Not every opportunity in the market comes from fast-growing stocks, which are in the news all the time. Sometimes, it’s the quieter names going through a reset that are worth a closer look — especially when short-term pressure creates a better entry point in an otherwise strong business.
Open Text (TSX: OTEX) is one of the top tech stocks on the TSX today. This Canadian software firm mainly specializes in enterprise information management, helping organizations handle data, security, and digital workflows across multiple platforms. Its ecosystem spans cloud-based content management, cybersecurity, analytics, and application modernization. At around $31.36 per share with a market cap of $7.9 billion, Open Text stock has been under pressure lately. But that weakness may not tell the full story.
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What’s been weighing on this tech stock?
Over the last six months, Open Text shares have tanked by around 45% and have seen about 33% value erosion so far in 2026. That decline hasn’t been driven by a collapse in demand for its services, but rather by its internal changes and broader repositioning.
Interestingly, the company has been actively reshaping its business of late. Leadership transitions and the sale of its non-core assets have created some short-term uncertainty. While these moves can weigh on investor sentiment in the near term, I see them as a part of its longer-term plan to refocus the business.
There are also early signs that the selling pressure could be easing as the stock has been consolidating near current levels in recent sessions, suggesting that selling momentum may be stabilizing and investor confidence may slowly be returning.
A closer look at the numbers
Despite a sharp drop in this TSX tech stock over the last few months, Open Text’s underlying business remains stable. In the second quarter of its fiscal year 2026 (ended in December 2025), the company reported revenue of US$1.3 billion, down just 0.6% YoY (year-over-year). That’s not strong growth, but it does show stability even in a challenging global environment.
More importantly, its cloud segment continues to expand. In the latest quarter, Open Text’s cloud revenue rose 3.4% YoY to US$478 million, marking the 20th straight quarter of organic growth. This shift toward cloud-based services is important, as it builds a more predictable and recurring revenue base for the company. Similarly, Open Text’s annual recurring revenue (ARR) also increased slightly to US$1.1 billion last quarter, highlighting that stability.
Profitability remains strong
Meanwhile, the company generated adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of US$491 million, which was about 37% of its total revenue. Also, its net profit margin stood at 12.7%, showing that the business is still highly profitable.
Even more telling is Open Text’s consistent cash generation. The company delivered US$319 million in operating cash flow and US$279 million in free cash flow during the quarter. While these figures are lower than last year, they still highlight a business that consistently produces cash.
Why the long-term story is still intact
In addition to the strength in its financials, Open Text is continuing to simplify operations to sharpen its focus on higher-growth areas. The recent sales of its eDOCS and Vertica business arms were part of this strategy. By trimming such non-core assets, the tech firm wants to concentrate more on enterprise information management and artificial intelligence (AI), both of which are expected to see solid demand in the coming years.
There’s also a leadership shift ahead, with Ayman Antoun set to take over as CEO later this month. Leadership changes can sometimes act as a catalyst, especially when paired with a clear strategic direction.
At the same time, Open Text isn’t shying away from returning capital to shareholders. It recently expanded its share buyback program, now totaling US$500 million, clearly showing confidence in its valuation and future prospects.
The bottom line
Open Text may not look exciting at first glance, especially after a nearly 45% decline in the last six months. But under the surface, its business remains stable, profitable, and cash-generative. Also, its growing cloud segment, recurring revenue base, and increasing focus on AI position it well for long-term growth trends. If the company executes on its strategy, today’s weakness could turn out to be a well-timed entry point for Foolish Investors.
