Cognyte Software Ltd. Q2 2027 Earnings Call Summary

Moby Intelligence

Wed, September 9, 2026 at 7:57 PM GMT+3 3 min read

Cognyte Software Ltd. Q2 2027 Earnings Call Summary - Moby

Strategic Performance and Market Dynamics

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Total software revenue grew 21% year-over-year, significantly outstripping total revenue growth as the company executes a deliberate shift toward higher-quality, scalable revenue streams.
Management attributes strong performance to a healthy demand environment where governments are prioritizing national security, border security, and public safety through enhanced intelligence capabilities.
The platform's competitive advantage is driven by 'sovereign AI,' allowing agencies to maintain full control over data and infrastructure while utilizing AI that is explainable rather than a 'black box.'
Domain expertise is cited as the primary differentiator against general-purpose AI models, as intelligence work focuses on rare and obscure data rather than common cases.
Operational leverage is expanding significantly, with profitability growing more than four times faster than revenue due to software mix shifts and efficiency initiatives.
The U.S. market strategy is gaining traction, with several federal opportunities moving into procurement following successful operational demonstrations and proof-of-concepts.

Strategic Outlook and Guidance Framework

Full-year revenue guidance is narrowed to approximately $448 million, reflecting high visibility into 85% of the revenue required for the next 12 months.
Management remains on track to achieve the fiscal 2028 revenue target of $500 million, supported by a strong start to Q3 and broad global momentum.
The company is making a deliberate strategic investment in inventory to mitigate supply chain risks and rising prices, ensuring they can meet growing customer demand for on-premise deployments.
Guidance assumes recurring revenue will continue to grow faster than total revenue, though the shift to subscription models may create timing-related fluctuations in reported revenue recognition.
The U.S. segment is targeted to achieve $20 million in signed deals this fiscal year, driven by both federal and state/local agency expansions.

Operational Context and Risk Factors

Operating expenses were impacted by foreign exchange headwinds, specifically the weaker U.S. dollar against the Israeli shekel, totaling approximately $7 million in the first half.
The transition to subscription-based arrangements is accelerating faster than expected, which management notes would represent even higher growth rates if measured on a perpetual-equivalent basis.
Reported RPO figures exclude $42 million in cancelable subscription portions and were impacted by the $30 million consumption of large multi-year support contracts.
A new Chief Revenue Officer, Adam Philpott, was appointed to lead global commercial operations and accelerate the three-pillar growth strategy.

Q&A Session Summary

U.S. Federal pipeline timing and procurement expectations

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Management confirmed that several federal and local agency transactions are currently in the procurement phase following successful proof-of-concepts.
Expectations are set for these deals to be awarded within the current fiscal year.

RPO decline versus strong demand signals

The decline in RPO is attributed to the consumption of large multi-year contracts (approximately $30 million this quarter) and the exclusion of $42 million in cancelable subscription revenue.
Management emphasized that RPO does not capture the full visibility, which stands at 85% when including expected renewals and recent post-quarter signings.

Operating cash flow targets and inventory strategy

The company moved away from a specific $45 million cash flow target to a 'significant positive' outlook due to deliberate inventory building.
Increasing inventory is a strategic choice to avoid execution risks related to long supply chain lead times and rising hardware costs.

Impact of subscription shift on reported growth rates

Management noted that if the mix of perpetual versus subscription licenses had remained identical to last year, reported growth would be several percentage points higher.
The shift is driven by agency preference for flexibility and easier access to technology updates without new purchasing cycles.