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CVLT · Analyze
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Full cross-cutting analysis: compare-korea-memory-selloff-CVLT-SNDK-KLAC-AMKR-GLW-2026-07-28.md Data note: Yahoo/roic.ai MCP not connected — fin.py (yfinance) + direct quarterly pull + live Public.com quotes.
⚠️ The reported story was wrong
Wire services (StockStory/FinancialContent) reported CVLT "missed on ARR" and guided next-quarter revenue "$266M, 13.7% below estimates." Both are apples-to-oranges errors. Verified against the primary press release:
- $266M is the Q2 subscription revenue guide ($264–268M), compared by the wire against a total revenue consensus.
- $1.05B is subscription ARR (+22% YoY), compared against a total ARR estimate of $1.15B.
Guidance was raised, not cut.
Q1 FY2027 actuals (reported 2026-07-28)
| Metric | Actual | YoY |
|---|---|---|
| Total revenue | $314.1M | +11% (beat $310.5M) |
| Subscription revenue | $267.0M | +16% |
| SaaS revenue | $100.6M | +39% |
| Subscription ARR | $1,054.3M | +22% |
| SaaS ARR | $424.3M | — |
| Gross margin | 81.6% | stable |
| Non-GAAP EBIT margin | 22.8% | expanding |
| Free cash flow | $51.1M | +71% |
| Non-GAAP EPS | $1.42 | vs $1.16 est (+22%) |
FY2027 guidance: subscription revenue raised to $1,119–1,129M (~16%); subscription ARR reiterated $1,200–1,210M (~19%); non-GAAP EBIT margin raised 50bps to ~21%; FCF $250–260M.
So why −16%?
- Valuation reset. Stock ran +66% in six months ($77.89 Mar → $141.73 Jun) into a 94x GAAP P/E. The beat was margin-driven, not growth-accelerating — software markets punish that at a premium multiple.
- AI monetization deferred. Management: "AI-related workloads are not yet a major contributor to guidance."
- The memory tax. Term-software net-new ARR flat sequentially, attributed to "hardware supply constraints and shorter deal terms" — the Korea/memory link, arriving as a customer cost problem (same effect that hit IBM's 7/14 warning).
🚩 Red flags the drop does not explain away
- Securities class action (D.N.J.) vs. the company, CEO Sanjay Mirchandani, and former CFO Jennifer DiRico. Class period Apr 29 2025 – Jan 26 2026. Allegation: ARR guidance failed to account for how the SaaS-vs-term mix suppresses net-new ARR. On Jan 27 2026 net-new ARR printed $39M vs $45M guided → stock −31%. Lead plaintiff deadline was Jul 17 2026. This attaches to the exact metric still soft today. CFO since changed (Gary Merrill, Apr 2026).
- Balance sheet transformed in one year. Debt $11M → $917.5M; equity $325M → $7.5M; Debt/Assets 1% → 48.6% — a $545.7M debt-funded buyback executed near the highs. Framework §1.2 explicitly warns on buybacks at rich prices.
Valuation (§3)
| Metric | Value |
|---|---|
| P/E (fwd) | 20.9x |
| P/FCF (FY27 guide $250–260M) | ~20x |
| FCF yield | ~4.9% |
| Graham IV | $2.54 — not meaningful (BVPS $0.18, book destroyed by buybacks) |
| Bogle expected return | ~13%/yr (0% yield + 16% growth − 3%/yr multiple compression) |
| Analyst target (16) | mean $159, range $100–200 |
Fair value: $115–150 (base ~$132). Reasonable for 22% subscription ARR growth at a 22.8% EBIT margin — not cheap.
Action
- HOLD the existing 1.5-share stub. Nothing to do.
- Add only $100–110, and only if Q2 FY27 shows term-software net-new ARR turning up.
- Trim $160+.
- Thesis break: subscription ARR growth <15%, net-new ARR misses guidance again, or FY27 FCF guide cut below $230M.
- 📅 Next catalyst: Q2 FY2027 (~late Oct 2026).