BlackBerry chief says general QNX rollout is ‘at the beginning of second inning’

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Giamatteo sees a growing pipeline of opportunities for QNX in robotics and physical AILast updated 10 minutes ago BlackBerry’s share price has surged over the last year, but some analysts question why the market’s reaction was 'relatively muted' following the strong Q2 results. Photo by Cole Burston/Bloomberg via Getty ImagesBlackBerry Ltd.’s QNX software is continuing to drive the company’s business forward as the Canadian tech pioneer beat analysts’ expectations in the second quarter and raised its full-year revenue outlook. THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe Waterloo, Ont.-based company said Thursday that revenue grew 26 per cent year over year in the three months ended Aug. 31 to US$163 million — above analysts’ forecasts of US$145 million — on the strength of QNX, a real-time operating system used in commercial and passenger vehicles, medical devices, industrial equipment, aerospace and defence systems. This advertisement has not loaded yet, but your article continues below.“Our view for some time has been that QNX is really the entire story at BlackBerry,” Canaccord Genuity analyst Kingsley Crane said in a note. Breaking business news, incisive views, must-reads and market signals. Weekdays by 9 a.m.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Posthaste will soon be in your inbox.We encountered an issue signing you up. Please try againOn a call with analysts, BlackBerry chief executive John J. Giamatteo said QNX’s core auto business helped the unit deliver record quarterly revenue of US$80.3 million, up 27 per cent from the same period last year. “That strength is being supported by the auto industry’s transition towards software-defined vehicles and more centralized compute architectures,” Giamatteo said. Revenue in BlackBerry’s secure communications unit, which provides encrypted communications and crisis management tools for governments and other organizations, increased two per cent year-over-year to nearly US$61 million. Licensing revenue came in well above the company’s expectations at US$22 million. Chief financial officer Tim Foote noted that licensing transactions can vary between quarters and said licensing revenue is expected to return to a more typical level of US$6 million in the second half of the fiscal year. “The key takeaway is that (BlackBerry’s) headline beat was largely driven by high-margin, non-recurring licensing revenue,” TD Cowen analyst John Shao said in a note. “However, even excluding this benefit, the core QNX business still delivered a decent beat relative to expectations.” This advertisement has not loaded yet, but your article continues below.BlackBerry increased its full-year outlook, which was previously US$594 million to US$621 million. For fiscal 2027, the company now expects to earn between US$616 million to US$636 million. It took a more conservative view on secure communications and lowered the unit’s full-year revenue outlook by $US10 million to US$260 million or US$270 million. Giamatteo said the division has a “substantial footprint” providing services to the U.S. federal government and that the “already dynamic backdrop” in America is being further complicated by recent geopolitical developments, including Canada-U.S. trade tensions. Giamatteo highlighted a recent deal for Alloy Kore, an automotive operating system co-developed by QNX and Germany’s Vector Informatik GmbH, which he called the “largest design win in QNX’s history.” On Sept. 22, the companies announced that Coretura AB, a joint venture between Volvo Group and Daimler Truck, will use Alloy Kore as the software foundation platform for the operating system it is currently developing for commercial vehicles. This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Giamatteo said the deal could net BlackBerry an estimated US$100 million in future royalties. “For QNX, we believe the business has a highly attractive setup for (fiscal 2027), with the likelihood of additional Alloy Kore and (general embedded market) wins, which could result in a significant increase in backlog,” CIBC Capital Markets analyst Todd Coupland said in a note. BlackBerry’s share price has surged over the last year, but Shao from TD Cowen said there were questions around why the market’s reaction was “relatively muted” following the strong Q2 results. While BlackBerry raised its full-year guidance, its third-quarter revenue projection of US$143 million to US$154 million is lower than the US$163 million it raked in during Q2. Foote said the company continues to take a “measured approach” to its quarterly outlook. Shao said that while some investors pointed to an implied slowdown in the second half of the year, he believes the updated guidance reflects “management’s conservatism rather than a deterioration in underlying fundamentals.” “In our view, the stock has likely entered a digestion phase following its 126 per cent YTD rally,” Shao said. “Although the combination of strong results and weak share price performance could weigh on sentiment in the near term, it may ultimately help reduce the volatility and speculative trading patterns seen earlier this year.” This advertisement has not loaded yet, but your article continues below.On Thursday’s earnings call, Giamatteo also announced a deal between QNX and Uber Technologies Inc. as the rideshare company expands into robotaxis. Beyond Uber, he sees a growing pipeline of opportunities for QNX in robotics and physical AI. QNX’s three growth pillars are its core automotive business, Alloy Kore and expansion into adjacent general embedded markets (GEM), said Giamatteo. GEM represents about 20 per cent of QNX’s revenues, and the CEO said it’s a growing area that can materially expand QNX’s long-term addressable market. To punctuate his point, he offered a baseball analogy: “If you think about this as a nine-inning game, I’d say we’re really just about at the beginning of the second inning.” We apologize, but this video has failed to load.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.