In relation to synthetic intelligence (AI) shares, there’s no scarcity of choices. Between hyped-up tech giants and flashy new AI startups, it’s straightforward to get distracted. However for my cash, OpenText (TSX:OTEX) is the under-the-radar Canadian powerhouse that makes me extra excited than some other AI funding in the marketplace at this time.
About OpenText
Certain, OpenText doesn’t scream “AI” the way in which some Silicon Valley names do. But that’s exactly why it’s so compelling. This Waterloo-based agency has been steadily embedding AI into its large suite of enterprise instruments, not as a advertising and marketing stunt, however as a basic pillar of its long-term progress plan. Whereas others chase headlines, OpenText is constructing infrastructure that international companies already depend on, with AI because the engine powering the subsequent section.
Let’s get the onerous numbers out of the way in which. In its newest earnings launch for the third quarter (Q3) of fiscal 2025, OpenText reported $1.254 billion in whole income. That’s down 13.3% 12 months over 12 months, largely as a result of AMC divestiture. However whenever you strip that out, the decline was simply 4.5%. In the meantime, cloud income was up 1.8% to $463 million, marking the seventeenth straight quarter of cloud natural progress.
Extra importantly, OpenText continues to generate hefty free money flows. In Q3 alone, it posted $374 million in free money circulate, up 7.4% 12 months over 12 months. Adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) got here in at $395 million with a stable margin of 31.5%. This isn’t a tech inventory chasing income on the expense of profitability. It’s steadily optimizing, slicing prices, integrating acquisitions, and automating operations. Actually, its Enterprise Optimization Plan is predicted to yield $490 to $550 million in annualized financial savings as soon as absolutely carried out.
Extra to return
OpenText’s not too long ago launched Titanium X platform is the crown jewel right here. It’s a next-gen software program as a service (SaaS) and hybrid resolution that enables clients to make smarter selections utilizing OpenText Aviator AI. Consider it like this: whereas different corporations are constructing AI for tomorrow, OpenText is integrating AI into the actual workflows of at this time. Content material administration, cybersecurity, compliance, these aren’t non-obligatory options for Fortune 500 corporations; they’re requirements. And OpenText is giving them AI-powered instruments to do it higher, quicker, and with much less handbook effort.
CEO Mark Barrenechea is evident about the place the tech inventory is headed, stating, “We proceed to show the criticality of OpenText merchandise and the resiliency of our enterprise mannequin.” He additionally emphasised the function of AI, saying that the corporate is reinvesting for the long run in “our Aviator AI platform, Content material, Safety and Cloud progress merchandise.” CFO Chadwick Westlake was much more blunt: “It’s an distinctive time for buyers to take part within the earnings progress engine we’re constructing at OpenText.”
And that’s simply it. That is now not only a doc administration agency. It’s an AI-first enterprise cloud firm with $1.28 billion in money, a rising cybersecurity division, and an aggressive share-repurchase plan. Final quarter, OpenText returned $183 million to shareholders, together with $68 million in dividends and $115 million in inventory buybacks.
Silly takeaway
Critics could level to the income drop, however this misses the forest for the bushes. OpenText has been reorienting its whole enterprise post-Micro Focus acquisition and post-AMC divestiture. The near-term headwinds are transitional. The long-term imaginative and prescient? A leaner, AI-anchored, cash-generating tech machine.
And as a Canadian investor, that’s uncommon. We don’t have many software program titans enjoying at this scale, particularly not ones main in AI, cybersecurity, and enterprise cloud. OpenText’s present dividend of $0.2625 per quarter provides an honest yield, too, whereas buyers look ahead to earnings to reaccelerate.
There’s a quiet confidence in OpenText’s execution that units it aside. It isn’t chasing the AI hype cycle. It’s embedding intelligence into the core of how companies function, and that’s the place the actual cash will probably be made.
