"Q2 bookings were $964 million, up 5% in constant currency and up 4% in USD." - Vincent Pilette
Gen Digital Inc (GEN) QQ2 2025 Results: Booking Momentum, AI-Driven Cyber Safety Expansion, and Durable Growth
Executive Summary
Gen Digital delivered a solid QQ2 2025 quarter characterized by resilient top-line performance, robust bookings growth, and meaningful progress on monetization and product expansion. Q2 bookings reached $964 million, up 5% on a constant-currency basis, while revenue rose 3% to $974 million, underscoring a durable mid-single-digit growth trajectory in cyber-safety bookings and direct monetization. The company continues to execute its AI-driven strategy, with Genie anti-scam solutions downloaded over 1.6 million times and on a path to broader integration across Norton 360 and LifeLock offerings, signaling meaningful product differentiation and potential uplift in ARPU and mix. Management raised the full-year guidance, indicating confidence in continued mid-single-digit revenue growth and 12-15% non-GAAP EPS growth in constant currency, supported by strong cash generation and disciplined capital allocation.
Key profitability and cash-flow metrics remained solid in the quarter. Q2 operating income was reported at a high level with a 58.2% operating margin, GAAP net income of $336 million and GAAP diluted EPS of $0.54. Operating cash flow was $158 million and free cash flow was $156 million, with ending cash of $737 million and total liquidity above $2.2 billion. The company continued to invest in growth initiatives (marketing, R&D, and AI-enabled capabilities) while maintaining lean G&A (~2% of revenue) and returning cash to shareholders via dividends and buybacks. Gen also highlighted a healthy retention profile (direct retention at 78%, up one point YoY) and a record 39.7 million direct customers, supported by strong cross-sell dynamics across Norton, LifeLock, and Avast brands. Overall, Gen remains well-positioned to extend its consumer cyber-safety leadership through AI-enabled product innovations, international expansion, and expanded partner channels, while managing leverage and maintaining liquidity.
The outlook remains constructive: Q3 non-GAAP revenue expected at $980β$990 million with non-GAAP EPS of $0.54β$0.56, and FY2025 non-GAAP EPS guidance raised to $2.18β$2.23 (up 12β15% YoY in constant currency). Investors should monitor AI-driven monetization from Genie, LifeLock adoption, macro-driven identity theft demand, and the progress of international/mobile expansion as key catalysts and risk factors.
Key Performance Indicators
Revenue
974.00M
QoQ: 0.93% | YoY:2.74%
Gross Profit
780.00M
80.08% margin
QoQ: 0.65% | YoY:1.56%
Operating Income
402.00M
QoQ: -3.37% | YoY:1 508.00%
Net Income
161.00M
QoQ: -11.05% | YoY:8.05%
EPS
0.26
QoQ: -10.34% | YoY:13.04%
Revenue Trend
Margin Analysis
Key Insights
Q2 bookings: $964 million, up 5% in constant currency and up 4% in USD. Cyber Safety bookings up 5% YoY in constant currency, the highest growth since the Avast acquisition.
Q2 revenue: $974 million, up 3% YoY and in line with guidance. Direct revenue: $860 million, up 3%.
Customer metrics and monetization:
Direct customers: 39.7 million, up 389k sequentially and more than 1.1 million YoY.
Direct ARPU: $7.26 in USD, up $0.03 sequentially and $0.01 YoY; FX contributed about $0.02 sequentially.
Retention: Direct retention at 78% (in-line with prior quarter, up 1 point YoY). Long-term engagement via Gen Stack and cross-sell continues to improve monetization across cohorts.
Profitability and cash flow:
Financial Highlights
Revenue and bookings:
- Q2 bookings: $964 million, up 5% in constant currency and up 4% in USD. Cyber Safety bookings up 5% YoY in constant currency, the highest growth since the Avast acquisition.
- Q2 revenue: $974 million, up 3% YoY and in line with guidance. Direct revenue: $860 million, up 3%.
Customer metrics and monetization:
- Direct customers: 39.7 million, up 389k sequentially and more than 1.1 million YoY.
- Direct ARPU: $7.26 in USD, up $0.03 sequentially and $0.01 YoY; FX contributed about $0.02 sequentially.
- Retention: Direct retention at 78% (in-line with prior quarter, up 1 point YoY). Long-term engagement via Gen Stack and cross-sell continues to improve monetization across cohorts.
