Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
BlackBerry’s BB fiscal first-quarter results beat management guidance across the top and bottom lines. Revenue fell 15% year over year to $122 million. Management lightly raised its fiscal 2026 revenue guidance, which implies a modest decline, while keeping the rest of its outlook.
Why it matters: BlackBerry showed solid execution, but its outlook for fiscal 2026 remains weak. We expect macroeconomic uncertainty, slow government order cycles, and negative impacts from US automotive tariffs to weigh on sales throughout the year.
We attribute soft secure communications revenue partly to slower government order cycles amid potential budget cuts, which is also underpinning BlackBerry’s weak outlook for the rest of the fiscal year.We continue to appreciate BlackBerry’s march to improved profitability under CFO Tim Foote, and note the first quarter of positive GAAP profitability in three years. We like BlackBerry’s strategy to grow organically and streamline its product portfolio and operating spending.
The bottom line: We maintain our $3.60 per share fair value estimate for BlackBerry, as we continue to expect a soft fiscal 2026 and healthy organic growth in the long term. Shares look moderately overvalued to us, implying stronger long-term growth and margin expansion than we expect.
We believe BlackBerry’s government business can return to growth after this year, coming back in line with our long-term expectations for high-single-digit firm revenue growth. We continue to like the firm’s improved profitability, and expect margin expansion to continue after fiscal 2026.
Coming up: BlackBerry raised its secure communications revenue guidance for fiscal 2026 by $4 million to a midpoint of $239 million. This was less than the amount that first-quarter results beat guidance, showing continued soft expectations for government and auto demand in fiscal 2026.
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