BlackBerry Limited’s BB shares have rallied 47.1% in the past month, significantly outpacing the industry’s growth of 0.8% and the S&P 500 composite’s decline of 0.3%.

Price Performance

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The stock received impetus following the company’s announcement of the sale of its Cylance business to Arctic Wolf and third-quarter 2025 results, wherein BB reported solid adjusted EBITDA performance and positive free cash flow ahead of schedule.

BB stock gained 2.7% last day and closed the session at $3.79, slightly below its 52-week high of $3.85. Will the stock register further gain or has it peaked? Let us discuss BlackBerry’s pros and cons and decide if the stock is worth investment consideration.

Strong Quarterly Numbers for BB

BlackBerry reported the third quarter of fiscal 2025 non-GAAP earnings per share (EPS) of 2 cents. The figure was better than the company’s estimate of a loss of 1 cent to EPS of 1 cent. In the year-ago quarter, it reported a non-GAAP EPS of 1 cent. The Zacks Consensus Estimate was pegged at a loss of 2 cents per share. Cost discipline aided the bottom-line performance.

Quarterly revenues (including Cylance business, reclassified as held for sale as of Nov. 30, 2024) of $162 million, declined 7.4% year over year. Revenues excluding Cylance were $143 million, down 5.9% year over year. The company expected revenues to be in the range of $146-$154 million. Revenues exceeded guidance but declined year over year due to tough comparisons.

Cost-cutting and restructuring measures are driving up margin performance for BlackBerry. The company’s total non-GAAP operating expenses declined 10% to $79 million. As a result, adjusted EBITDA (from continuing and discontinued operations) was $23 million, up from $18 million in the year-ago quarter. The company had expected adjusted EBITDA to be $0-$10 million. It continues to focus on cost discipline and has announced back-office headcount reductions and facility closures.

Moreover, BlackBerry achieved both positive operating and free cash flow of $3 million, ahead of schedule. The company’s ability to achieve this target ahead of expectations reinforces the case for its operational turnaround and financial stability.

BB’s IoT Business Remains Strong

Revenues from the IoT business totaled $62 million, which was up 13% year over year and surpassed the company’s guidance of $56-$60 million. This uptick was attributed to strong revenues from royalties and development seat licenses. The increasing adoption of the next-generation version of the QNX operating system, SDP 8.0, in the Auto and General Embedded market is a positive factor. BB highlighted that more than 10 leading silicon vendors have already committed to supporting SDP 8.0.

Revenues are now estimated to be in the band of $230-$235 million for the IoT business. Earlier, revenues from this segment were expected to be in the band of $225-$235 million.

Sale of BB’s Cylance Unit Bodes Well

BlackBerry’s announcement of the sale of its underperforming Cylance business within the Cybersecurity unit cheered investors, which led to a sharp 15% gain that day.

The deal, valued at roughly $160 million, includes cash considerations and Arctic Wolf’s common shares. Per the terms of the deal, following purchase price adjustments, BB will receive almost $80 million in cash at settlement and another $40 million a year after settlement. Arctic Wolf will also issue around 5.5 million common shares to BB as part of the deal. This acquisition, expected to close in the fourth quarter of fiscal 2025, is subject to customary regulatory approvals and conditions.

Although BlackBerry is divesting its Cylance assets, the company remains committed to its Secure Communications business, which includes BlackBerry UEM, BlackBerry AtHoc and BlackBerry SecuSUITE. These solutions will remain central to BlackBerry's operations as it strengthens the company’s foothold in secure communications.

Owing to the Cylance sale, BB announced that it is “standing down” all previously provided guidance, related to cybersecurity and the overall guidance for the company. It is now providing guidance only for the new Secure Communications division. The company will provide revised guidance for fiscal 2026 for both Secure Communications division and total revenues during its fourth quarter of fiscal 2025 earnings. For the Secure Communications division, revenues are expected to be in the range of $267-$271 million.

Challenging Automotive Backdrop for BB

The automotive industry is highly cyclical and has been affected by broader economic conditions, including supply-chain disruptions and fluctuating consumer demand. Significant delays in the ramp-up of automaker software development programs to continue to remain an overhang on the IoT revenues in the near term. The company had earlier noted that these delays have extended QNX development cycles and have an “even greater impact” on IVY.

Stiff Competition & Rising Costs for BlackBerry

BlackBerry operates in markets that are highly competitive and rapidly evolving. The company competes with a broad range of vendors in each of its businesses. This could weigh on profitability.

Increasing operating costs for continuous research and development activities to introduce new products and fend off competition can also impede profitability especially if revenue growth does not keep up pace. In fiscal 2024, research and development amounted to $186 million.

How Should Investors Approach BB Stock?

BlackBerry faces several external risks that could put downward pressure on the stock trajectory. Uncertainty surrounding the impact of the Cylance divestiture and slow growth in its Cybersecurity division are concerns. Challenging automotive backdrop could impact IoT revenues. BB’s ability to contain operating expenses while dealing with a competitive market could affect margin performance. Investors should consider these risks when evaluating BlackBerry’s stock, especially given its transitionary stage.

At present, BB carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks from the broader technology space are Fortinet FTNT, InterDigital, Inc. IDCC and Five9, Inc. FIVN, each presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for FTNT’s 2024 EPS is pegged at $2.23, unchanged in the past seven days. FTNT’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 23.6%. Its shares have increased 62.9% in the past year.

The Zacks Consensus Estimate for IDCC’s 2024 earnings is pegged at $15.22, unchanged in the past seven days. IDCC’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 163.7%. Its shares have surged 71.8% in the past year.

The Zacks Consensus Estimate for FIVN’s 2024 EPS is pegged at $2.37, unchanged in the past seven days. Five9’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 22.46%.

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