Cognyte Software Ltd. (NASDAQ:CGNT) shares fell more than 20% in premarket trading on Wednesday after the company reported first-quarter fiscal 2027 earnings that came in below analyst expectations, despite delivering revenue slightly ahead of forecasts.
The sharp market reaction suggested investors focused on weaker-than-expected profitability metrics rather than the company’s top-line growth and reaffirmed outlook.
Revenue Tops Expectations but Profit Falls Short
For the quarter, Cognyte reported adjusted earnings per share of $0.03, missing the consensus estimate of $0.08 per share.
Revenue reached $105.5 million, modestly exceeding analyst expectations of $104.96 million and representing a 10.4% increase from the $95.5 million generated during the same period a year earlier.
Despite the revenue beat, the earnings shortfall weighed heavily on investor sentiment.
Company Reaffirms Full-Year Guidance
Management left its fiscal 2027 outlook unchanged, forecasting adjusted earnings per share of approximately $0.47 for the full year, broadly in line with market expectations.
The company also maintained its revenue outlook, targeting approximately $448 million at the midpoint of its guidance range, compared with analyst forecasts of roughly $446 million.
Subscription Adoption Continues to Accelerate
Chief Financial Officer David Abadi highlighted the growing contribution from recurring revenue streams and subscription-based offerings.
“Our first quarter results reflect the substantial value our differentiated solutions deliver to customers and the operational discipline with which we are managing the business,” said David Abadi, Cognyte’s chief financial officer. “As a result of better-than-expected adoption of subscription offerings, we now expect recurring revenue to grow faster than total revenue.”
The comments underscore the company’s ongoing transition toward a more predictable and recurring revenue model.
Profitability Metrics Show Improvement
Although earnings per share missed expectations, several operating metrics improved year over year.
Adjusted EBITDA rose 31.5% to $13.6 million, compared with $10.3 million in the prior-year quarter.
Adjusted operating income increased 41.5% to $10.7 million from $7.6 million a year earlier, reflecting continued operational efficiency improvements.
Software Business Drives Growth
Cognyte’s software segment remained a key growth engine during the quarter.
Software revenue climbed 26.5% year over year to $47.3 million, while software services revenue increased 12.1% to $50.1 million.
Meanwhile, professional services and other revenue declined to $8.2 million from $13.5 million in the prior-year period.
Recurring revenue, which includes support agreements and subscription services, rose 10% to $51.9 million and accounted for 49.2% of total revenue during the quarter.
Strong Balance Sheet Supports Capital Returns
The company ended the quarter with $109.2 million in cash and cash equivalents and remained debt-free.
Cognyte also continued returning capital to shareholders, repurchasing approximately one million shares during the quarter for a total cost of $8.2 million.
While investors reacted negatively to the earnings miss, the company’s solid cash position, recurring revenue growth and maintained full-year guidance suggest management remains confident in its longer-term operating trajectory.