Profitability and cash flow:
- Q2 operating income: $567 million, translating to a 58.2% operating margin. The quarter reflected ongoing investments in marketing, R&D, and new offerings with leverage supported by disciplined cost management.
- Net income: $336 million; Diluted EPS: $0.54 (up 16% YoY).
- Interest expense: $142 million; Non-GAAP tax rate: 22%; Ending share count: 622 million (down 22 million YoY).
- Cash flow: Operating cash flow $158 million; Free cash flow $156 million. End-of-period cash: $737 million; liquidity >$2.2 billion (including $1.5 billion revolver).
Capital allocation and dividends:
- Q2 dividend paid: $77 million ($0.125 per share).
- Buybacks: Company notes 100% of excess free cash flow to shareholders; over $2 billion of debt paid down since start of 2023 and $1.6 billion in buybacks historically.
Balance sheet and leverage:
- Total debt: $8.588 billion; Net debt: $7.851 billion; Debt-to-capitalization: 0.804; Interest coverage: 2.70; Cash to debt ratio: 0.0184; Cash position supports ongoing shareholder returns and selective deleveraging.
Guidance and outlook:
- Q3 2025 revenue guidance: $980β$990 million; non-GAAP EPS: $0.54β$0.56.
- Fiscal 2025 revenue: $3.905β$3.930 billion; cyber safety growth guidance: 4β5% in constant currency; non-GAAP EPS guidance: $2.18β$2.23 (up 12β15% YoY).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
974.00M
2.74%
0.93%
Gross Profit
780.00M
1.56%
0.65%
Operating Income
402.00M
1 508.00%
-3.37%
Net Income
161.00M
8.05%
-11.05%
EPS
0.26
13.04%
-10.34%
Key Financial Ratios
currentRatio
0.32
grossProfitMargin
80.1%
operatingProfitMargin
41.3%
netProfitMargin
16.5%
returnOnAssets
1.04%
returnOnEquity
7.67%
debtEquityRatio
4.09
operatingCashFlowPerShare
$0.26
freeCashFlowPerShare
$0.25
dividendPayoutRatio
47.8%
priceToBookRatio
8.07
priceEarningsRatio
26.28
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Themes and management insights from the earnings call:
- Strategy and growth ambition: Vincent Pilette highlighted a mission-driven focus on empowering consumers in an expanding threat environment, with Genie anti-scam AI as a flagship example of innovation that will extend across core offerings. Context: Genie has approximately 1.6 million downloads and βits overall efficacy is approaching 100%,β illustrating a tangible early validation of AI-enabled defenses and a clear path to deeper integration across Norton 360 and LifeLock.
- Customer acquisition and monetization: Natalie Derse emphasized the flywheel of monetization through cross-sell, tier upgrades (LifeLock Identity protection value), and international/mobile expansion. Context: net new customers expanded to 39.7 million; ARPU increased modestly with FX tailwinds; retention trends (78%) are trending toward the 80% target.
- Risk and competitive positioning: Management noted a rising threat landscape with AI-facilitated scams and the need to stay ahead through ongoing investments in AI and product capabilities. Context: the NPD breach and data-exposure scans increased LifeLock demand and identity protection opportunities, reinforcing the value of the LifeLock portfolio in driving smaller, high-LTV customers.
- Financial discipline and capital allocation: The company underscored a disciplined approach to marketing spend, R&D, and go-to-market investments while maintaining a lean G&A structure (~2% of revenue). Context: guidance was raised, and capital allocation remains focused on returning cash to shareholders while deleveraging a high-debt balance sheet.
Q2 bookings were $964 million, up 5% in constant currency and up 4% in USD.
β Vincent Pilette
Today, we have over 1.6 million downloads and its overall efficacy is approaching 100%.
β Vincent Pilette
Forward Guidance
Gen Digital's QQ2 2025 outlook remains constructive, anchored by a stable mid-single-digit revenue growth trajectory and a material AI-enabled product roadmap. Near-term targets include:
- Q3 2025 revenue guidance of $980β$990 million and non-GAAP EPS of $0.54β$0.56, implying continued favorable mix and operating leverage as investments pay off.
- FY2025 revenue guidance raised to $3.905β$3.930 billion, with cyber safety bookings growth projected at 4β5% in constant currency.
- Non-GAAP EPS guidance raised to $2.18β$2.23, representing 12β15% year-over-year growth in constant currency.
