Blackberry Earnings: Weak Guidance Eclipses Earnings Beat; Decreasing Fair Value Estimate to $3.60

No-moat Blackberry reported good fourth-quarter earnings that beat our model and consensus on both revenue and profitability fronts. However, management unveiled a weak outlook for fiscal 2026 largely due to headwinds from US federal contract cuts and geopolitical uncertainty in its Secure Communications (previously Cybersecurity) business. Management is uncertain on the impact of automotive tariffs on the firm’s QNX (Internet of Things) business, but we anticipate some indirect headwinds from conservative automotive spending in the near to medium term. We have tempered our estimates in accordance with guidance. As a result, we have reduced our fair value estimate to $3.60 from $3.80. Nevertheless, we maintain our long-term thesis of high-single digits to low-teens revenue growth driven by a recovery in demand for automotive software applications and the firm’s growing content-per-vehicle. Shares were down 9% for the day and we view them as fairly valued.