down from prior quarter’s 82.3 percent
• Operating cash flow: $77 million vs $32 million last quarter
• Free cash flow: $74 million vs $30 million in prior quarter
• Cash and cash equivalents: $1.1 billion
• EPS: $0.91- below forecast $0.94

The subscription customer count rose by c100 to go past 13,000. Commvault says it has a highly recurring, read predictable, revenue base, with its subscription ARR being 86 percent of its total ARR. The SaaS ARR total was $335.7 million, a growth rate of 56 percent.

Security is growing faster than backup, Mirchandani said in the earnings call: “This quarter, we saw strong momentum across our identity and data security-focused offerings, which grew double-digit sequentially and represented nearly 40% of net new ARR. Our fastest growing SaaS offering this quarter rapidly restores Active Directory and Entra ID for identity protection services.”

CFO Jen DiRico commented in this: “Active Directory, a mission-critical identity tool for an effective resilience strategy, saw usage more than triple year over year as IT leaders adopt our data and identity recovery solution. In just two years, Active Directory is on pace to become one of our largest SaaS offerings.”

In her view: “Our solid Q2 results confirm that data is moving to the cloud at an accelerating pace. Our Commvault Cloud Platform is well situated to benefit from this shift.”

However, there was a sequential revenue decline of 2 percent, and Commvault’s gross margin declined from last quarter’s 82.3 percent to 80.1 percent. The profit was down 36 percent sequentially as well as being 5.4 percent down Y/Y. Also the EPS number was less than forecast. Why was this?

DiRico said: “Strong double-digit growth in transaction volume was tempered due to a shift in term duration, which reduced average deal size. In Q2, customers chose shorter contract duration to maintain flexibility between software and SaaS as they evaluate the timing of their transition to cloud. … The overall gross margin pressure that we saw really came down to the fact that our SaaS business continues to accelerate, which, as we all know, is a great, great thing and ultimately just has a different margin profile.”

Nothing serious then, and she pulled a positive out of this shift: “What we were really pleased with was the volume that we saw in our software term business. From a volume perspective, deals greater than $100,000 actually increased 17 percent. Ultimately, that’s really where we see the strength coming from, from an ARR perspective, and we do believe that is the best indicator of growth.”

Commvault reckons it’s taking market share, as its ARR numbers are growing faster than the growth rate of its total addressable market (TAM). Mirchandani said: “When you look at our growth, healthy double digits has been for a few quarters, this quarter included, overall both SaaS and software. You know, when you break down the TAM, at least on the more classic data protection side, you’ll see that the SaaS market’s growing double digits and we’re fast outpacing it at 55 percent ARR growth this quarter on just our SaaS product. When you look at the software TAM, that’s probably growing zero to low single digits and has been again for a while. Our software business is growing at a healthy double digits, which brings you to we’re taking share and we continue to take share.”

Mirchandani flagged that new product and service announcements were coming on November 12 at the company’s SHIFT 2025 event.

Next quarter’s revenue guidance is $299 million +/- $1 million, a 13.9 percent Y/Y increase, which represents slower growth than in the latest quarter. Commvault’s full fiscal 2026 revenue guidance is $1.163 billion +/- $2 million, the same as before, although it did raise its ARR growth guidance to 18 – 19 percent; an increase of 50 basis points at the midpoint.

Bootnote

Commvault announced the integration of Lumen’s secure global network backbone and edge infrastructure, with its own cyber resilience platform. As part of the partnership, the Lumen Validated Design (LVD) for Cyber Resilience with Commvault was published. This reduces complexity, enforces zero-trust access, and accelerates backup and recovery for customers in regulated or distributed infrastructures. Features include air-gapped storage, anomaly detection, and centralized policy management for data integrity and business continuity even during sophisticated cyber incidents.