KeyBanc Capital Markets has lowered its price target on CommVault Systems to $108 from $152, though the firm left its Overweight rating in place. The move follows what KeyBanc characterized as "mixed" results for the fiscal third quarter, where normalized annual recurring revenue (NNARR) in constant currency fell short of expectations because of a larger-than-anticipated shift to software-as-a-service (SaaS) offerings and a higher proportion of longer-duration term contracts.
The stock has experienced a sharp pullback recently, falling 25.44% over the past week. Data used to assess valuation indicates the company is trading below its Fair Value.
Despite the revenue mix and duration headwinds, CommVault continues to report strong margin and growth metrics: gross profit margins stood at 81.44% and the company recorded revenue growth of 21.52% over the trailing twelve months.
KeyBanc highlighted two structural elements behind the NNARR miss. First, SaaS deals generally capture 33% to 50% of term average selling prices, which can lower near-term recognized revenue versus on-premise or perpetual-license sales. Second, longer-duration contracts tend to be dilutive to annual recurring revenue (ARR) on a near-term basis because they spread revenue over a longer period. Together, these factors pressured normalized recurring metrics in the quarter.
As a result of the evolving mix and duration profile, CommVault trimmed its fiscal year 2026 constant currency ARR growth guidance to 18.0% from a prior target of 18.5%.
KeyBanc attributed the mixed quarter to "unpredictability on duration and mix shift" and indicated that the situation may have been compounded by what "could have been clearer messaging and expectation setting" from the company. The research note specifically stated that the quarter’s outcomes did not reflect weakening demand or changes in the competitive backdrop.
Operational results for the quarter included an EPS of $1.17, above the analyst consensus of $0.98, and revenue of $314 million, exceeding the expected $299.05 million. Despite these beats, several research firms revised their price targets downward following the NNARR and ARR shortfalls.
Notable target adjustments included Cantor Fitzgerald lowering its target to $100 from $144 and pointing to a net new annualized recurring revenue (NNARR) figure of $39 million versus an expected $45 million. Stephens cut its target to $135 from $162, flagging concerns around ARR and SaaS net revenue retention. Truist Securities moved its target to $155 from $175, describing the quarter as mixed given revenue and margins beat but NNARR missed. Mizuho reduced its target to $140 from $180 while maintaining an Outperform rating and noting the ARR shortfall.
Clear summary
- KeyBanc cut CommVault’s price target to $108 from $152 but retained an Overweight rating after mixed Q3 results driven by a SaaS mix shift and longer-duration deals.
- CommVault posted EPS of $1.17 and revenue of $314 million, both ahead of expectations, yet NNARR missed forecasts and FY26 ARR guidance was nudged down to 18.0% from 18.5%.
- Other analysts, including Cantor Fitzgerald, Stephens, Truist, and Mizuho, also lowered targets citing NNARR and ARR concerns.
Key points
- Financial markets - The stock dropped 25.44% over the prior week, and valuation metrics show trading below Fair Value.
- Software and cloud sector - The shift to SaaS and extended contract durations is dilutive to near-term ARR metrics despite healthy gross margins.
- Analyst coverage - Multiple firms revised price targets downward while differing on the implications for demand and competitive dynamics.
Risks and uncertainties
- Revenue mix risk - A continued shift toward SaaS, representing 33% to 50% of term average selling prices, could suppress near-term recognized recurring revenue.
- Contract duration uncertainty - Longer-duration deals are ARR dilutive and create unpredictability in near-term recurring revenue metrics.
- Communication and expectation setting - Management messaging and guidance clarity could affect analyst expectations and market reactions.