Automakers are ensuring cars get a tech upgrade. We are talking about software-defined vehicles (SDVs), over-the-air updates, constant connectivity, and AI integration. McKinsey & Company forecasts that the global automotive software and electronics market could reach 519 billion US Dollars by 2035, cruising at a 4.5% CAGR.

But with high-tech cars comes cybersecurity threats. The UN’s regulatory framework, UNECE WP.29, is laying down the law by forcing carmakers to install cybersecurity management systems. Manufacturers will have to lock down security from the factory floor to the driveway by using regular software updates to detect, monitor, and squash cyber threats.

These developments bring the spotlight onto BlackBerry Limited—yes, the exact same company behind the iconic, clicky-keyboard phones that were an obsession among both corporate executives and teenagers in the early 2010s.

While the physical phones have officially ridden into the sunset, BlackBerry pulled off one of the tech world's greatest pivots: next-generation vehicle software. Today, the company operates two major segments: QNX, which provides real-time operating systems (RTOS) for cars and safety-critical applications; and Secure Communications, which supports secure digital communication tools for governments and regulated industries.

Moving margins

Revenue in Q1 27 increased 26.0% y/y to USD 152.9m from USD 121.7m, supported by growth across its core business segments. QNX revenue rose 25.7% y/y to USD 72.3m in Q1 27 from USD 57.5m in Q1 26 and Secure Communications revenue rose to USD 73.6m in Q1 27 from USD 59.5m in Q1 26, up 23.7% y/y.

Higher-margin QNX royalties and a stable revenue stream from the Secure Communications segment supported improved profitability. Operating income increased to USD 15.3m in Q1 27 from USD 2.0m in Q1 26, up 665.0% y/y, as operating expenses were driven higher by R&D and General & Administrative costs.

As a result, net income rose to USD 8.5m in Q1 27 from USD 1.9m in Q1 26, up 347.4% y/y. The net profit margin improved to 5.6% in Q1 27 from 1.6% in Q1 26, reflecting stronger earnings conversion during the quarter.

Cash flow was perhaps the most encouraging figure. FCF improved to an inflow of USD 1.7m in Q1 27 from an outflow of USD 18.9m in Q1 26.

The high ground

Shares have staged an extraordinary rally over the past year, climbing 183.8% and lifting the company's market capitalization to USD 6.4bn. The stock now trades at CAD 16.3 (USD 11.5), just below its 52-week high of CAD 18.4 (USD 13), reflecting growing optimism around the company's outlook.

The rally, however, has outpaced conviction on the Street. Among the six analysts covering the stock, two maintain a “Buy” rating, while four recommend “Hold”. The average target price stands at USD 8.1, which is well below the current share price, implying a 29.7% downside. The gap suggests the market may be pricing in a more optimistic outlook than analyst expectations warrant.

Hard sell?

The Secure Communications segment has exposure to large government contracts that do not close every quarter. This could cause fluctuations in revenue and earnings, as large contracts can be awarded unevenly across quarters. BlackBerry's strategy increasingly relies on expanding the amount of software deployed in each vehicle. Moreover, betting on new tech, such as Physical AI and Alloy Kore, leaves future growth dependent on customer uptake.