COMMVAULT SYSTEMS INC (CVLT): what the price assumes

In the published model solve dated 2026-Q2, anchored at $136.41, COMMVAULT SYSTEMS INC (CVLT) is priced for +49.2% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/CVLT

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Solve inputs: computed at a 8.6% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: elevated (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.0%); the inversion above states its own rate.

Per-Model Detail (n=16)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Recurring revenue closed fiscal 2026 at $1,121.6 million, up 21% on the year, and the cloud-delivered portion of it reached $400.2 million, up 42%.

• That cloud line grew 68% the year before, and the 10-K is blunt that "many of our competitors have greater resources and larger, established customer bases", so how fast the deceleration continues is the question a buyer at today's price is answering.

• Fiscal first quarter results are due July 28, 2026, the first print since a cluster of raised broker targets in the middle of July.

Bull Case

Four percent of revenue still arrives as perpetual software licences, the old way of selling this product, and that residue is the tell. This is a data-protection vendor part way through a business-model change, and the reported income statement reads the way such changes always read: operating profit at 6.3% of revenue over the trailing year, thin by software standards. A perpetual licence books its revenue on delivery. A subscription books the same customer across the life of the contract. During the switch, reported earnings understate the commercial base actually being assembled, which is why the 10-K says plainly that "We are focused on these types of recurring revenue arrangements".

The base is measurable, and it is the number that matters. Recurring revenue closed fiscal 2026 at $1,121.6 million, up 21% year over year, with the cloud-delivered portion at $400.2 million, up 42%. In the December quarter, term-based licence revenue rose $21.3 million, or 22% on the year, which the filing attributes primarily to "a 25% increase in larger transactions (deals greater than $0.1 million)". Growth coming from bigger contracts rather than more small ones is the signature of a product moving up-market, and it is the harder kind of growth to buy.

Cash tells a friendlier story than accounting profit does. Free cash flow ran $237.2 million over the trailing year against operating profit of $71.0 million, and most of the gap is customers paying ahead of delivery: amounts "collected in advance of services being provided are accounted for as deferred revenue". A business collecting cash years before it is allowed to call it revenue will always look worse on the income statement than it is on the bank statement. That is a timing artifact of the accounting, not a quality-of-earnings problem, and it reverses as the mix finishes shifting.

The cohort puts the profitability in proportion. RBRK is growing revenue at 45.7% and running a negative 21.4% operating margin to do it; ESTC grew 17.3% at a negative 1.9% margin. Commvault grew and earned in the same year. The closest fully-converted comparison is DT, at a 12.2% operating margin on 18.8% growth and roughly twice the revenue base, which is a fair picture of where a finished transition can land. The distance between 6.3% and that figure is the cost of being mid-transition rather than through it.

Capital allocation has been unusually cheap. In September 2025 the company raised 900 million dollars in convertible notes at a zero coupon, leaving cash of 1,026.3 million dollars at the end of December against essentially no interest bill; interest income of 8.4 million dollars in that quarter alone now runs well ahead of what the borrowing costs. Share count has come down about 1.1% a year over four years, with 1,254.6 million dollars carried in treasury stock. The company is buying its own shares with money that costs it nothing to hold, which is a rare enough position to be worth naming.

Bear Case

Begin with the security that pays no interest. In September 2025 the company issued 900 million dollars of convertible senior notes with a zero coupon, maturing in 2030, and spent 99.6 million dollars of the proceeds on capped calls to blunt the dilution if the shares convert. Zero-coupon borrowing is free right up until it isn't. The filing states that conversion consideration "will consist of cash, up to the principal amount of the Notes to be converted", which makes the principal a cash obligation whichever way the share price goes. If the stock holds, holders convert and the company settles in cash or in stock. If the stock falls far enough that conversion is worthless, the whole principal comes due in 2030 out of operating cash flow. The instrument looks costless today because the cost was moved to a date.

The equity cushion behind it has been deliberately thinned. Total stockholders' equity stood at 216.7 million dollars at the end of December 2025, down from 325.1 million nine months earlier, with 1,254.6 million dollars sitting in treasury stock. For an asset-light software business that is a defensible choice rather than a red flag, but it does mean there is no accounting net worth to fall back on. What a buyer owns here is a recurring revenue stream and the willingness of customers to keep renewing it. Nothing else on the balance sheet is doing any work.

