BlackBerry (TSX:BB) investors are patiently waiting for the stock to stage a turnaround after wrestling with years of underperformance. In 2016, BlackBerry exited the smartphone business as it lost market share to Apple, Samsung, and a host of China-based manufacturers, including Huawei, Xiaomi, and Oppo.
BlackBerry shifted its focus to provide a portfolio of software services to enterprises but has failed to deliver on its lofty promises. Since late 2016, the TSX tech stock has lost 69% in market value and currently trades at $1.82 billion.
Let’s see if BlackBerry stock can stage a comeback and outpace the broader markets in 2024 and beyond.
An overview of BlackBerry
BlackBerry provides intelligence security software and services to enterprises and governments globally. Its auto software powers more than 235 million vehicles as the company aims to leverage AI (artificial intelligence) and machine learning to deliver solutions across verticals such as data privacy, endpoint security management, encryption and embedded systems.
How did BlackBerry perform in fiscal Q1 of 2025
In the fiscal first quarter (Q1) of 2025 (ended in May), BlackBerry established its IoT (Internet of Things) and cybersecurity businesses as standalone divisions while focusing on cost efficiencies. It delivered the third consecutive quarter of better free cash flow usage amid an uncertain macro environment.
BlackBerry’s IoT and security divisions delivered better than forecast sales, while the cybersecurity business achieved improvements in annual recurring revenue and dollar-based new retention rate metrics.
BlackBerry’s IoT business reported US$53 million in sales with a gross margin of 81%, as royalties and professional services were strong and at record levels. In fact, royalties were stronger than forecast and were a key driver of business performance. Further, automotive sales accounted for 80% of IoT sales.
The software company emphasized it will invest to scale its services team to support customer development programs, which should result in additional revenue while helping customers unlock its royalty backlog, which totals US$815 million.
In the automotive business, BlackBerry reported new design wins for the digital cockpit and ADAS (advanced driver assistance system). BlackBerry claimed that a top five global automobile manufacturer is utilizing the QNX hypervisor and the QNX ADAS sensor framework. Moreover, another leading European original equipment manufacturer (OEM) will leverage a Qualcomm chipset in the cockpit, while an electric vehicle OEM will deploy QNX across the latest range of vehicles.
BlackBerry’s annual recurring revenue (ARR) in the cybersecurity business increased for the second consecutive quarter to US$285 million, while Q1 sales stood at US$85 million. Its dollar-based net retention rate was 87%, which means existing customers reduced spending by 13% in the last 12 months.
In fiscal 2025, BlackBerry forecasts cybersecurity sales to range between US$350 million and US$365 million.
BlackBerry remains a high-risk investment
While BlackBerry’s operating expenses fell by US$4 million sequentially to US$109 million, the company reported an operating loss of US$12 million in fiscal Q1. Its free cash outflow stood at US$16 million and its balance sheet cash fell by US$32 million to US$143 million in the last three months.
Analysts expect BlackBerry to report an adjusted loss of US$0.06 per share in fiscal 2025, while earnings per share are forecast at $0.05 in 2026. However, analysts remain bullish and expect the stock to more than double in the next three months.
