BlackBerry's Guidance Raise Masks Execution Risks Amid QNX Growth

What happened

BlackBerry reported GAAP profitability in Q2 FY2026, with revenue rising 3% year-over-year to $129.6 million, driven by a 15% surge in QNX royalties. The company raised its full-year FY2026 guidance, attributing this to strong QNX adoption and operational streamlining that pushed adjusted gross margin to 75% and EBITDA up 72% year-over-year. However, management's optimistic narrative overlooks persistent risks, including reliance on a single large customer and macroeconomic pressures that could derail growth, as noted in the DeepValue report. While QNX's entrenched position in over 255 million vehicles provides a durable moat, the stock trades at a discounted 4.8x P/S multiple, reflecting market skepticism about sustainable profitability. The DeepValue report emphasizes that continued execution on QNX revenue and EBITDA guidance is critical, with any material misses threatening the bullish thesis.

Implication

Investors may see BlackBerry's improved financials as a catalyst for revaluation, given its low valuation and QNX's growth, but the company's volatile history and exposure to automotive cycles warrant caution. The raised guidance depends on sustained QNX royalties and secure communications demand, which face intensifying competition and regulatory hurdles in key markets like the EU. Positive free cash flow trends and a strong balance sheet with net cash provide some downside protection, yet any slippage in EBITDA or gross margins could quickly erode gains. Monitoring the deferred Cylance payment and customer concentration risks is essential, as these factors could impact liquidity and revenue stability. Overall, while the stock appears undervalued, it remains a speculative bet on flawless execution in a challenging environment.

Thesis delta

The latest results reinforce the DeepValue BUY thesis by demonstrating actual profitability and guidance beats, aligning with previously raised expectations for QNX and EBITDA. However, no fundamental shift occurs; investors should maintain a critical eye on management's portrayal, as sustained execution on QNX revenue and margin targets is now even more pivotal to avoid thesis invalidation.