Which brings the argument to what today's price asks that stream to do. At $142.25 the market is paying for the company's current operating economics to compound at the top of what it can fund from its own cash flow, sustained for roughly five years. About a quarter of comparable fast-growers have managed a run of that length. The sharper point is positional: the multiple these shares carry sits at the very top of the distribution their peers occupy, well past the upper quartile. There is no reading of the cohort in which this is a middling bet.

The most recent evidence is a slowdown, and it is visible in the company's own disclosure. Cloud-delivered recurring revenue grew 42% in fiscal 2026 after 68% the year before. Total recurring revenue printed 21% in both years, which means the fast part decelerated sharply while the mix shift held the headline steady. The 10-K makes no claim that the field is thinning: the market is "intensely competitive, highly fragmented", consolidation is expected to bring more of it, and "Increased competition could result in pricing pressure". A twenty-six point deceleration in the growth engine, in a market the company itself describes that way, is not a rounding error.

One line separates what the business produces from what the shareholder keeps. Free cash flow of $237.2 million reads comfortably until stock compensation of roughly 120 million dollars comes out of it, at which point about half of what the business generates is being handed to employees in equity the shareholder ultimately funds, with the buyback then quietly recycling part of it. The bull is right that reported profit understates the business today. The difficulty is that the price does not merely need the transition to finish. It needs the transition to finish and then five more years of compounding at the ceiling on top.

Valuation

Every static way of valuing this business lands under the quote, and only the forward-growth approaches reach it. That is the whole shape of the disagreement, and it is not a narrow one. Capitalize what the company earns today with no growth assumed and the answer sits at a fraction of $142.25. Apply the multiple the sector carries against EBITDA and the answer is still well short. Project revenue and cash flow forward at the 19% pace of recent years, and only then do the methods arrive at the price and keep going past it. A price that none of the static frames can reach is, by construction, a price paying for durability, because durability is precisely what a static frame cannot see.

The cash-flow approach that clears the price gets there by carrying free cash flow of roughly 0.3 billion forward at 19% growth over six years and settling into a 4.0% terminal rate. The revenue-based version tapers that same 19% and holds the sales multiple flat at today's 5.4, compressing to 4.4 in the bear scenario and expanding to 6.3 in the bull. Neither construction is exotic. Both rest entirely on the growth rate surviving contact with the next six years, and the disclosure above shows the cloud line already decelerating from 68% to 42%.

Trailing earnings give the plainest picture of the demand. The shares change hands at about ninety dollars of price per dollar of trailing earnings, against a sector reference near thirty-five; blending the two still leaves the peer comparison anchored above fifty. On the enterprise-value-to-EBITDA measure the sector reference is twenty-five, and this business carries appreciably more than that. Read against a cohort of the same kind, the demand is specific rather than abstract: DT earns a 12.2% operating margin on 2.018 billion of revenue growing 18.8%; NTNX earns 8.6% on 2.750 billion growing 13.0%; AVPT earns 9.6% on 443.7 million growing 27.1%. Commvault earns 6.3% on a revenue base near 1.18 billion, and carries a multiple at the very top of that distribution.

Read backwards, the price embeds current operating economics compounding at the top of what the business can self-fund for about five years. Treat that figure as indicative rather than exact; the band behind it is wide, and each percentage point of growth shifts the implied horizon by less than a year, so the arithmetic is sensitive to inputs nobody can pin down in advance. What survives the imprecision is the direction: the requirement is long-duration, not modest.

The balance sheet is the least ambiguous part of the file, and the useful figures come from the filings rather than any ratio. Cash of 1,026.3 million dollars at the end of December 2025 sits against 900 million of convertible principal that pays no coupon and does not mature until 2030. Interest income of 8.4 million dollars in that single quarter now exceeds what the borrowing costs, which is also why the after-tax result and the operating result land so close to each other. The decisive number, though, is one the income statement does not show: 400.2 million dollars of cloud recurring revenue growing 42%. If that line holds its pace, the static methods eventually walk up to the price. If it does not, the price rests on the forward projection that produced it and nothing else.

