BlackBerry's Q3 2026: Contradictions Emerge on QNX Revenue Growth, Secusmart Prospects, and Tariff Impacts

Date of Call: None provided

Financials Results

• Revenue: $141.8M in Q3, above the high end of guidance
• EPS: $0.05 non-GAAP EPS in Q3, beat guidance
• Gross Margin: Adjusted gross margin 78%, up 3 percentage points sequentially and described as relatively flat year-over-year
• Operating Margin: Adjusted EBITDA margin 20% (Adjusted EBITDA $28.7M) for the total company

Guidance:

• QNX Q4 revenue guidance $71–$77M; Adjusted EBITDA $17–$23M.
• Secure Communications Q4 revenue $61–$65M; Adjusted EBITDA $11–$15M.
• Total company Q4 revenue $138–$148M; Adjusted EBITDA $22–$32M.
• Full FY revenue guidance $531–$541M; adjusted EBITDA $94–$104M.
• Q4 non-GAAP EPS $0.03–$0.05; FY non-GAAP EPS $0.14–$0.16.
• Q4 operating cash flow $40–$45M; FY operating cash flow $43–$48M; +$38M investing cash from Cylance expected in Q4.
• Licensing reiterated at ~ $6M revenue / ~$5M adjusted EBITDA per quarter; FY licensing ~$24M revenue / ~$20M adjusted EBITDA.
• Adjusted corporate OpEx (ex-amort) ~ $14M for the full fiscal year.

Business Commentary:

• QNX Revenue Growth and Strategic Investments:
• QNX delivered an all-time record for quarterly revenue at $68.7 million, up 10% year-over-year and 9% sequentially.

• Growth was driven by solid growth in royalties, development seat, and professional services revenue, as well as strategic investments in expanding into automotive and embedded spaces with new products like QNX Sound and QNX Cabin.

• Secure Communications Financial Performance:

• Secure communications revenue exceeded the top end of guidance at $67 million.

• This growth was supported by better-than-expected renewals and effective navigation of the U.S. government shutdown, with a strong dollar-based net retention rate of 92%.

• Automotive and Embedded Market Expansion:

• QNX continued to gain traction in the automotive market, securing multiple major design wins with top European and Asian OEMs for ADAS and cockpit domains.
• Expansion into automotive and embedded markets was facilitated by strategic partnerships and product development, such as the vehicle software platform co-developed with Vector.

• Operating Cash Flow Improvement:
• BlackBerry reported $17.9 million in operating cash flow, up over 200% year-over-year.
• This improvement was attributed to strong execution, disciplined cost management, and the conversion of profitability into cash, despite a significant increase in strategic investments.

Sentiment Analysis:

Overall Tone: Positive

• Management: "Q3 was another quarter of solid results, adding to our track record of consistently meeting or beating guidance." Total revenue $141.8M "above the high end of our guidance." QNX "all-time record" revenue $68.7M, up 10% YoY. Adjusted EBITDA $28.7M (20% margin). Operating cash flow $17.9M, up three times YoY.

Q&A:

• Question from Kingsley Crane (Canaccord Genuity): So we’ve talked about the GEM opportunity requiring more investment in the near term as you work towards gaining critical mass in key end markets. As you think about fiscal 2027, where do you think you need to invest more within that space? What’s working, what needs more help? Follow-up: On the luxury China EV win—what ultimately allowed you to win that deal (cost savings, weight, superior software), and to what extent could this be a blueprint for more success in China?
  Response: They’ll prioritize go-to-market spend (more sales, distribution partners) to scale GEDP in GEM; the China EV win was driven primarily by BOM cost savings (plus weight/performance).

• Question from Luke Junk (Baird): On getting to a vehicle platform award, what gates are you advancing through now to get closer to that outcome, and should we expect to hear more about this at CES? Follow-up: Regarding China OEMs, what system-design elements from QNX put BOM in a more compelling position for them?
  Response: Integration with Vector is progressing well—the combined SDP8+middleware is close to market; it reduces OEM integration burden and improves time-to-market/cost; more color and demos forthcoming (CES).

• Question from Todd Coupland (CIBC): QNX growth: 15% last quarter, 10% this quarter, guide implies 15%—how should we think about the trend into fiscal 2027? Follow-up: Secusmart—declines are about half the projected rate recently; is this the new normal and can it become a growth segment with defense spending improving?
  Response: QNX momentum and backlog are strong; conversion of backlog and new royalties should drive FY27—company will provide FY27 guide at Q4; Secure Communications has a stronger, but lumpy, pipeline and management expects to convert opportunities into FY27 results.

• Question from Trip Chowdhry (Global Equities Research): Regarding the US government shutdown, do you think everything is back to normal or did it materially impact the quarter? Second, can you provide color on robotics wins—what kinds of robots and demand characteristics?
  Response: Shutdown impacts were limited—mission-critical solutions held up and backlog was processed; robotics wins target high-compute/high-performance segments (e.g., humanoids and advanced robotics) where SDP8 fits—demos planned at CES.

