CVLT · Research
Commvault Swaps Perpetual Support for SaaS, and the $900M Convert Is Fully Covered by Cash
SaaS ARR grew 38% to $424.3M while perpetual support shrank 18.97%. GAAP EBITDA is thin because stock pay and sales spending absorb the gross profit, so the cash flow line, not EBITDA, is the honest read on what Commvault earns.
| Scorecard | Read |
|---|---|
| Thesis | SaaS ARR compounding near 38% turns Commvault into a recovery record that customers rent rather than own, and the shift lifts cash ahead of GAAP profit |
| What proves it wrong | SaaS ARR growth falls below 25% while subscription net retention slips under 110%, or term license renewals start shrinking |
| Next catalyst | Q2 fiscal 2027 10-Q for the quarter ended Sep 30, 2026, with SaaS ARR, net retention and the convert carrying value |
| Key multiple | 83.89x EV / GAAP EBITDA of $84.68M |
| Debt | $881.93M carrying value of 0% convertible notes due 2030, $900M principal. Cash of $929.84M exceeds it |
| Stock pay | $128.53M from the cash flow line, 10.57% of revenue |
What Commvault sells
Commvault protects enterprise data and gets it back after something breaks. It backs up servers, databases, cloud workloads and SaaS applications, keeps the copies, and restores them after an outage or a ransomware attack [1].
Q1 fiscal 2027 revenue, the quarter to Jun 30, 2026, was $314.13M, up 11.40% from $281.98M [1]. Twelve-month revenue was $1.22B [1].
Subscription revenue was $267.03M, 85.01% of the quarter. Inside it, term license was $110.42M, term support $56.06M and SaaS $100.55M [1].
The rest is legacy and services. Perpetual license was $8.70M, perpetual support $25.48M and other services $12.93M [1].
Perpetual support fell 18.97% as customers move to subscription contracts.
SaaS is the line that compounds
Subscription ARR reached $1,054.3M, up 22%. SaaS ARR reached $424.3M, up 38%, and is now 40.24% of subscription ARR [1].
Subscription net revenue retention was 114% [1]. A customer base that spends 14% more each year before any new logos is the core of the case.
Commvault no longer publishes total ARR, only subscription and SaaS ARR [1]. That is a change worth noting: the legacy perpetual base no longer has a headline number.
SaaS revenue grew 38.80% in the quarter, from $72.45M to $100.55M [1]. Term license grew only 1.04% and term support grew 17.81%.
Growth is shifting to the hosted product, which is billed ratably and recognized over time.
That shift matters for the income statement. Term license revenue lands mostly up front when a contract is signed.
SaaS revenue lands month by month. A fast SaaS shift slows revenue growth on the income statement even when bookings are healthy.
How good is the revenue
Q1 gross margin was 81.66% against 81.99% a year earlier [1]. Total gross margin barely moved even as SaaS, which carries hosting costs, grew to nearly a third of revenue.
SaaS gross margin improved. SaaS cost of revenue was $29.65M against $100.55M of SaaS revenue, a 70.51% margin, up from 64.15% a year earlier [1].
Scale on the hosted product is working.
Sales and marketing was $139.80M, 44.50% of revenue, against 43.44% a year earlier. R&D was $39.54M, 12.59% of revenue, and slightly lower in dollars [1].
Commvault is spending more to win SaaS customers and holding engineering spend flat.
Why EBITDA undercounts Commvault
GAAP EBITDA is $84.68M, only 6.96% of revenue [1]. Operating income is held down by stock pay of $128.53M and by sales spending to win SaaS customers.
That makes the EBITDA multiple of 83.89x a poor guide. The EV to operating cash flow multiple of 26.84x is closer to what an owner sees [1].
The gap between the two is deferred revenue. Customers prepay annual and multi-year subscriptions, so cash arrives before revenue.
Deferred revenue was $473.7M current and $291.2M long term at Jun 30, 2026 [1].
The toll-gate test
A toll gate owns the record, owns the connection, prices on outcomes and spends R&D on the gate. Commvault owns the record most clearly: the backup copies and their catalog live in its system.
The connection test is partial. Commvault agents sit on many workloads, but restores can be done by rival tools if a customer re-protects everything.
Switching cost is real, not absolute.
Pricing is the weak test. Commvault charges for data and users protected, not for recoveries.
A ransomware recovery that saves a customer millions earns Commvault nothing extra.
