Data backup provider Commvault (NASDAQ:CVLT) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 25.5% year on year to $282 million. Guidance for next quarter’s revenue was better than expected at $273 million at the midpoint, 0.7% above analysts’ estimates. Its non-GAAP profit of $1.01 per share was 4.1% above analysts’ consensus estimates.
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Commvault Systems (CVLT) Q2 CY2025 Highlights:
- Revenue: $282 million vs analyst estimates of $268 million (25.5% year-on-year growth, 5.2% beat)
- Adjusted EPS: $1.01 vs analyst estimates of $0.97 (4.1% beat)
- Adjusted Operating Income: $58.25 million vs analyst estimates of $56.21 million (20.7% margin, 3.6% beat)
- The company lifted its revenue guidance for the full year to $1.16 billion at the midpoint from $1.14 billion, a 2.5% increase
- Operating Margin: 8.9%, in line with the same quarter last year
- Free Cash Flow Margin: 10.6%, down from 27.7% in the previous quarter
- Annual Recurring Revenue: $996.2 million at quarter end, up 24.1% year on year
- Billings: $299.4 million at quarter end, up 28.2% year on year
- Market Capitalization: $7.28 billion
"Commvault delivered a strong start to the fiscal year, fueled by customer growth, disciplined execution, and rising demand for our industry-leading cyber resilience platform," said Sanjay Mirchandani, President and CEO, Commvault.
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.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, Commvault Systems grew its sales at a 10.3% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.
This quarter, Commvault Systems reported robust year-on-year revenue growth of 25.5%, and its $282 million of revenue topped Wall Street estimates by 5.2%. Company management is currently guiding for a 17% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 10.8% over the next 12 months, similar to its three-year rate. This projection is above the sector average and indicates its newer products and services will help support its historical 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 $996.2 million in Q2, and over the last four quarters, its growth was impressive as it averaged 20.8% 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.
Commvault Systems is efficient at acquiring new customers, and its CAC payback period checked in at 37.8 months this quarter. The company’s relatively fast recovery of its customer acquisition costs gives it the option to accelerate growth by increasing its sales and marketing investments.
Key Takeaways from Commvault Systems’s Q2 Results
We were impressed by how significantly Commvault Systems blew past analysts’ billings, ARR, EPS, and EBITDA expectations this quarter. We were also glad it lifted its full-year revenue guidance. Zooming out, we think this quarter featured some important positives. The stock traded up 4.7% to $171.21 immediately following the results.
Commvault Systems put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.