Cerence (CRNC) Returns To TTM Profitability Testing Bullish Turnaround Narratives

Cerence (CRNC) opened its 2026 financial year with Q1 revenue of US$115.1 million and a basic EPS loss of US$0.12, as the company continued to work through a period of mixed earnings. Over the past few quarters, revenue has moved from US$50.9 million in Q1 2025 to US$60.6 million in Q4 2025 and now US$115.1 million in Q1 2026. Over the same period, basic EPS has ranged from a loss of US$0.57 in Q1 2025 to a loss of US$0.31 in Q4 2025 and the latest Q1 loss of US$0.12, creating an earnings story where margins and consistency are front of mind for investors.

See our full analysis for Cerence.

With the headline numbers on the table, the next step is to weigh these results against the main stories investors follow around Cerence, to see which narratives the latest margins support and which ones the figures start to challenge.

Curious how numbers become stories that shape markets? Explore Community Narratives

Trailing 12 months just back to profit

• On a trailing 12 month basis, Cerence has just tipped into a small profit, with net income of US$0.3 million and basic EPS of about US$0.01, after several prior periods in the data set showed losses.
• What stands out for a bullish view is that this recent profitability comes after a period where trailing five year earnings in the dataset averaged a 31.7% annual decline. This means:
  • Bulls pointing to a turnaround now have concrete support from the move to slightly positive trailing EPS, even though individual quarters in 2025 and Q1 2026 still show losses.
  • At the same time, the earlier losses in 2024 and early 2025, including multi hundred million dollar trailing net losses in that history, remind you that the path to this profit has been uneven.

Analysts who see this swing back to profit as a turning point may be focusing on whether that tiny US$0.3 million gain can grow into something more consistent.

📊 Read the full Cerence Consensus Narrative.

Revenue expectations point to a different story

• The dataset shows revenue is expected to decline by about 5.1% per year over the next three years, even though the latest trailing 12 month revenue is US$316.0 million.
• Bears arguing that the top line is the weak link find support in this picture, because:
  • An expected 5.1% annual revenue decline sits awkwardly next to the very large forecast earnings growth rate of about 135% per year, so critics can question how earnings can grow that fast if sales are shrinking.
  • The presence of a US$14.2 million one off loss in the last 12 months also means some of the recent improvement in net income may be tied to unusual items rather than a clean revenue and margin trend.

For a cautious investor, the key question is whether cost control and mix changes can really compensate if that expected revenue decline plays out.

Low P/S of 1.1x against peers

• Cerence is trading on a P/S of 1.1x, which is well below the 3.9x average for US software and the 2.6x peer average, and sits close to a DCF fair value of about US$7.63 per share against a current price of US$7.65.
• Supporters who see this as a bullish value setup point to several tensions in the numbers:
  • The low P/S multiple and the price sitting just above DCF fair value suggest the market is not paying up for the dataset’s high forecast earnings growth, even with analysts citing a target price of US$11.00, which is meaningfully above the current US$7.65.
  • On the other hand, the same valuation could be read as the market discounting the expected 5.1% annual revenue decline and past volatility in earnings, so the gap to US$11.00 may depend on how investors weigh that risk.

If you are trying to decide whether the low 1.1x P/S is a signal or a warning, it really comes down to how you think the revenue and earnings paths line up from here.

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on Cerence's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

Cerence is still working through losses, uneven revenue expectations and a history of volatile earnings, which may leave you wanting a steadier financial profile.

If that mixed picture feels a bit uncomfortable, you might want to focus on companies with stronger financial foundations, and our solid balance sheet and fundamentals stocks screener (46 results) can quickly surface ideas that look better suited to that goal.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com