Let’s be direct: Coveo Solutions (TSX:CVO) is one of the most underappreciated AI stocks on the Toronto Stock Exchange right now. The Quebec-based company is down roughly 57% from its highs, yet it just reported its best year of new business bookings in its history.
That kind of divergence between price and performance is the setup long-term investors should be hunting for.
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Is the TSX tech stock a good buy?
Coveo builds the AI intelligence layer that sits beneath enterprise software. Think of it this way: large language models like those from OpenAI or Anthropic are powerful, but they do not know a company’s products, documents, contracts, or customer data by default. Coveo fixes that.
Its platform indexes unstructured data from across an enterprise, applies machine learning to surface what is relevant, and then feeds that context to AI models so they can produce accurate, permission-aware answers at scale.
As Coveo Co-Founder and CEO Laurent Simoneau put it on the company’s fiscal fourth-quarter 2026 earnings call, “enterprises invest in AI-driven search, discovery, knowledge and agentic experiences.”
The company serves manufacturers, distributors, financial services firms, and high-tech companies. In the most recent quarter, it signed deals with Palo Alto Networks, Intuit, Deloitte, and the Australian Taxation Office, among others.
For the second consecutive quarter, Coveo landed the largest deal in its history, a seven-figure annual subscription with a Global 1000 industrial manufacturer whose business case estimates hundreds of millions of dollars in incremental revenue over three years.
A strong performance in fiscal 2026
Coveo’s fiscal year 2026 results (ended March 31, 2026) show a company executing well despite a tough macro backdrop.
- Full-year software-as-a-service revenue rose 13% to US$142.5 million.
- The Coveo Core platform, which excludes the deprecated Qubit product, grew 15%.
- Total revenue came in at US$148.3 million, up 11%.
- Gross margin held steady at 78%, with product gross margin at 81%.
Perhaps most importantly, the company generated US$10.5 million in operating cash flow for the year and ended with approximately US$102 million in cash and zero debt.
Net expansion rates for AI stock-keeping units remained above 150%. The company nearly doubled its generative AI customer count year over year. Moreover, AI solutions now represent 13% of total annual recurring revenue.
Executive Chairman Louis Tetu made the competitive positioning very clear on the earnings call: “These large manufacturers, equipment companies, distributors… because of the power of Coveo AI… are no longer looking at service in an isolated way or commerce in an isolated way.”
That convergence of commerce, service, and knowledge into a single AI-driven experience is Coveo’s sweet spot.
Yes, some of Coveo’s older, pre-generative AI customer cohorts are renewing at more modest rates. The Salesforce churn event in the second quarter of fiscal 2026 was a notable headwind.
And management is guiding fiscal 2027 conservatively, with SaaS (software-as-a-service) revenue expected between US$154 million and US$158 million, representing roughly 10% to 13% core growth, partly because large enterprise deals are inherently hard to time.
The strategic growth areas, which now represent the majority of total annual recurring revenue, are growing rapidly. The company also announced a strategic agreement with Bell AI Fabric and a memorandum of understanding with the Canadian government, creating optionality in sovereign AI deployments that is not reflected in current guidance.
Is the TSX stock undervalued?
Valued at a market cap of $380 million, Coveo Solutions is forecast to increase its free cash flow from US$9.7 million in fiscal 2026 to US$130 million in fiscal 2031. If the TSX tech stock is priced at 10 times forward FCF, which is very cheap, it could surge close to 400% within the next four years.
At current prices, you are buying a cash-flow-positive, debt-free enterprise AI platform that is growing its most strategic segments at above-market rates, at a significant discount to its historical trading range.
For patient investors with a multi-year time horizon, this Canadian tech stock looks like one of the better risk-reward setups in the market today.
