Gen Digital Raises FY27 Outlook After Q2 Revenue Grows 12%

Gen Digital Inc. (NASDAQ: GEN) raised its fiscal 2027 non-GAAP revenue and earnings outlook after second-quarter revenue increased 12% year over year, supported by rapid growth in its Trust-Based Solutions segment and a 40% increase in partner revenue.

The company now expects FY27 revenue of $5.465 billion to $5.515 billion, representing adjusted growth of 10% to 11%. Its previous forecast called for growth of 9% to 11%. Non-GAAP earnings per share are projected at $2.93 to $2.98, or adjusted growth of 16% to 18%, compared with the prior range of 14% to 18%.

For the third quarter, management expects revenue of $1.365 billion to $1.39 billion, up 10% to 12% year over year, and non-GAAP EPS of $0.73 to $0.75, an increase of 15% to 18%. The guidance assumes foreign-exchange rates as of the end of the second quarter, a non-GAAP effective tax rate of about 22% and current SOFR curves.

Revenue and earnings post double-digit growth

Second-quarter revenue reached $1.369 billion, up from $1.220 billion a year earlier and above the high end of the company’s guidance. Bookings rose 10% to $1.347 billion, marking the sixth consecutive quarter of double-digit bookings growth.

Non-GAAP operating income increased 10% to $686 million, while operating margin narrowed to 50% from 51%. Gross margin declined to 80% from 84%, although operating expenses fell to 30% of revenue from 33% as expense growth remained below the increase in sales.

Non-GAAP net income rose 15% to $444 million, and non-GAAP EPS increased 19% to $0.74. The diluted share count declined 3% to 603 million, contributing to the faster per-share earnings growth. On a GAAP basis, Gen reported net income of $287 million and EPS of $0.48, compared with non-GAAP results that exclude items including stock-based compensation and intangible-asset amortization.

Trust-Based Solutions leads segment growth

Trust-Based Solutions, which includes identity, personal financial management and the Engine marketplace, remained the main source of expansion. Segment revenue climbed 26% to $511 million, while bookings rose 24%. Operating income increased 24% to $152 million, with the segment’s operating margin holding at 30%.

Gen said the LifeLock brand and product experience produced stronger conversion and upsell rates. Financial Wellness also recorded strong growth and record originations, supported by a broader range of products addressing consumer cash-flow needs. New and planned offerings include scam verification and reimbursement, enhanced anomaly detection, MoneyLion Save, a cash-flow assistant and rent-splitting services in selected markets.

Cyber Safety Platform revenue increased 5% to $858 million, while operating income rose 7% to $534 million. Its operating margin reached 62%, up one percentage point and the highest level shown in the presentation. Constant-currency bookings grew 4%, supported by Norton renewals, cross-selling and upselling.

The company is adding AI-related protection features to Norton 360, including controls intended to prevent unwanted AI actions, identify risky links and manage AI access to files. Gen is also expanding privacy and identity capabilities across Avast and LifeLock products.

By channel, direct revenue rose 6% to $1.074 billion, while partner revenue increased 40% to $295 million. Gen attributed partner growth to its Engine financial marketplace, enterprise-benefits relationships and telecommunications channels. Paid customers reached 83 million, up from 81 million in the previous quarter and 77 million a year earlier.

Cash generation and capital allocation

Gen generated $326 million of operating cash flow and $323 million of free cash flow during the quarter. Free cash flow for the latest 12 months totaled $1.8 billion, up 36% year over year.

The company returned $247 million to shareholders in the quarter through $171 million of share repurchases and $76 million of dividends. It also repaid $45 million of debt. Over the latest 12 months, Gen deployed $1.7 billion toward buybacks, debt reduction and dividends, including $1.1 billion returned to shareholders.

Quarter-end debt principal stood at $8.185 billion, while cash, cash equivalents and restricted cash totaled $589 million. Net leverage was below 2.9 times covenant debt EBITDA, under the company’s 3.0-times target. Gen reported $2.1 billion of liquidity, including an undrawn $1.5 billion revolving credit facility, and had $1.8 billion remaining under its share-repurchase authorization.

Management expects FY27 segment margins to remain at 60% or above for Cyber Safety and about 30% for Trust-Based Solutions, net of investments in Gen’s common platform and AI capabilities. The company also plans to return excess free cash flow to shareholders.

The outlook remains subject to risks including customer retention and conversion, returns on customer-acquisition spending, execution of the consumer operating model, integration and synergy realization from acquisitions, product adoption, cybersecurity disruptions, interest-rate exposure and broader macroeconomic conditions. About 70% of Gen’s debt is floating-rate, and its current cost of debt is approximately 5.8%.