• Question from Paul Treiber (RBC Capital Markets): On the vehicle software platform pricing opportunity—what ROI/cost savings do automakers get and how will economics split between QNX and Vector? Follow-up: On the Canadian federal government, remind us of SecuSUITE exposure and opportunity to expand with new budget/Buy Canada initiatives?
  Response: OEMs get cost and time-to-market savings by outsourcing integration; BlackBerry will bill and take a significant portion with Vector paid via cost of sales (no detailed split disclosed); and BlackBerry has a strong UEM relationship with Canada and is actively discussing expansion into SecuSUITE/AtHoc as Buy-Canada and defense spending increase.

Contradiction Point 1

QNX Revenue Growth Sustainability

It involves the sustainability of QNX's double-digit growth, which is crucial for investor expectations and financial projections.

How should we assess the QNX business trend considering fluctuating growth rates in fiscal 2027? - Todd Coupland(CIBC)

2026Q3: We're optimistic about sustaining the momentum into the second half of the year and beyond, supported by strong progress in new programs, increased adoption of SDP8, and diversification into GEM. - John Giamatteo(CEO)

How should we think about operating leverage for QNX given the mid-teens YoY growth and declining R&D and S&M expenses YoY? - Luke L. Junk(Baird)

2026Q2: I see a lot of leverage in the QNX model. We're already at gross margins of 83%, and over time, they should improve as the mix of royalties increases. While we continue to invest in R&D and sales and marketing, especially in the GEM opportunity, the investment should stabilize. This will result in strong adjusted EBITDA margins going forward. - Tim Foote(CFO)

Contradiction Point 2

Secusmart Business Growth Potential

It involves differing views on the growth potential of the Secusmart business, which is a significant part of the company's operations.

Is the Secusmart business declining at half the rate you projected in the past few quarters? Could this business become a growth segment? - Todd Coupland(CIBC)

2026Q3: We're modeling next year and have a strong pipeline. The business performed solidly, navigating the U.S. government shutdown. We're optimistic about fiscal 2027. - John Giamatteo(CEO)

Did the government shutdown impact more than half of the quarter, and is everything now back to normal? - Trip Chowdhry(Global Equities Research)

2026Q2: We believe now is the right time to leverage our extensive expertise in secure mobile communications to provide a comprehensive suite of offerings for the enterprise market. We believe that there's a unique opportunity for us to use our expertise in the traditional enterprise market to disrupt traditional voice and collaboration and messaging, and this is an area that the team is fully focused on. - Tim Foote(CFO)

Contradiction Point 3

QNX Business Growth Rate

It involves differing expectations for the growth rate of the QNX business, which is crucial for understanding the company's growth trajectory and revenue projections.

Where to increase investment in the GEM space for fiscal 2027? What areas are working well and require additional support? - Kingsley Crane(Canaccord Genuity)

2026Q3: We'll give the fiscal 2027 guidance at the end of Q4. We've got good momentum; royalties from new programs are coming online. - John Giamatteo(CEO)

Can you assess the auto versus non-auto mix in the pipeline and its relation to QNX's backlog figures? - Luke L. Junk(Robert W. Baird & Co. Incorporated)

2026Q1: The SDP 8.0 represents a whole new level of engagement with a customer base where QNX has been the traditional OS platform. - John Giamatteo(CEO)

Contradiction Point 4

Secusmart Business Performance and Projections

It involves differing perspectives on the performance and projections of the Secusmart business, which is critical for understanding the company's revenue streams and growth potential.

Is Secusmart's performance aligning with half the projected decline rate from previous quarters? Could it become a growth segment? - Todd Coupland(CIBC)

2026Q3: The business performed solidly, navigating the U.S. government shutdown. We're optimistic about fiscal 2027. - John Giamatteo(CEO)

What trends are you seeing in U.S. federal defense spending, and which BlackBerry products are gaining traction? - Tripatinder S. Chowdhry(Global Equities Research, LLC)

2026Q1: Secusmart continues to be a large portion of our U.S. business. Part of that reason is we're seeing revenue decline. - John Giamatteo(CEO)

Contradiction Point 5

Impact of Tariffs on BlackBerry's Operations

It highlights differing views on the impact of tariffs on BlackBerry's operations, which could influence strategic decision-making and investor confidence.

Is this a blueprint for success in China? - Kingsley Crane(Canaccord Genuity)

2026Q3: We have not seen any significant supply chain issues. Over 50% of our revenue comes from outside the US, which insulates us from some impacts. The situation remains fluid, but we are in close contact with large customers with no major supply chain disruptions reported. - John Giamatteo(CEO)

How are tariffs affecting auto OEMs? - Paul Treiber(RBC Capital Markets)

2025Q4: We have not seen any significant supply chain issues. OEMs are still navigating, and no significant downturns are reported. Everyone is closely watching the situation, but material impacts have not been raised. - John Giamatteo(CEO)