OTEX

Open Text is a mature enterprise information-management software vendor (content services, cybersecurity, business AI/clouds) with the classic high-margin, sticky-revenue economics: a 72.3% gross margin and a 17.3% operating margin. The FY2025 revenue decline of 10.4% to $5.17B looks alarming but is largely the result of the Application Modernization & Connectivity (AMC) divestiture rather than core erosion — operating income was essentially flat (+0.6% to $893M) and net income held up at $436M (-6.3%). Crucially, management's FY2026 outlook calls for a return to total revenue growth of 1-2%, cloud services/subscriptions growth of 3-4%, Adjusted EBITDA margin expansion of 50-100 bps, and double-digit free-cash-flow growth.

The capital-return profile is the heart of the buy case at this price. The stock trades at just 12.5x earnings and 1.0x sales, while OpenText generated $831M of operating cash flow, pays a growing dividend ($272M, +1.6%), and sharply accelerated buybacks ($413M, +175.5%, cutting shares 5.2%). A Business Optimization Plan (following the Micro Focus integration) targets ~2,000 net position reductions and up to $260M of cost actions to drive margin and FCF expansion — the engine behind the guided improvement.