BlackBerry’s (BB) strong fiscal first-quarter results show that its two main businesses–QNX and Secure Communications – are continuing to thrive. Meanwhile, both units continue to have very strong, positive catalysts. Consequently, BB stock is very attractive for growth investors.
Powerful Q1 Results
For BB’s Q1 that ended in May, the firm’s revenue surged 26% versus the same period a year earlier.
The sales of QNX, which specializes in providing a secure, real-time operating system with the same name, also rose 26% year-over-year (YOY) to $72.3 million. QNX is extensively used by many of the world’s largest automakers, and the division has expanded into providing a great deal of software beyond its core OS.
The Secure Communications unit, which provides highly hack-resistant communications offerings to governments and corporations, generated revenue of $73.6 million, representing a surge of 24% versus Q1 of the previous year.
BB’s net income, excluding certain items, soared 135% YOY to $25.4 million.
In-line with my previous predictions, QNX, is benefiting from the intensifying utilization of software by vehicles and auto manufacturers’ increased tendency to incorporate software into more of their systems. For example, one commercial vehicle maker is using QNX’s software “to provide the foundation for a multi-domain architecture across cockpit, ADAS, and centralized compute,” CEO John Giamatteo, speaking on BB’s Q1 earnings call, reported Outside of autos, QNX continues to be increasingly utilized in medical systems and in AI-powered physical products, such as robotics.
Boding well for BlackBerry’s ability to benefit meaningfully going forward from the growth of physical Al, Giamatteo noted that the firm had obtained “a significant royalty commitment by a leading semiconductor equipment manufacturer.”
Turning to Secure Communications, the unit got a lift last quarter from a major expansion of its existing deal with Canada that I had mentioned in a previous column. What’s more, Giamatteo noted that many governments are becoming much more intent on protecting their communications. Given the heightened geopolitical tensions in multiple regions of the world and the outbreak of armed conflict in much of the Mideast this year, that trend is certainly unsurprising.
Additionally, as DHI (DHI) CEO Art Zeile pointed out recently, the U.S. government is increasingly prioritizing cybersecurity, and BlackBerry, whose products are already intensively used by Washington, could benefit from this trend. DHI owns ClearanceJobs.
QNX’s Intensive, Potential, Positive Catalysts
As vehicles continuously become more software intensive, QNX is likely to be more extensively utilized by automakers that are concerned about protecting their systems from hacking and other adverse events. Moreover, Giamatteo indicated that Alloy Kore, the company’s “combined OS and middleware product,” can increase the amount of revenue that the firm obtains per vehicle by “hundreds of percent.”
The CEO also suggested that BB has made “encouraging progress” in convincing multiple customers to adopt the product, and he said that he was “confident” that one automaker would decide this year to adopt it. Over the longer term, Alloy Kore is likely to become a hugely positive game changer for BB.
Additionally, the continued proliferation of self-driving automobiles should also greatly boost QNX’s top and bottom lines, since protecting such vehicles from hackers who could take over its operations is particularly crucial.
Outside of vehicles, QNX is continuously making progress in other sectors which the company refers to as the General Embedded Market or GEM. Among QNX’s top GEM markets are medical devices, robotics, and industrial automation.
GEM is QNX’s “fastest growing segment,” said the CEO, adding that BB is “particularly excited” about its “long-term opportunity in physical AI,” since AI-powered devices require “safety, security, reliability, and real-time determinism .”
Secure Communications’ Intensive, Potential, Positive Catalysts
In terms of Secure Communications, BB is well-positioned to benefit, as suggested above, from continued high geopolitical tensions and Washington’s increased emphasis on cybersecurity. Further, hackers’ ongoing efforts to penetrate the systems of governments and businesses should enable Secure Communications, whose top line is expected to increase 4% to 8% during the current fiscal year, to continue to grow meaningfully going forward.
Finally, in the current geopolitical environment, BlackBerry in the longer term can convince multiple, other countries to adopt or tremendously expand their use of its Secure Communications products.
*This article is intended to be informational only; it is not financial advice.
