OpenText (TSX:OTEX) wrapped up fiscal 2025 with a mix of bold moves, solid cloud momentum, and a few bruises along the way. The Waterloo-based software giant has been reshaping itself over the past year, and the latest results show both the progress made and the challenges ahead. So, let’s dive in to see if a dividend increase is worth a buy today.
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What happened?
The most striking change in 2025 came from a major divestiture, the sale of its Application Modernization and Connectivity (AMC) business, which trimmed top-line numbers but sharpened the company’s focus. Adjusting for that sale, revenue still slipped 3% for the year, showing that transformation can be a little messy. But OpenText stock’s cloud segment kept pushing forward, delivering $1.86 billion in annual revenue, up 2% year over year, with bookings jumping 10%. In the fourth quarter (Q4), the cloud story was even brighter, with bookings up 32% and marking the 18th straight quarter of organic growth. That surge came largely from demand for its artificial intelligence (AI)-driven Titanium X platform, which management is betting heavily on for future growth.
Financially, the company’s profitability stood out. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margins hit 34.5% for the year, and free cash flow came in at $687 million, topping the high end of guidance. Even with revenue dips in some areas, operational discipline kept margins strong. OpenText stock returned a record $683 million to shareholders through dividends and buybacks, showing confidence in its future. Management sweetened the pot with a 5% dividend hike and a new $300 million share-repurchase program.
Looking back over the last four quarters, the ride has been bumpy. Revenue slid each quarter compared to the prior year, reflecting the AMC exit and softer customer support sales. Generally Accepted Accounting Principles (GAAP) earnings took a big hit in Q4, plunging nearly 88% from the same quarter in 2024, due partly to restructuring costs and divestiture impacts. However, on a non-GAAP basis, earnings per share (EPS) held steady year over year in Q4 at $0.97, suggesting the core business is more stable than headline figures might imply.
Looking ahead
The real watch item going forward is whether cloud momentum can offset softness elsewhere. For fiscal 2026, OpenText stock is guiding for 3% to 4% cloud revenue growth and 1% to 2% total revenue growth. That’s modest, but it comes with expectations for faster cloud bookings growth in the mid-teens, which could provide the spark for stronger results in the back half of the year. The AI, cloud, and cybersecurity markets are big tailwinds here, and OpenText stock is positioning itself as a trusted player in these areas, especially with its focus on Canadian sovereign AI solutions in partnership with TELUS.
Valuation-wise, shares trade at about 7.6 times forward earnings, which is low for a company with recurring revenue making up the bulk of sales. The dividend yield sits around 3.55% after the increase, giving income investors a reason to hold on while waiting for growth to reaccelerate. The balance sheet remains leveraged, with debt-to-equity above 160%, so management’s ability to keep generating strong cash flows will be key to reducing debt while still funding buybacks and dividends.
The main risks lie in execution. OpenText stock must prove it can replace the lost AMC revenue while avoiding prolonged declines in customer support sales. Competition in cloud and AI is fierce, and while Titanium X is gaining traction, the field is crowded with giants. Also, higher interest rates and tighter corporate spending could weigh on enterprise software budgets, potentially slowing deal flow.
Bottom line
Still, this is a company with a long history of adapting, often through acquisitions, but increasingly now through sharpening its core strengths. If management delivers on its growth promises in cloud and security, fiscal 2026 could mark the start of a steadier climb after a year of transition. For now, OpenText stock offers a blend of income, margin stability, and emerging tech exposure that’s rare in the Canadian market. Investors just need to be ready for a little more turbulence before the skies clear.
