Cognyte Software Ltd (NASDAQ:CGNT) Surges on Strong Profit Beat and Raised Guidance

Cognyte Software Ltd (NASDAQ:CGNT) reported financial results for its third quarter of fiscal year 2026, delivering a performance that notably exceeded analyst expectations on profitability, though revenue came in slightly below consensus. The company's updated full-year outlook, which was raised, appears to be a primary driver behind a significant positive reaction in the stock during pre-market trading.

Quarterly Performance vs. Estimates

For the quarter ended October 31, 2025, Cognyte posted revenue of $100.7 million, representing a solid 13.2% increase year-over-year. However, this figure fell just short of the analyst consensus estimate of approximately $101.5 million.

The standout metric was profitability. The company reported non-GAAP earnings per share (EPS) of $0.03, which dramatically surpassed the meager analyst estimate of $0.0054. This substantial beat was fueled by significant margin expansion and operational efficiency gains.

Key quarterly financial highlights include:

• Revenue: $100.7 million (up 13.2% YoY, slightly below estimate)
• Non-GAAP EPS: $0.03 (significantly above the $0.0054 estimate)
• Adjusted EBITDA: $11.9 million, up 80% from $6.6 million in the prior-year period
• GAAP Operating Income: Turned positive at $3.2 million, compared to a loss of $2.2 million a year ago
• Operating Cash Flow: A strong $25.0 million, more than double the $12.3 million generated in Q3 FY25

Market Reaction and Revised Outlook

The market's response to the mixed headline numbers has been decisively positive, focusing on the robust profit beat and an upgraded guidance. In pre-market trading, Cognyte's stock was indicated up approximately 5.9%.

This bullish sentiment is likely anchored to management's decision to raise its full-year outlook for fiscal 2026 (ending January 31, 2026). The company now anticipates:

• Revenue: Approximately $400 million (representing ~14% year-over-year growth).
• Adjusted EBITDA: Approximately $47 million (representing ~60% year-over-year growth).
• Non-GAAP Diluted EPS: $0.24.

This outlook compares favorably to the analyst consensus estimates provided, which projected full-year sales of about $404.3 million. While the revenue target is slightly more conservative, the projected profitability metrics underscore management's confidence in continued margin improvement and operational execution.

Press Release Summary and Business Drivers

Beyond the headline figures, the earnings release highlighted several positive operational trends. Software revenue, a key high-margin segment, surged 39.6% year-over-year to $41.9 million for the quarter, indicating strong demand for the company's core analytics platforms. The company also strengthened its balance sheet, ending the quarter with $106.6 million in cash and no debt, while generating robust cash flow.

CEO Elad Sharon attributed the strong performance to the company's leadership in "AI-driven investigative analytics," stating that customers are increasingly turning to Cognyte to solve complex security challenges. CFO David Abadi emphasized the company's "track record of consistently delivering revenue growth, margin expansion and strong cash generation."

The company also provided solid visibility into future revenue, with short-term Remaining Performance Obligations (RPO)—a measure of contracted future revenue—increasing to $358.9 million.

Conclusion

Cognyte's third-quarter results illustrate a company successfully executing a pivot towards higher profitability. While revenue growth remains healthy, the dramatic expansion in earnings and cash flow demonstrates effective cost management and a favorable shift in revenue mix toward higher-margin software. The market's positive reaction, particularly the pre-market surge, reflects investor approval of the raised full-year guidance that promises accelerated earnings growth. The focus is now on whether the company can maintain this momentum of profitable expansion in a competitive sector.

For a detailed look at Cognyte's historical earnings, future estimates, and analyst projections, you can review the data here.

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