Cognyte Software Ltd. CGNT has been on a sharp upward trajectory, with its stock up nearly 38.1% over the past three months. Cognyte is a relatively young, standalone public company that spun off from Verint Systems in 2021.
The rally over the past three months has been driven by improving financial performance, strengthening demand trends and growing investor interest in the company’s prospects. Cognyte operates in the niche but increasingly critical domain of investigative analytics. The company provides data processing and AI-driven investigative analytics solutions primarily to governments and law enforcement agencies. As simmering geopolitical tensions spawn complex and massive volumes of data, the demand for such solutions is exploding.
However, such a rally often raises a critical question for investors: is there still meaningful upside left in the stock?
Let's do a deep dive and assess what to do with CGNT
CGNT: Multiple Tailwinds Offer Long Runway for Growth
The company is operating in a domain shaped by rising geopolitical tensions, increasing cyber and hybrid threats, sophisticated and complex data, and the need for real-time intelligence. Management noted that these factors are driving demand for its solutions.
Cognyte delivered double-digit revenue growth, with fiscal 2026 revenues rising 14.1% year over year. Demand from repeat customers, as well as increasing new customers, cushioned the top-line performance. Management noted that the installed base forms a significant portion of revenues, highlighting customer stickiness.
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In the fourth quarter of fiscal 2026, recurring revenues were up 5.6% to $50 million, representing 47.1% of total revenues.
CGNT recently announced that it won a $20 million plus, three-year subscription contract with a “long-standing customer” in the Europe/Middle East/Africa region, underscoring both demand visibility and customer stickiness.
Apart from installed base expansion, focus on new customers and scaling of the U.S. market bodes well. 61 new customers were added in fiscal 2026. CGNT is also strengthening its sales team and recently added Carahsoft as a channel partner. Carahsoft will aid in providing access to federal, state and local procurement channels to boost adoption of CGNT’s solutions.
The integration of AI into investigative workflows is emerging as a key differentiator. Cognyte is embedding AI into its operational systems platform, which creates a competitive moat.
The company’s backlog and remaining performance obligations (“RPO”) strengthen revenue visibility. Total RPO stood at $557.2 million, with a backlog of $433.4 million at the end of fiscal 2026. Total RPO is the sum of contract liabilities and backlog. As a result, the company now expects fiscal 2027 revenues to be $448 million (+/-3%) compared with $400 million in fiscal 2026.
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As revenues scale, profitability is also improving. Fiscal 2026 non-GAAP gross margin expanded 200 basis points to 73%, while non-GAAP operating profit of $36.7 more than doubled year over year. Adjusted EBITDA came in at $48.2 million, up from $29.1 million in the prior-year quarter. The company has already achieved its fiscal 2028 gross margin targets ahead of schedule, indicating strong execution.
Cognyte ended fiscal 2026 with approximately $116.9 million in cash and no debt. A strong balance sheet provides flexibility for acquisitions, innovation and shareholder returns. The company is also actively returning capital through share buybacks, signaling confidence in its growth. For fiscal 2026, CGNT repurchased stock worth $21.4 million.
However, macro uncertainty, competition, rising operating expenses and dependence on government spending cycles remain concerns.
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Analysts have significantly revised earnings estimates upwards for CGNT’s current fiscal year.
CGNT Stock vs. Peers
CGNT’s 38.1% gain stands in stark contrast to the Zacks Internet Software market’s decline of 1.6% in the past three months. The broader Computer and Technology sector and the S&P 500 are up 11.6% and 5%, respectively.
Price Performance
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Some of its peers, such as Elbit Systems ESLT and Palantir PLTR, have gained 29% and 7.4%, respectively, while L3Harris Technologies LHX is down 11.7%. Elbit Systems is an Israel-based company like Cognyte, while Palantir and L3Harris are established U.S.-based companies.
CGNT’s Discounted Valuation
In terms of the price/book multiple, CGNT is trading at 3.23X, lower than the sector’s multiple of 4.83X.
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ESLT, PLTR and LHX trade at a price/book multiple of 9.23X, 46.64X and 2.93X, respectively.
Why CGNT Still Has Room to Run
At present, CGNT flaunts a Zacks Rank #1 (Strong Buy).
Cognyte’s strong revenue visibility, expanding margins and growing role in the AI-driven investigative analytics space bode well. With a robust backlog and exposure to long-term geopolitical and security tailwinds, the company appears well-positioned for sustained growth.
While risks remain, CGNT still looks to have meaningful upside potential.
You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).