BlackBerry Secure Comms: What Drives the Lower FY27 Outlook?
BlackBerry BB entered the second half of fiscal 2027 with a cautious outlook for its Secure Communications business, despite maintaining a relatively stable recurring-revenue base and continuing to see customer activity across key government and regulated markets.
Following the first quarter, BlackBerry had projected fiscal 2027 Secure Communications revenues in the range of $270-$280 million. In its latest update, the company lowered that range to $260-$270 million, while guiding adjusted EBITDA to $50-$58 million.
Management said it was taking a cautious view on the timing of government opportunities amid broader geopolitical and trade uncertainty, including Canada-U.S. tensions. However, management added that BlackBerry has not seen “anything material arising from this issue” and has not observed a “slowdown in pipeline generation outside of North America”.
In the fiscal second quarter, Secure Communications revenues rose 2% year over year to $61 million. Segment adjusted gross margin fell 500 basis points to 61%, reflecting lower-margin Secusmart device revenues. Adjusted EBITDA was $8 million, down 18%, with a 13% margin. Annual recurring revenues reached approximately $221 million, up 4%, while dollar-based net retention was 91%.
First-half Secure Communications revenues rose 13% year over year, supported by renewals and expansions across the United States, Canada, Europe, Asia and the Middle East.
Management noted that about 80% of the business is supported by ARR. However, the key uncertainty lies in the roughly 20% of the revenue outlook tied to larger government deals. Management said larger government opportunities can create quarter-to-quarter variability as these have long sales cycles.
Let’s Look at BB’s Peers
In the broader cybersecurity market, BlackBerry operates alongside several leading names, including CrowdStrike Holdings CRWD, Palo Alto Networks PANW and Motorola Solutions MSI.
While BlackBerry focuses on encrypted communications and sovereign-grade infrastructure, CrowdStrike is a leading pure-play cybersecurity vendor. Revenues for the second quarter of fiscal 2027 stood at $1.47 billion, increasing 26% year over year. CrowdStrike’s growth is being fueled by rising AI-security demand, Falcon Flex adoption and momentum across next-gen SIEM and AIDR adoption. For fiscal 2027, CrowdStrike’s revenues are now projected between $5.991 billion and $6.011 billion, with ARR of $6.603 billion to $6.612 billion.
Palo Alto Networks’ fiscal fourth-quarter revenues surged 34% to $3.41 billion, while remaining performance obligations reached $21.2 billion, up 34%. Performance was driven by broad-based strength across Network and AI Security, XSIAM momentum and contributions from CyberArk and Chronosphere acquisitions. Palo Alto Networks expects fiscal 2027 Network & AI Security revenues to grow in the low double digits. Cortex revenues is projected to rise about 30% and Idira revenues are expected to reach approximately $1.5 billion.
Motorola, through its Software and Services segment, offers a wide range of services and software to government, public safety and commercial communication networks. Services include offerings such as repair, technical support and maintenance, along with monitoring, software updates and cybersecurity services. Motorola’s second-quarter revenues rose 13% year over year, while Software and Services revenues increased 10%.
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This article originally published on Zacks Investment Research (zacks.com).
