BlackBerry Limited (BB) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This filing covers the quarterly period ended August 31, 2025 (Second Quarter of Fiscal 2026). BlackBerry Limited operates as a provider of intelligent software and services, organized into three reportable segments: QNX (embedded software), Secure Communications (mobile fortification and critical event management), and Licensing (intellectual property monetization). The Cylance cybersecurity business was sold in the prior fiscal year and is reported as discontinued operations.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Revenue | $129.6 million | $126.2 million | $251.3 million | $249.6 million |
| Gross Margin | $96.6 million (74.5%) | $88.6 million (70.2%) | $186.9 million (74.4%) | $178.6 million (71.6%) |
| Operating Income | $11.5 million | $2.2 million | $13.5 million | ($10.7 million) |
| Net Income (Loss) | $13.3 million | ($19.7 million) | $15.2 million | ($61.1 million) |
| Diluted EPS | $0.02 | ($0.03) | $0.03 | ($0.10) |
| Cash & Investments | $363.5 million (as of Aug 31, 2025) | |||
| Long-Term Debt | $195.9 million (Carrying Value) |
Non-GAAP Highlights: Adjusted EBITDA for Q2 2026 was $25.9 million (vs. $15.1 million prior year). Adjusted Net Income was $24.2 million ($0.04 per share).
Material Changes vs. Prior Period
- Profitability Turnaround: The Company returned to GAAP profitability ($13.3M net income) compared to a net loss of $19.7M in the prior year quarter. This improvement is driven by higher gross margins, reduced operating expenses, and the absence of discontinued operation losses from the Cylance business.
- Revenue Growth: Total revenue increased 2.7% year-over-year. The QNX segment drove growth with revenue of $63.1M (up 15.4%), exceeding guidance due to strong royalty and development seat revenue. Secure Communications revenue declined 10% to $59.9M, primarily due to lower Secusmart product revenue.
- Expense Reduction: Operating expenses decreased 1.5% year-over-year to $85.1M. Adjusted operating expenses decreased 4.7%, aided by benefits from Strategic Innovation Fund (SIF) claims and infrastructure cost reductions.
- Share Repurchases: The Company repurchased 7.6 million shares for $30.0 million during the six-month period under its Normal Course Issuer Bid (NCIB) program.
Guidance, Outlook, and Risks
Updated Fiscal 2026 Guidance: Management has raised full-year expectations based on stronger first-half performance:
- Total Revenue: Raised to $519M - $541M (previously $508M - $538M).
- Adjusted EBITDA: Raised to $82M - $101M (previously $72M - $87M).
- Non-GAAP EPS: Raised to $0.11 - $0.15 (previously $0.08 - $0.10).
- Operating Cash Flow: Raised to $35M - $40M (previously ~$35M).
Q3 2026 Outlook: Revenue expected in the range of $132M - $140M; Adjusted EBITDA expected in the range of $20M - $28M.
Risks and Contingencies:
- Liquidity of Investments: Approximately $58.8 million of investments are in private companies (including Arctic Wolf shares received for the Cylance sale) which are illiquid and lack a public market.
- Customer Concentration: One customer comprised 11% of revenue in the six months ended August 31, 2025.
- Legal Proceedings: Ongoing litigation includes a Canadian employment class action (settled in principle for ~$2.8M, awaiting court approval) and various patent infringement claims.
Investor Verification Checklist
- QNX Royalty Sustainability: Verify the durability of the royalty revenue spike that drove QNX results above guidance.
- Secure Communications Churn: Assess the impact of the 10% revenue decline in Secure Communications and the 93% Dollar-Based Net Retention Rate on future growth.
- Non-GAAP Reconciliations: Review the reconciliation of Adjusted EBITDA to GAAP Operating Income, noting the exclusion of restructuring charges ($3.4M in Q2) and stock-based compensation.
- Arctic Wolf Receivables: Confirm the status of the $38.1 million delayed cash payment receivable from Arctic Wolf (due one year post-closing).
- Share Count Dilution: Monitor the impact of the 51.5 million shares issuable upon conversion of the 3.00% senior convertible notes due 2029.