The owner-cash staircase
Start with GAAP EBITDA of $84.68M: operating income of $74.62M plus D&A of $10.06M over the twelve months [1]. Each step down the staircase removes one thing an owner cannot spend.
Step one is operating cash flow of $264.67M, above EBITDA by $179.99M. Operating cash ran well above EBITDA because customers prepay subscriptions and because stock pay is non-cash.
[1].
Step two subtracts stock pay of $128.53M, taken from the cash flow line. That leaves $136.13M.
Stock pay is 48.56% of operating cash flow. That is the largest single claim on Commvault's cash generation, and it is why EBITDA and owner cash diverge [1].
Step three subtracts all capex of $6.22M, including capitalized software. Owner cash is $129.91M, or 10.69% of revenue and 153.42% of EBITDA.
Capex is minimal because the SaaS product runs on public cloud infrastructure. Hosting costs flow through cost of revenue rather than capex [1].
| Step | Twelve months | What the gap is |
|---|---|---|
| GAAP EBITDA | $84.68M | Operating income plus D&A |
| Operating cash flow | $264.67M | Working capital, cash taxes, interest and non-cash items |
| After stock pay | $136.13M | Stock pay treated as a real cost |
| After all capex | $129.91M | What an owner could take out |
Balance sheet and debt
Commvault issued $900M of 0% convertible senior notes due 2030 on Sep 5, 2025 [1]. The carrying value at Jun 30, 2026 was $881.93M and fair value was $849.86M.
The company bought capped calls alongside the notes to reduce dilution if the notes convert [1]. The notes pay no cash interest.
Cash was $929.84M, more than the carrying value of the notes [1]. Net of the converts, Commvault holds $47.91M of net cash.
The share count on the cover was 41,444,564 at Jul 27, 2026 [1]., down from 44.10M shares outstanding at Mar 31, 2025. Q1 buybacks were $10.13M [1].
What gets overlooked
Stock pay at 10.57% of revenue is high for a company growing revenue near 11%. If SaaS growth slows, the stock pay burden becomes harder to defend.
Perpetual support is shrinking at nearly 19% a year. That is fine if those customers move to subscription.
It is a leak if they move to a rival.
The convert matures in 2030. With cash above the carrying value, refinancing risk is low, but the capped calls only limit dilution up to a point.
What the multiple measures
EV is $7.10B: equity value at the Oct 27, 2026 close on 41.44M cover-page shares, plus debt of $881.93M at carrying value, less cash and equivalents of $929.84M.
On GAAP EBITDA of $84.68M that is 83.89x. On operating cash flow of $264.67M it is 26.84x.
Owner cash of $129.91M is 1.83% of EV.
Cash exceeds debt by $47.91M, so the balance sheet adds no leverage to the multiple.
Peers
The peer set is Box, AvePoint and NetScout: data and infrastructure software with similar recurring models and different growth profiles.
Peer figures come from each company's latest periodic filing [2][3][4]. Figures are derived from filed statements, and nothing here is a price view.
Commvault screens the highest on EV to GAAP EBITDA because its GAAP margin is thin. On EV to operating cash flow it sits much closer to the group.
Bull, base and bear
| Case | What happens | What the filings would show |
|---|---|---|
| Bull | SaaS ARR keeps growing above 35% and net retention holds at 114% | SaaS above half of subscription ARR within two years |
| Base | SaaS growth eases toward 30% and perpetual support keeps shrinking | Revenue growth near 10%, operating cash near 22% of revenue |
| Bear | SaaS growth falls below 25% and term renewals shrink | Net retention under 110% and deferred revenue falling |
The base case keeps revenue growth near the current 11.40% as SaaS absorbs the decline in perpetual support. Cash flow stays well above GAAP profit.
The bear case is a SaaS slowdown that coincides with a weaker term license renewal cycle. Revenue growth would drop toward mid single digits while stock pay stays high.
The bull case is SaaS crossing half of subscription ARR with net retention steady. That would make Commvault's recurring base more predictable and lift the share of revenue recognized ratably.
What to watch
The Q2 fiscal 2027 10-Q will show whether SaaS ARR growth holds near 38% and whether subscription net retention stays at 114% [1].
Watch the split of term license and SaaS in new bookings. A customer moving from term license to SaaS lowers revenue in the quarter of the switch but raises one-time value.
Watch stock pay against revenue. A drift above 11% would mean the company is paying more to stand still.
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