Data backup provider Commvault (NASDAQ:CVLT) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 23.2% year on year to $275 million. Guidance for next quarter’s revenue was better than expected at $268 million at the midpoint, 1.8% above analysts’ estimates. Its non-GAAP profit of $1.03 per share was 11% above analysts’ consensus estimates.
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Commvault Systems (CVLT) Q1 CY2025 Highlights:
- Revenue: $275 million vs analyst estimates of $262.4 million (23.2% year-on-year growth, 4.8% beat)
- Adjusted EPS: $1.03 vs analyst estimates of $0.93 (11% beat)
- Adjusted Operating Income: $59.1 million vs analyst estimates of $53.97 million (21.5% margin, 9.5% beat)
- Management’s revenue guidance for the upcoming financial year 2026 is $1.14 billion at the midpoint, beating analyst estimates by 2.8% and implying 14% growth (vs 18.4% in FY2025)
- Operating Margin: 0%, down from 8.1% in the same quarter last year
- Free Cash Flow Margin: 27.7%, up from 11.4% in the previous quarter
- Annual Recurring Revenue: $930.1 million at quarter end, up 20.8% year on year
- Billings: $304.8 million at quarter end, up 24.7% year on year
- Market Capitalization: $7.30 billion
"It was a record-breaking year at Commvault," said Sanjay Mirchandani, President and CEO.
Company Overview
Originally formed in 1988 as part of Bell Labs, Commvault (NASDAQ: CVLT) provides enterprise software used for data backup and recovery, cloud and infrastructure management, retention, and compliance.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Commvault Systems’s 9% annualized revenue growth over the last three years was sluggish. This wasn’t a great result compared to the rest of the software sector, but there are still things to like about Commvault Systems.
This quarter, Commvault Systems reported robust year-on-year revenue growth of 23.2%, and its $275 million of revenue topped Wall Street estimates by 4.8%. Company management is currently guiding for a 19.3% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 11.1% over the next 12 months, an acceleration versus the last three years. This projection is above average for the sector and implies its newer products and services will fuel better top-line performance.
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Annual Recurring Revenue
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
Commvault Systems’s ARR punched in at $930.1 million in Q1, and over the last four quarters, its growth was impressive as it averaged 19% year-on-year increases. This performance aligned with its total sales growth and shows that customers are willing to take multi-year bets on the company’s technology. Its growth also makes Commvault Systems a more predictable business, a tailwind for its valuation as investors typically prefer businesses with recurring revenue. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
It’s relatively expensive for Commvault Systems to acquire new customers as its CAC payback period checked in at 84.3 months this quarter. The company’s slow recovery of its sales and marketing expenses indicates it operates in a highly competitive market and must invest to stand out, even if the return on that investment is low.
Key Takeaways from Commvault Systems’s Q1 Results
We were impressed by how significantly Commvault Systems blew past analysts’ billings, revenue, EPS, and adjusted operating income expectations this quarter. We were also happy its full-year revenue guidance topped Wall Street’s estimates. Overall, we think this was a solid quarter. The stock traded up 5.7% to $175.13 immediately after reporting.
Commvault Systems may have had a good quarter, but does that mean you should invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.