Cognyte Software Posts 12% Revenue Growth on Government AI Demand

Cognyte Software (NASDAQ:CGNT) delivered a 12% year-over-year revenue increase in the second quarter of fiscal 2027, reaching approximately $109 million. The growth was fueled by a significant shift in business mix toward software, with total software revenue rising 20.9% to $100.8 million. This segment now represents more than 92% of total revenue, up from 86% in the prior-year quarter, indicating a successful transition away from lower-margin professional services.

Profitability metrics expanded sharply alongside the top-line growth. Non-GAAP operating income climbed 52.5% to $12.2 million, while adjusted EBITDA increased 35.7% to $14.9 million. Non-GAAP earnings per share reached $0.15, nearly doubling the $0.08 reported in the same period last year. CFO David Abadi attributed the margin expansion to the software-heavy mix and efficiency initiatives, partially offsetting the impact of a weaker U.S. dollar against the Israeli shekel.

Government Demand Drives Revenue Mix

The primary driver of this performance is sustained demand from government agencies for explainable, agency-controlled artificial intelligence. CEO Elad Sharon noted that customers in national security, border security, and public safety are prioritizing platforms that embed AI into operational workflows without becoming black boxes. This shift has allowed Cognyte to add 40 new customers in the first half of the year, solidifying its position in sovereign intelligence capabilities.

Recurring revenue grew 18.4% to $56.2 million, accounting for 51.4% of total sales. Within the software segment, perpetual licenses and appliances rose 34.5% to $49.2 million, while support contracts and SaaS subscriptions increased 10.3% to $51.6 million. Conversely, professional services revenue declined to $8.4 million from $14.2 million a year earlier, reflecting the intended reduction in low-margin services as the software base expands.

Fiscal 2027 Outlook Remains Stable

Management reaffirmed its fiscal 2027 guidance, targeting revenue of approximately $448 million and adjusted EBITDA of $68 million. The company expects non-GAAP EPS of $0.47 for the full year. Cognyte ended the quarter with $102.2 million in cash and no debt, providing a strong liquidity position to support its growth initiatives and capital allocation strategies.

The company reports visibility into about 85% of the revenue required for its next-twelve-month plan. According to data from GN markets/earnings, the firm remains on track to sign $20 million in U.S. deals during fiscal 2027. First-half revenue totaled $214.7 million, up 11.2%, with a net unfavorable foreign exchange impact of approximately $7 million on operating expenses, a factor management is actively managing through operational efficiency.