BlackBerry returns to profit without selling phones

BlackBerry is reporting a return to profitability, but the company is no longer trying to sell phones to consumers. The Canadian firm now generates revenue by supplying software embedded inside cars, industrial machines, and secure government networks. This shift away from hardware is finally producing the financial results investors have been waiting for.

During the three months ending May 31, BlackBerry generated $152.9 million in revenue, a 26 per cent increase compared with the same period last year. Excluding one-time gains from a previous patent sale, this was the company’s first cash-positive opening quarter in nine years. Investors pushed its shares higher by roughly 20 per cent following the announcement, and the stock has risen sharply over the past year as markets reassess the firm.

The principal engine of this recovery is QNX, a secure operating system acquired by the company in 2010 for about $200 million. The technology is essential to vehicle manufacturers because it can control systems that must operate predictably and safely. As cars rely more on software, automakers need operating systems that separate critical functions—like braking or steering—from entertainment features and third-party applications.

A frozen music app is merely annoying, but a software failure affecting a safety system presents a much higher risk. That is the specific problem BlackBerry is solving for the automotive industry. The company reports that its QNX technology has been incorporated into more than 275 million vehicles and is used by most of the world’s major carmakers.

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This business is likely to grow as the industry moves toward software-defined vehicles, which allow manufacturers to introduce new features and updates throughout a car’s life. BlackBerry is also pushing QNX beyond the automotive sector, using it in medical devices, industrial automation, aerospace, and robotics. The firm has expanded its partnership with Nvidia to support physical AI, which refers to artificial intelligence that operates machines in the real world. Potential applications include autonomous equipment, humanoid robots, surgical systems, and medical imaging.

Secure communications and a new focus

BlackBerry’s second core business is Secure Communications, which brought in $73.6 million in quarterly revenue, up 24 per cent year on year. This division supplies encrypted communications to governments, financial institutions, and other organizations handling sensitive information. The segment includes technology acquired when BlackBerry bought German encryption specialist Secusmart in 2014.

The company states that its secure voice, messaging, and text services are used by government clients that require high levels of protection. The commercial case has strengthened as cyber threats, geopolitical tensions, and defense spending have increased. This leaves BlackBerry operating in two expanding markets: the software required to run increasingly complex machines and the encryption needed to protect sensitive communications.

Neither of these businesses offers the consumer visibility BlackBerry enjoyed when its handsets were carried by politicians, celebrities, and corporate executives. However, this new model may be more defensible than the smartphone market it left behind. The firm has increased its forecast for full-year revenue to between $594 million and $621 million and expects to generate approximately $100 million in operating cash flow.