Why Analysts Remain Neutral on BlackBerry Despite Earnings Beats and IoT Growth

BlackBerry Limited (BB) has defied expectations in 2025, with its IoT division-anchored by the QNX operating system-posting record quarterly revenue of $68.7 million in Q3 FY2026, a 10% year-over-year increase. This growth, driven by deeper automotive integration and expansion into medical and industrial markets, has led the company to raise its full-year revenue forecast to $531–541 million. Yet, despite these positive metrics, analysts remain cautiously neutral on the stock. This neutrality stems from two critical factors: the sustainability of IoT-driven revenue and a valuation that appears misaligned with both traditional metrics and intrinsic value estimates.

The QNX Engine: Growth, but With Caveats

BlackBerry's QNX division has become a linchpin of its strategy, with the operating system embedded in over 235 million vehicles globally. The division's 12% year-over-year revenue growth in Q2 FY2025 and 10% in Q3 FY2026 underscores its importance. However, analysts question whether this momentum can persist. The automotive sector, while lucrative, is highly competitive, with rivals like Microsoft and Tesla's Autopilot systems vying for market share. Additionally, QNX's expansion into adjacent markets remains unproven at scale.

Management's focus on scaling IVY vehicle data services, a recurring revenue stream, adds optimism. Yet, as RBC Capital notes in its "Sector Perform" rating, revenue visibility remains constrained by the long lead times in automotive design cycles and the need for sustained design wins. This uncertainty tempers enthusiasm, even as QNX's production revenue visibility improves according to market analysis.

Valuation Dilemmas: DCF vs. PE Ratios

The disconnect between BlackBerry's financial performance and its stock valuation further complicates the outlook. A discounted cash flow (DCF) analysis suggests the stock is undervalued by 83.7%, with an intrinsic value of $37.14 per share compared to its current price of around $6 according to financial modeling. This wide margin of safety hinges on assumptions about future cash flows from QNX and cybersecurity services. However, traditional valuation metrics tell a different story.

BlackBerry's price-to-earnings (PE) ratio of 131.6x far exceeds the Canadian Software industry average of 48.9x according to market data, implying the market is pricing in aggressive growth that may be difficult to sustain. Compounding this is the company's weak profitability: its Return on Equity (ROE) of 2.88% and Return on Assets (ROA) of 2.48% lag behind industry benchmarks according to financial analysis. Negative ROE figures in recent quarters, such as -4.8% and -2.7% according to historical data, highlight ongoing challenges in converting revenue into sustainable profits.

Strategic Shifts and Profitability Pressures

BlackBerry's pivot to cybersecurity and software-as-a-service (SaaS) models has added complexity to its valuation. While the Secure Communications segment generated $67 million in Q3 FY2026 revenue according to earnings reports, the company's overall net margin remains negative at -6.3% according to financial statements. Analysts like Morningstar emphasize that BlackBerry's high-margin opportunities in cybersecurity are promising, but scaling these operations without diluting margins remains a hurdle.

The recent realignment of the business-operating cybersecurity and IoT divisions independently-signals a strategic bet on higher-margin software. However, this shift also raises questions about execution risks. Leadership changes, including the appointment of cybersecurity-focused executives, aim to address these concerns according to company announcements, but tangible results are still emerging.

The Neutral Consensus: Balancing Optimism and Skepticism

Analysts' neutral stance reflects a balancing act between BlackBerry's operational progress and structural risks. While the company's IoT growth and cybersecurity ambitions are compelling, the valuation appears to embed aggressive expectations. As TD Securities notes, BlackBerry's stock is a high-conviction play, but the current price assumes a perfect storm of design wins, margin expansion, and market share gains-none of which are guaranteed.

This caution is further amplified by the company's reliance on one-time licensing gains and the softness in its Licensing segment, which contributed to a 1.3% year-over-year revenue dip in Q3 FY2026. Until BlackBerry demonstrates consistent profitability and clearer revenue visibility, analysts are unlikely to upgrade their ratings.

Conclusion

BlackBerry's IoT division, particularly QNX, has undeniably reinvigorated the company's growth prospects. Yet, the sustainability of this growth and the stock's valuation remain contentious. A DCF model suggests undervaluation, but a lofty PE ratio and weak profitability metrics paint a conflicting picture. Analysts' neutrality, therefore, is not a dismissal of BlackBerry's potential but a recognition of the risks inherent in its transformation. For investors, the key question is whether the company can bridge the gap between its ambitious vision and its current financial reality-a challenge that will define its trajectory in 2026 and beyond.