Should You Hold or Sell BlackBerry Stock Before Q1 Earnings?

BlackBerry (NYSE: BB) remains a polarizing investment, oscillating between skepticism over its legacy reputation and optimism about its pivot to cybersecurity and embedded software. With Q1 2026 earnings looming on June 24, investors face a critical decision: hold through potential volatility or sell ahead of uncertainty. This analysis weighs near-term risks—geopolitical headwinds, valuation discounts, and earnings pressure—against long-term catalysts like QNX's momentum, strategic partnerships, and cost discipline to argue for a hold stance with selective entry points.

Near-Term Risks: Geopolitical Crosswinds and Earnings Pressure

1. Geopolitical Uncertainties
BlackBerry's QNX division, which powers mission-critical embedded systems in automotive, aerospace, and defense, faces risks tied to global supply chain disruptions and regulatory shifts. For instance, geopolitical tensions could delay automotive production timelines, impacting QNX's royalty revenue. The division's $865M royalty backlog (as of Q3 2025) is a strength, but execution risks persist if partners like AMD or Intel face chip shortages.

2. Valuation Discounts and Investor Sentiment
BlackBerry trades at a significant discount to peers like Microsoft (cybersecurity) or Autoliv (automotive software). While its $410M cash balance (post-Cylance sale) provides liquidity, its stock has underperformed due to lingering doubts about its ability to monetize its software stack. The 52-week trading range—though mistakenly listed as $0.00 in some reports—likely reflects low volatility and apathy.

3. Earnings Expectations vs. Execution
Analysts project Q1 2026 revenue of ~$140M, with adjusted EBITDA breakeven still on the horizon. Any miss on QNX's royalty growth or cybersecurity revenue could spook investors. The company's focus on separating IoT and Cybersecurity businesses introduces operational complexity, which might weigh on short-term results.

Long-Term Growth Catalysts: QNX's Dominance and Strategic Leverage

1. QNX's Embedded Software Moat

QNX's 10% year-over-year growth to $236M in FY2025 underscores its position as a leader in safety-critical systems. Its $865M royalty backlog reflects long-term contracts with automakers like BMW and Toyota, which are unlikely to pivot away from QNX's certified OS amid regulatory scrutiny over software reliability. Partnerships with AMD (for functional safety platforms) and Intel (on General Embedded Development Platforms) further solidify its ecosystem.

2. Cost Cuts and Balance Sheet Strength
BlackBerry slashed non-GAAP operating expenses by ~15% in FY2025, while the $80M windfall from selling Cylance to Arctic Wolf has bolstered its cash reserves. With a net cash position of $410M, management can weather short-term dips while reinvesting in QNX's automotive and government verticals. The company's Q4 2025 operating cash flow of $42M (up $57M YoY) signals improving profitability.

3. Cybersecurity's Steady Trajectory
Secure Communications revenue hit $272.6M in FY2025, driven by $208M in recurring revenue. Its 93% dollar-based net retention rate and government contracts (e.g., U.S. DoD) provide a stable cash flow base. While Cybersecurity margins lag QNX's 29% adjusted EBITDA margin, the division's growth aligns with rising demand for zero-trust architectures.

Earnings Beat Probability: QNX Momentum and Cost Discipline

BlackBerry has beaten EPS estimates in three of the last four quarters, including a 300% surprise in Q3 2025. For Q1 2026, two factors tilt the odds in favor of an over-delivery:

• QNX's Pipeline Strength: The $865M royalty backlog is ~3.5x the division's annual revenue, suggesting strong visibility. Automotive partners are accelerating QNX deployments to meet 2026 EU regulations on vehicle cybersecurity, creating urgency for licenses.
• Cost Synergies: FY2025's $84.2M adjusted EBITDA beat implies management's ability to trim expenses while scaling revenue. The Q4 2025 GAAP EPS of $0.03 (vs. -$0.01 expected) hints at a path to breakeven.

Valuation and Investment Strategy

BlackBerry's stock trades at ~4x trailing revenue, far below peers like CrowdStrike (13x) or Fortinet (10x). Even with its embedded software moat, the market discounts its QNX growth due to execution risks. However, a post-earnings dip could offer an entry point if Q1 results confirm margin expansion and backlog conversion.

Hold Recommendation:
- Hold: Retain positions if Q1 results meet or beat revenue guidance ($140M+) and reaffirm FY2026 targets.
- Buy on Dips: Consider adding shares if the stock drops 10-15% post-earnings on temporary concerns, provided QNX's backlog and partnerships remain intact.
- Sell Only: If QNX's automotive pipeline stalls, or cybersecurity revenue falters due to lost government contracts.

Conclusion

BlackBerry's near-term risks—geopolitical volatility, execution pressure—are manageable given its fortress balance sheet and QNX's structural tailwinds. With embedded software demand set to surge in automotive and defense, and cybersecurity's recurring revenue providing stability, the company is positioned for long-term growth. Investors should treat the earnings report as a catalyst to refine their positions rather than panic-sell. For now, hold through Q1 and await valuation re-rating as QNX's backlog converts to cash.

Final Note: Monitor geopolitical headlines impacting automotive supply chains and BlackBerry's Q1 conference call for updates on QNX's automotive partnerships.