Key Takeaways:
- AI Positioning: Open Text’s 30 years of enterprise content management expertise position it perfectly for the agentic AI revolution.
- Price Projection: Based on current execution, OTEX stock could reach $40 by June 2028.
- Potential Gains: This target implies a total return of 63% from the current price of $24.59.
- Annual Return: Investors could see roughly 23% growth over the next 2.4 years.
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Open Text Corporation (OTEX) delivered a solid second quarter in fiscal 2026, beating expectations on total revenues, adjusted EBITDA margin, and earnings per share.
The company reported total revenue of approximately $1.33 billion, driven by 3.4% year-over-year growth in cloud revenue.
Management highlighted strong enterprise cloud bookings of $295 million, representing 18% growth, while total cloud RPO jumped 13.7%.
Interim CEO James McGourlay emphasized robust performance in the company’s core business segments.
- The Content business, which represents 43% of total revenues, grew 4.5% year-over-year in Q2.
- More impressively, Content Cloud revenue surged 18% year-over-year, demonstrating the successful transition to cloud-based offerings.
- Enterprise content requirements are expanding rapidly as companies prepare for AI deployment.
- Open Text’s customers are actively organizing and curating their data to train agentic AI systems, creating sustained demand for the company’s information management platforms.
- The company’s AI Aviator tools deliver enhanced value to customers from their content assets.
- Executive Chair Tom Jenkins highlighted that the same secure information management capabilities Open Text has delivered for 30 years now serve as the foundation for enterprise AI training. This positions the company uniquely, whether customers use traditional applications or AI to meet their business needs.
- Open Text secured notable wins during the quarter. US Bank completed a full migration to hosted architecture and cybersecurity. BNP Paribas selected Open Text’s integrated application security stack after testing all major vendors.
- At the November OpenText World Conference, customers, including IBM and Honda, showcased their use of OpenText AI solutions across global operations.
Despite strong fundamentals in content management and a strategic position in the AI revolution, Open Text trades at $24.59, offering significant upside for investors who recognize the company’s transformation potential.
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What the Model Says for Open Text Stock
We analyzed Open Text’s evolution into a cloud-focused content management leader positioned for the AI-driven era.
The company benefits from a critical advantage: enterprises need properly organized, permissioned data to train AI systems.
Open Text’s three decades of experience managing secure enterprise content directly address this requirement.
As Tom Jenkins explained, training an AI with regulated data means that the AI must also operate under the same regulatory restrictions.
Management is executing a portfolio reshaping strategy, divesting non-core assets while focusing resources on faster-growing businesses.
The company has announced divestitures of Vertica for $150 million and the closure of the eDOCS divestiture for $163 million, with plans to continue selling one business unit per quarter. This streamlining should accelerate growth in core segments while improving operational efficiency.
The Content Cloud business shows particular strength. With 18% year-over-year growth in cloud revenue and increasing customer migration activity, this segment provides the foundation for sustained expansion.
Management expects cloud migrations to accelerate without the revenue dips that plagued earlier software companies making similar transitions.
Using a forecast of 1.0% annual revenue growth through 2029 and a 34.2% operating margin, our model projects the stock price will rise to $40 in 2.4 years. This assumes a 5.8x price-to-earnings multiple.
That represents significant compression from Open Text’s historical P/E averages of 7.7x (one year) and 10.2x (five years).
The conservative multiple reflects near-term uncertainty around the portfolio transformation and modest revenue growth during the transition period.
The real value lies in the company’s positioning as enterprises increasingly adopt agentic AI. Open Text provides the critical infrastructure to manage, secure, and organize the data these systems require.
Our Valuation Assumptions
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for OTEX stock:
1. Revenue Growth: 1.0%
Open Text’s growth reflects a business in transition. The company is divesting slower-growing assets while accelerating its cloud migration.
Management reaffirmed full-year fiscal 2026 guidance of 1% to 2% total revenue growth.
The Content business demonstrates underlying strength, with core cloud revenue growing faster than total company revenue.
Enterprise cloud bookings growth of 18% signals building momentum as customers migrate existing installations and purchase new cloud solutions.
Management highlighted strong pipeline development across product categories.
Recent customer conversations indicate accelerating cloud migration plans, though these deals require longer sales cycles. The impact should become visible over the next several quarters.
2. Operating margins: 34.2%
Open Text has maintained healthy profitability while investing in growth initiatives.
Adjusted EBITDA margins reached 37.0% in Q2, demonstrating operational discipline.
The company’s business optimization plan targets $490-550 million in total savings, with approximately one-third realized in fiscal 2026.
These efficiency gains should support margin expansion even as the company invests in cloud infrastructure and sales capabilities.
3. Exit P/E Multiple: 5.8x
The market currently values Open Text at 5.9x NTM earnings. We assume modest compression to 5.8x over our forecast period.
Near-term headwinds include execution risk around portfolio divestitures and the cloud transition.
However, as Open Text demonstrates consistent cloud growth in core businesses and successfully navigates its transformation, the company should command a premium to current levels.
The appointment of new CEO Ayman Antoun, a software industry veteran who has led IBM’s $30 billion Americas business, adds credibility to the strategic pivot.
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What Happens If Things Go Better or Worse?
Enterprise software companies face technology transitions and market uncertainties. Here’s how Open Text stock might perform under different scenarios through June 2028:
- Low Case: If revenue growth slows to 0.9% and operating margins compress to 20.6%, investors still see a 96.7% total return (16.7% annually).
- Mid Case: With 1.0% growth and 21.5% margins, we expect a total return of 146.3% (22.9% annually).
- High Case: If cloud migration accelerates to drive 1.1% revenue growth while Open Text maintains 22.1% margins, returns could hit 198.4% total (28.4% annually).
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The range reflects execution on cloud migrations, successful portfolio reshaping, and the company’s ability to capitalize on enterprise AI adoption.
In the bear case, cloud transitions disappoint, or divested assets prove difficult to sell at attractive valuations.
In the bull case, agentic AI adoption accelerates faster than expected, driving robust demand for Open Text’s content management platforms.
How Much Upside Does Open Text Stock Have From Here?
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- Operating Margins
- Exit P/E Multiple
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
