BlackBerry’s (BB) QNX unit performed quite well last quarter, and the company disclosed positive news about its Secure Communications businesses on April 2.
While BlackBerry could be negatively affected by tariffs and in theory, DOGE’s cuts could also harm BB, there are solid reasons to believe that BB stock will rise significantly over the long term despite these challenges.
BB’s Q4 Results and Comments Bode Well for Its Outlook
On April 2, BB reported the financial results for the fourth quarter of its 2025 fiscal year
Its QNX unit, which specializes in providing the company’s QNX operating system and related software products, generated revenue of $65.8 million, up from $62 million in the prior quarter. Additionally, the unit’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), came in at $19.2 million, representing an 8.5% increase compared with the $17.7 million of adjusted EBITDA that it produced during the same period a year earlier. EBITDA is a commonly used measure of cash flow.
The unit’s revenue was little changed compared withQ4 of FY24, but the significant, sequential increase in its sales, along with the meaningful gain in its adjusted EBITDA, are reasons to be optimistic about its future.
Additionally, CEO John Giamatteo noted on the firm’s April 2 earnings call that last quarter marked the highest “development seat revenue” for QNX of any quarter in the company’s last fiscal year. Since QNX generates such revenue relatively soon after firms sign deals with it, and it garners much higher revenue from royalties a number of years later, the increase in development seat revenue last quarter suggests that the unit’s revenue and profit will surge over the long term.
In other positive news, Giamatteo noted that the Malaysian government, which had signed up for many of the services provided by BB’s Secure Communications unit in November 2023, had decided to raise the number of licenses and the length of its contract with the company.
The news suggests that Malaysia is quite pleased with BB’s offerings and increases my confidence in BlackBerry’s ability to make similar, large deals with other countries.
Also noteworthy is that the U.S. Air Force, the Department of Homeland Security, the U.S. Department of the Treasury, and the U.S. Missile Defense Agency all renewed deals or signed new agreements with BB last quarter.
The latter news suggests that BB continues to be in Washington’s good graces.
Assessing Potential Challenges
Giamatteo stated that “Given the recent tariff changes, and particularly automotive tariffs, like others in the industry, we’re currently uncertain of the impact this could have on our business.”
While QNX does obtain most of its revenue from automobiles, about 50% of its sales are generated outside of North America. Moreover, despite the 25% tariff on vehicles, many automobiles are already made in America, and the value of U.S.-made parts in vehicles assembled in Mexico and Canada will be exempted from the calculation of the tariffs.
And suggesting that BB does not expect tariffs to have a large impact on its financial result, the company reiterated its previous FY26 guidance for the adjusted EBITDA of QNX. Specifically, BB continues to expect the unit to reported full-year adjusted EBITDA of $55 million to $60 million.
The company’s Secure Communications unit could theoretically be negatively affected by DOGE’s initiatives. But encouragingly, Giamatteo, who estimated that 20%-25% of the company’s revenue comes from Washington, reported that the firm had not “seen any material impact” from DOGE’s efforts.
The CEO asserted that the federal government would be wary of making significant cuts to BlackBerry’s contracts because the company does “provide…secure mission critical communications.” I agree that in most cases, Washington would indeed be quite reluctant to seek to eliminate or scale down such deals, given the importance of secure communications to the government in this era of widespread hacking.
BB’s Low Valuation More Than Accounts for the Company’s Potential Challenges
Analysts on average predict that BlackBerry’s sales this year will come in at $515 million. Subtracting the $338 million of net cash that it had as of the end of last quarter from its market capitalization of $2 billion yields $1.66 billion. That means the shares are changing hands at a relatively low price-to-sales ratio, excluding cash, of 3.2 times.
Conversely, SoundHound AI (SOUN), which has some attributes in common with BB, has a price-sales ratio of 35 times.
At BB’s current valuation, I believe that the stock more than bakes in the firm’s current challenges.
*This article is intended to be informational only; it is not financial advice.
