When it comes to artificial intelligence (AI) stocks, there’s no shortage of options. Between hyped-up tech giants and flashy new AI startups, it’s easy to get distracted. But for my money, OpenText (TSX:OTEX) is the under-the-radar Canadian powerhouse that makes me more excited than any other AI investment on the market today.
About OpenText
Sure, OpenText doesn’t scream “AI” the way some Silicon Valley names do. Yet that’s precisely why it’s so compelling. This Waterloo-based firm has been steadily embedding AI into its massive suite of enterprise tools, not as a marketing stunt, but as a fundamental pillar of its long-term growth plan. While others chase headlines, OpenText is building infrastructure that global businesses already rely on, with AI as the engine powering the next phase.
Let’s get the hard numbers out of the way. In its latest earnings release for the third quarter (Q3) of fiscal 2025, OpenText reported $1.254 billion in total revenue. That’s down 13.3% year over year, largely due to the AMC divestiture. But when you strip that out, the decline was just 4.5%. Meanwhile, cloud revenue was up 1.8% to $463 million, marking the 17th straight quarter of cloud organic growth.
More importantly, OpenText continues to generate hefty free cash flows. In Q3 alone, it posted $374 million in free cash flow, up 7.4% year over year. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $395 million with a solid margin of 31.5%. This isn’t a tech stock chasing revenue at the expense of profitability. It’s steadily optimizing, cutting costs, integrating acquisitions, and automating operations. In fact, its Business Optimization Plan is expected to yield $490 to $550 million in annualized savings once fully implemented.
More to come
OpenText’s recently launched Titanium X platform is the crown jewel here. It’s a next-gen software as a service (SaaS) and hybrid solution that allows customers to make smarter decisions using OpenText Aviator AI. Think of it like this: while other companies are building AI for tomorrow, OpenText is integrating AI into the real workflows of today. Content management, cybersecurity, compliance, these aren’t optional features for Fortune 500 companies; they’re necessities. And OpenText is giving them AI-powered tools to do it better, faster, and with less manual effort.
CEO Mark Barrenechea is clear about where the tech stock is headed, stating, “We continue to prove the criticality of OpenText products and the resiliency of our business model.” He also emphasized the role of AI, saying that the company is reinvesting for the long term in “our Aviator AI platform, Content, Security and Cloud growth products.” CFO Chadwick Westlake was even more blunt: “It’s an exceptional time for investors to participate in the earnings growth engine we’re building at OpenText.”
And that’s just it. This is no longer just a document management firm. It’s an AI-first business cloud company with $1.28 billion in cash, a growing cybersecurity division, and an aggressive share-repurchase plan. Last quarter, OpenText returned $183 million to shareholders, including $68 million in dividends and $115 million in stock buybacks.
Foolish takeaway
Critics may point to the revenue drop, but this misses the forest for the trees. OpenText has been reorienting its entire business post-Micro Focus acquisition and post-AMC divestiture. The near-term headwinds are transitional. The long-term vision? A leaner, AI-anchored, cash-generating tech machine.
And as a Canadian investor, that’s rare. We don’t have many software titans playing at this scale, especially not ones leading in AI, cybersecurity, and enterprise cloud. OpenText’s current dividend of $0.2625 per quarter offers a decent yield, too, while investors wait for earnings to reaccelerate.
There’s a quiet confidence in OpenText’s execution that sets it apart. It isn’t chasing the AI hype cycle. It’s embedding intelligence into the core of how businesses operate, and that’s where the real money will be made.
