BlackBerry Earnings: Strong Fundamentals and Execution, but a Challenging Valuation

Key Morningstar Metrics for Blackberry

• Fair Value Estimate
  : C$7.30
• Morningstar Rating
  : ★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Very High

What We Thought of Blackberry’s Earnings

BlackBerry reported good fiscal first-quarter results well above guidance. Revenue rose 26% year over year to USD 153 million, while non-GAAP operating margin of 21% was up about 1,000 basis points year over year. Management raised fiscal 2027 guidance by about the level of the first-quarter beat.

Why it matters: BlackBerry continues to show improved financial performance, driven by its strong core technology. We like the momentum for QNX software platforms in automotive, which we expect to see long-term secular growth as vehicles become increasingly software-driven.

• The smaller secure communications segment did well, with a large contract win with the Canadian government in the quarter. BlackBerry’s core security proposition does very well in regulated industries like government, and we see this segment as lower-growth but highly sticky.
• BlackBerry is now translating its core portfolio into better financial results, with the fifth straight quarter of GAAP profitability. We like where its core operating profitability sits today and believe it can continue to exert leverage on healthy top-line growth.

The bottom line: We raise our fair value estimate for no-moat BlackBerry to account for higher long-term growth expectations for QNX. Shares rose more than 15% in early market trading on the beat-and-raise, and they remain overvalued to us.

• BlackBerry shares are up more than 150% year to date, as the firm has gotten wider investor recognition and garnered optimism for physical artificial intelligence. We agree with BlackBerry’s positive opportunity, but we find the valuation stretched versus actual fundamentals.
• We model high-single-digit growth for BlackBerry over the long term, with double-digit QNX growth and low growth for secure communications. We also expect non-GAAP operating margin to expand to 30% in fiscal 2031, from 17% in 2026. Investors have to expect better to buy in today.