Open Text has underperformed its peers in recent years, falling nearly 40% from its all-time high. The continued pullback has seen OTEX stock return 61% to shareholders over the past decade, even when adjusting for dividend reinvestments.
However, the pullback allows shareholders to buy the dip and gain exposure to a company that offers a 3.5% dividend yield.
Is the Canadian tech stock a good buy?
OpenText Corporation develops and sells information management software and cloud solutions worldwide.
The company offers software-as-a-service, application programming interfaces (APIs), hosted services and packaged enterprise applications, including content management, cybersecurity, DevOps, analytics and AI services. Revenue streams include cloud subscriptions, software licensing, consulting, training, and managed services.
OpenText maintains strategic partnerships with JUICE, Googling Cloud, AWS, Microsoft, OracleAnd Salesforceas well as system integrators such as Accenture and Deloitte. The company serves enterprise organizations, government agencies and mid-market companies around the world.
In the first fiscal quarter of 2026 (ending September):
- Open Text reported revenue of $1.3 billion, up 1.5% year over year, while cloud sales rose 6% to $485 million.
- The standout performance came from Open Text’s Content business, which represents approximately 40% of total revenue and saw cloud growth accelerate year over year to 21%.
- That represents a significant jump from the 17% cloud growth rate the division posted last year.
- The company’s current remaining performance obligations, a key measure of future cloud revenues, rose 6% year over year, while long-term cloud RPO rose 16%.
Executive Chairman Tom Jenkins has outlined a clear strategy to shed 15% to 20% of the company’s revenue by selling non-core assets.
The goal is to focus solely on content that trains agent AI systems. Open Text has already sold its eDOCS business and plans to divest one additional unit per quarter over the next three quarters. Jenkins emphasized that the pace of divestments is a result of operational prudence rather than market demand constraints.
The company’s positioning in AI stems from its vast library of data connectors built up over the past 35 years. Open Text maintains more than 1,500 connectors to legacy and current enterprise systems, providing access to content behind corporate firewalls that public AI models cannot reach. A recent MIT study found that 95% of early enterprise AI projects failed, mainly due to insufficient training content.
New CFO Steve Rai, who took office in October BlackBerryindicated that customers are accelerating their cloud migrations faster than expected.
This shift creates a revenue recognition timing issue, with license revenue declining in the short term but being replaced by larger recurring cloud contracts. The company expects to convert every dollar of maintenance revenue into two dollars of cloud revenue.
Open Text closed 33 deals over $1 million in the first quarter, up 43% year over year. The company maintained its full-year 2026 guidance, even as second-quarter revenue expectations fell short of expectations.
What is OTEX’s price target?
Analysts predict that revenue will increase from $5.17 billion in fiscal 2025 to $5.37 billion in fiscal 2028. During this period, adjusted earnings per share are expected to rise from $3.82 to $4.77.
OTEX stock trades at a forward earnings multiple of 7.4 times, which is lower than the 10-year average of 12.1 times. At current prices, the price could rise by 15% over the next eighteen months. If we adjust the dividends, the cumulative return could be closer to 20%.
Bay Street remains bullish on Canadian tech stocks, forecasting a 30% upside from current levels.
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