Catalysts

The next scheduled event is the fiscal first quarter report on July 28, 2026. The line to watch is not revenue, which the subscription accounting smooths, but the cloud recurring revenue figure and its growth rate. Fiscal 2026 closed that line at $400.2 million, up 42% after 68% the prior year, so the market has a fresh reading on whether the deceleration is settling or continuing. Fiscal 2026 revenue came in at $1.18 billion, up about 19% on the year, with reported earnings of $70.7 million.

Broker sentiment moved sharply in the ten days before the print. Truist raised its target to $182 from $155 on July 24 while keeping a buy rating, KeyBanc went to $175 from $125 on July 18 citing survey work, Mizuho to $175 from $140 on July 17, Oppenheimer to $175 from $150 on July 20, and RBC Capital to $150 from $110 on July 19 while holding a neutral rating. Every one of those figures sits above the current quote, and the distance is a difference of question rather than of arithmetic: those targets credit a forward re-rating on continued subscription growth, while trailing and asset-based measures describe only what the company has already delivered. Both readings can be honest at the same time.

One structural date belongs on the calendar well ahead of any quarter. The 900 million dollars of convertible notes issued in September 2025 mature in 2030 and carry no coupon, so they will produce no news at all until they produce all of it at once, either as conversion into shares or as a cash settlement. Management has discretion over how to settle anything above the principal amount, which means the choice between dilution and cash is one the shares' own performance will largely make for them.

Peer Cohorts (Per Segment, With Filing Citations)

Data protection software & services (Commvault consolidated) (reported)

• RBRK (RUBRIK, INC.)
• FY2025 10-K: …be expensive and complex and will require the dedication of significant management time and attention. We could also face inefficiencies, vulnerabilities, or service disruptions as a result of our efforts to scale our internal infrastructure, which may result in extended outages, loss of customer trust, and harm to…
• FY2025 10-K: …platform to deliver comprehensive data security products to our customers and partners. We intend to continue to pursue strategic teams, technologies, and products to accelerate time-to-market for new data security capabilities and widen the competitive moat for our products and solutions. Our Customers We sell to…
• AVPT (AvePoint, Inc.)
• FY2025 10-K: …and recovery services : Backup architecture, recovery workflows, ransomware recovery/testing (where applicable). ■ Analytics/insights : Risk posture, usage optimization, compliance reporting. Security, Compliance, and Trust We support customer requirements for security and compliance through our operational controls,…
• FY2025 10-K: (RBAC), continuous vulnerability scanning, and a secure software development lifecycle (SDLC) to minimize risk and ensure auditability across all platform operations. 8 Table of Contents PART I ITEM 1 Customer Support and Success Our customer success approach is proactive and relationship-focused, designed to help…
• NTNX (NUTANIX, INC.)
• FY2025 10-K: …data in core data centers, at the edge, and in public clouds, while supporting customer choice across server platforms, storage options, public and managed clouds, and container and virtualization platforms. The Nutanix Cloud Platform supports a wide variety of workloads with varied compute, storage, and network…
• FY2025 10-K: Inc., NetApp, Inc., and Huawei Technologies Co., Ltd., many of which offer integrated systems that bundle servers, storage and networking solutions, as well as standalone server and storage products. Competition generally varies by workload and customer segment, and customers often evaluate multiple alternatives…
• DT (Dynatrace, Inc.)
• FY2025 10-K: …including Ahead, Computacenter, Trace3, and World Wide Technology, that help joint customers integrate our offerings into their multicloud ecosystems. These partners extend our scale and reach and collaborate with our direct sales teams, bringing domain expertise in technologies and industries along with additional…
• FY2025 10-K: …factor in our industry, we make statements in our privacy policies, our online product documentation, and in our marketing materials describing the security of our platform, including descriptions of certain security measures we employ or security features embedded within our offerings. In addition, our customer…
• ESTC (Elastic N.V.)
• FY2025 10-K: …and we may lose revenue and profits as a result of our inability to timely produce, distribute, invoice and collect payments for our products and services. In addition, many of our customers may use our software for processing their confidential information, including business strategies, financial and operational…
• FY2025 10-K: …our customers' data, including sensitive and personal information. Further, threat actors may attempt to deploy malicious code to users of the open source libraries leveraged by our products, which could negatively affect us and those users. Techniques used to sabotage or obtain unauthorized access to systems or…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.