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  5. OTEX: Time for an OTEX update, have we finally turned a corner? [Open Text Corporation]
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Q: Time for an OTEX update, have we finally turned a corner? How much of a risk do you think AI presents?
Asked by Jim on August 12, 2025
5i Research Answer:

We posted some comments on OTEX yesterday. AI is both a threat and an opportunity to the company. Recent numbers were better than expected, and the VERY low valuation we think reflects a lot of the potential risks. OpenText's organic growth challenges may persist, as revenue declines in the high-growth cybersecurity segment point to execution issues. Though the company is making progress in observability and IT-service management, we remain cautious about its ability to scale up amid keen competition and sustained innovation pressures. The free-cash-flow growth outlook of 17-20% is encouraging, but falls short of the roughly $1 billion ambition discussed in May. Though the dividend-increase and $300 million share-buyback announcements provide interim support, we would still be a bit cautious about OpenText's ability to outperform similar-size software peers on top-line growth.