A sharp rotation in the artificial intelligence trade sent shares of BlackBerry (NYSE:BB) soaring 18% Friday, as investors shifted capital from broad-based semiconductor giants like Nvidia to specialized software leaders in the automotive sector. The move signals a new phase in AI investing, where the market is looking beyond the hardware powering large language models to the companies enabling AI in physical applications.
The rally follows recent commentary from BlackBerry's leadership, who described a successful turnaround and a new focus on growth. "We pivoted the company from one which was loss-making, burning significant amount of cash to one that's now solidly profitable," BlackBerry CFO Tim Foote said at the CIBC Technology & Innovation Conference. Foote noted the company has had eight consecutive quarters of improving GAAP net income and is now generating cash.
The renewed investor confidence is built on the performance of BlackBerry's QNX software, which saw revenues increase 14% last fiscal year. The platform provides the core operating systems for digital dashboards, driver-assistance features, and other in-vehicle systems. While shares have gained 16% in the past month, the company trades at a forward P/E ratio of 36.81, a premium to the industry average of 18.56, according to Zacks.
This pivot to software is what’s at stake for investors, as BlackBerry carves out a defensible niche in the high-growth automotive AI market. While Nvidia provides the powerful chips for AI, BlackBerry's QNX provides the mission-critical software that runs on them, a business model that is now returning to growth. Investors will be watching closely when the company reports earnings next, with consensus estimates forecasting EPS of $0.03, a 50% rise from the prior-year quarter.
QNX: From Legacy Tech to AI Powerhouse
The core of the bull thesis rests on the QNX software platform, which has become a standard in the automotive industry. "What we're seeing in the general embedded market is the same things that we've seen in automotive, which is the need for higher performance compute, the need for more speed," QNX President John Wall said recently. Beyond the automotive market, the company is pushing QNX into robotics and industrial automation, which it terms "physical AI," expanding its total addressable market. The company's other major division, Secure Communications, has also returned to growth, benefiting from trends in digital sovereignty and increased defense spending.
Analyst Outlook Remains Bullish
Wall Street has taken note of the operational turnaround. BlackBerry currently holds a Zacks Rank of #2 (Buy), reflecting optimism about the business outlook. Recent analyst estimate revisions, which often precede stock price movements, have been positive. For the full year, Zacks Consensus Estimates project earnings of $0.17 per share and revenue of $600.2 million, representing year-over-year growth of 6.25% and 9.31%, respectively. This performance stands in stark contrast to the company's legacy as a smartphone maker, a past that now feels distant as it establishes its new identity as a core software provider for the internet of things and the AI-powered vehicle.
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