Gen Digital Q4 Earnings Surpass Expectations, Revenues Rise Y/Y
Gen Digital Inc. GEN reported fourth-quarter fiscal 2025 results, wherein both revenues and earnings beat the Zacks Consensus Estimate.
Gen Digital reported non-GAAP earnings of 59 cents per share, which beat the Zacks Consensus Estimate by 1.7%. The figure improved 11.3% year over year and 13% on a constant currency basis. In the fiscal fourth quarter, the bottom line came at the high end of management's guidance of 57-59 cents.
In the trailing four quarters, GEN's earnings surpassed the Zacks Consensus Estimate twice, while matching twice on the same occasion, delivering an average surprise of 0.94%.
Gen Digital's fourth-quarter non-GAAP revenues increased 5% year over year and on a constant currency basis to $1.01 billion, which beat the Zacks Consensus Estimate by 1.2%. The strong revenue growth was due to escalating AI-powered scams, ransomware, and impersonation threats fueling demand for Gen Digital's AI-driven cyber safety solutions, including Genie Scam Protection.
Furthermore, GEN's investment in AI has significantly improved product efficacy, enhancing monetization opportunities and lifetime customer value. The acquisition of MoneyLion has expanded GEN's Total Addressable Market into financial wellness.
GEN's Q4 Top-Line Details
Robust growth in Gen Digital's top line can be attributed to the increase in the Cyber Safety revenues, which comprise the Direct Customer revenues and the Partner revenues.
Gen Digital's Cyber Safety revenues amounted to $998 million in the fourth quarter, out of which Direct Customer revenues increased 3.9% year over year to $877 million, and Partner revenues improved 15.2% to $121 million.
The direct monthly average revenue per user (ARPU) increased to $7.27 compared with the year-ago quarter's ARPU of $7.22 but remained the same as the previous quarter's $7.27.
The quarterly bookings advanced 3% year over year to $1.076 billion.
Gen Digital's average direct customer count increased to 40.4 million from 39.1 million in the year-ago quarter and 40.1 million in the previous quarter.
GEN's customer retention rate was 78%, up from 77.0% in the year-ago quarter and unchanged from the previous quarter.
GEN's Operating Details
The non-GAAP gross profit grew 4.3% year over year to $868 million in the fourth quarter. However, the gross margin contracted 40 basis points (bps) to 85.9%.
Non-GAAP operating expenses increased to $278 million, up 4.5% year over year. As a percentage of revenues, non-GAAP operating expenses declined 10 bps year over year to 27.5%.
The non-GAAP operating income in the fourth quarter of fiscal 2025 totaled $590 million, up 4.2% year over year. The non-GAAP operating margin was 58.4%, down 30 bps year over year.
Non-GAAP EBITDA increased 8.6% year over year to $518 million.
Gen Digital's Balance Sheet & Cash Flow
Gen Digital exited the fourth quarter with cash and cash equivalents of $1.006 billion, up from $883 million in the previous quarter. The long-term debt was $7.968 billion, down from $8.429 billion in the year-ago period.
In the fourth quarter of fiscal 2025, the company generated operating and free cash flows of $473 million and $470 million, respectively. For the full fiscal year, Gen Digital generated operating cash flow of $1.221 billion and free cash flow of $1.206 billion.
Gen Digital paid out $77 million in dividends during the fourth quarter. For fiscal 2025, it paid $313 million in dividends, repurchased stocks worth $272 million, and repaid debt worth $1.311 billion.
Gen Digital Initiates Guidance for 2026
For the first quarter of fiscal 2026, Gen Digital anticipates revenues between $1.18 billion and $1.21 billion. The company projects non-GAAP earnings between 59 cents and 61 cents in the fiscal first quarter. The Zacks Consensus Estimate for first-quarter revenues and non-GAAP earnings is currently pegged at $996.5 billion and 58 cents per share, respectively.
For fiscal 2026, Gen Digital projects revenues in the range of $4.7-$4.8 billion. It anticipates earnings per share in the range of $2.56-$2.54. The consensus mark for fiscal 2026 revenues and non-GAAP earnings is currently pinned at $4.03 billion and $2.39, respectively.
Zacks Rank and Stocks to Consider
Currently, GEN carries a Zacks Rank #4 (Sell).
Affirm AFRM, Super Micro Computer SMCI and Paycom Software PAYC are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. AFRM, SMCI and PAYC sport a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today's Zacks #1 Rank stocks here.
AFRM shares have gained 4% in the past year. The Zacks Consensus Estimate for AFRM's 2025 is pegged at a loss of 6 cents per share, narrowed by 7 cents over the past 60 days, suggesting growth of 96.7% from the year-ago quarter's reported figure.
SMCI shares have plunged 56.4% in the past year. The Zacks Consensus Estimate for SMCI's fiscal 2025 earnings has been revised downward to $2.52 in the past seven days, suggesting year-over-year growth of 14%.
PAYC shares have gained 6% over the past year. The Zacks Consensus Estimate for PAYC's 2025 earnings is pegged at $8.72 per share, implying a rise of 6.21% from the year-ago quarter's levels.
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Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
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