Key catalysts and risks:
- Catalysts: Genie AI expansion across Norton 360 and LifeLock, upgrade and cross-sell dynamics (especially LifeLock Identity protection), international/mobile growth, and new partner go-to-market arrangements that drive adoption. Management signaled βmore to comeβ on AI-enabled features and the expansion of anti-scam technology across the core portfolio.
- Risks: Sustained macro pressure on consumer spending could affect CAC efficiency and ARPU progression; integration and monetization timing of Genie features; CAD/FX exposures are currently modest but monitored; high leverage requires ongoing deleveraging and cash-flow discipline.
Overall assessment: The combination of durable recurring revenue with high gross margins, accelerated AI-enabled product differentiation, and disciplined capital allocation supports a constructive long-term investment thesis. Investors should monitor Genie monetization milestones, execution of international/mobile expansion, and the pace of debt reduction versus the continued drive for organic growth.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
GEN Focus
80.08%
41.30%
7.67%
26.28%
WEX
56.90%
25.20%
4.32%
23.76%
FLT
1.00%
44.40%
9.15%
20.81%
CSGS
45.50%
11.60%
5.06%
20.90%
SQSP
71.20%
5.68%
-2.53%
244.45%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Gen Digital maintains a constructive investment case built on durable subscription revenue, high gross margins, and healthy cash generation, underpinned by a scalable AI-enabled product roadmap. The companyβs guidance raise for FY2025 and the mid-single-digit revenue growth trajectory imply confidence in the monetization of Genie and cross-sell initiatives. Key factors investors should monitor include: AI-driven monetization milestones (Genie-enabled upgrades and standalone tools), LifeLock attach rates and tier expansion, international/mobile growth traction, and the pace of debt reduction in the context of a leveraged balance sheet. Relative to software peers, Genβs P/S around 17.4x and EV/Revenue around 61.6x reflect elevated growth expectations; execution will be critical to justify the premium multiple over time. Overall, Gen remains well-positioned to sustain mid-single-digit top-line growth while advancing profitability and deleveraging on the back of strong FCF generation.
Key Investment Factors
Growth Potential
AI-enabled Genηζ: Genie AI as a core differentiator across Norton 360 and LifeLock, with ongoing expansion into scam-detection and broader protection features. Expected uplift in ARPU and higher-tier LifeLock adoption through cross-sell and upgrade paths; international/mobile expansion and partner channels (employee benefits, telcos) to fuel new customer growth and higher activation in underpenetrated markets.
Profitability Risk
High leverage and debt burden (net debt around $7.85B; debt-to-capitalization ~0.804) creates sensitivity to interest rates and liquidity conditions. Dependence on consumer spending in cybersecurity may be cyclical. CAC competition and channel mix fluctuations could impact profitability if marketing efficiency deteriorates. Integration risk around Genie expansion and ensuring monetization aligns with plan.
Financial Position
Strong liquidity with cash of $737M and total liquidity >$2.2B; consistent operating cash flow generation ($158M in Q2) and free cash flow ($156M). G&A lean at ~2% of revenue supports profitability while maintaining investment cadence. Margin profile remains robust (operating margin ~58.2%, gross margin ~80.1%).
SWOT Analysis
Strengths
Leading consumer cyber-safety platform with diversified brands (Norton, LifeLock, Avast) and broad geographic reach.
High gross margin (~80%) and strong recurring revenue mix.
Robust cash flow generation and substantial liquidity (cash $737M; total liquidity >$2.2B).
Significant customer base with 39.7M direct customers and improving retention (78%).
AI-enabled product initiatives (Genie) with early traction (1.6M downloads; near 100% efficacy).
Weaknesses
High leverage and sizable absolute debt load (~$8.59B total debt; net debt ~$7.85B).
Dependence on consumer cybersecurity demand which can be influenced by macro cycles.
CAC variability and channel diversification require ongoing optimization.
Opportunities
Expansion of Genie AI across core offerings to drive cross-sell and upgrade revenue.
Growth in LifeLock Identity protection offerings and premium memberships.
International and mobile expansion; growing partner channels (employee benefits, telcos) supporting scalable customer acquisition.
Threats
Rising and evolving cyber threats and scams requiring continuous product innovation.
Competitive landscape in consumer cybersecurity and identity protection.
FX and macro shocks could impact bookings and monetization timing; leverage risk remains non-trivial.
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