Constellation Software Hosts its First Earnings Call in Eight Years and Kraken Robotics Expands Subsea Defence Capabilities with $615 Covelya Acquisition
Constellation sees no major financial impact from AI and Kraken Robotics scales underwater technology platform with Covelya acquisition
Constellation Software Reports Q4 2025 Earnings
Yesterday, Constellation Software reported its Q4 2025 earnings results and hosted its first quarterly earnings call in over eight years. While the share price was mostly unchanged following the news, overall, the stock has recovered from its low of C$2,200 in mid-February to C$2,975 on March 9th as the SaaS sector bounced back.
For the quarter, revenue increased 18% year-over-year to US$3.18 billion. Organic growth was 2% after adjusting for foreign exchange rates, in line with prior quarters. Free cash flow to shareholders declined 12% to US$423 million due to a revaluation charge related to the investment in equity securities of Sygnity and Asseco.
Notably, Constellation disclosed over US$800 million of completed or committed acquisitions after year-end, highlighting the strength of the serial acquirer model, which allows companies to deploy capital when valuations are low and potentially earn higher returns for investors over the long term.
During the earnings call, management discussed a few topics worth highlighting.
Firstly, Constellation formally introduced what it calls its PEMS strategy, short for “permanent engaged minority shareholder strategy.” Constellation is expanding its traditional acquisition model by pursuing minority stakes in businesses it understands well, particularly those that are too large to acquire outright. Constellation’s stake in Sabre was the first example of this strategy.
Management also clarified during the Q&A that they still intend to be a permanent holder of these minority stakes and that the strategy is not a response to AI, but rather a necessary step to deploy more capital.
Secondly, management noted that thousands of company developers have already been upskilled in AI-augmented coding, and they expect AI-enabled coding to become more commonplace. However, management was equally clear that faster product development will not be a durable competitive advantage on its own. Constellation’s true differentiation lies in its deep vertical expertise, understanding of customer workflows, data assets, and trusted relationships with customers.
This suggests that Constellation does not view AI as an existential threat but sees AI as another tool the company can use to better serve customers.
Thirdly, and perhaps most importantly, management said they have not yet seen much direct financial impact from AI. There has been neither meaningful incremental revenue from AI-related capabilities nor loss of revenue because of AI. Pricing appears to be unchanged, and Constellation has not seen any major pushback from customers on price increases because of AI.
To me, the common thread from the call was that, despite all the noise around AI, Constellation is marching forward with the same discipline that has defined it for decades. In fact, the current environment of lower SaaS valuations is more favourable than ever for serial acquirers like Constellation.
The stock will likely remain volatile as AI continues to advance and geopolitical events continue to unfold, but this earnings call should provide reassurance to investors who have been feeling the pressure from falling share prices.
Disclosure: I own shares of Constellation Software
Kraken Robotics deepens defence tech presence with Covelya Group acquisition
St. John’s–based Kraken Robotics has agreed to acquire United Kingdom–based Covelya Group for C$615 million, a deal that will significantly expand Kraken’s capabilities in subsea technology across defence and commercial markets. The transaction will be funded with C$480 million in cash, supported by a credit facility and bought deal public offering, with the remaining C$135 million paid in Kraken shares issued to Covelya. The companies said the deal will create a larger subsea technology provider with complementary products across defence and commercial maritime markets.
This announcement comes amid rapidly shifting geopolitics and renewed focus on defence investment in Canada. In February, the federal government launched its first Defence Industrial Strategy, aimed at strengthening domestic defence capabilities and prioritizing Canadian manufacturers and suppliers in future procurement.
Over the next decade, the strategy identifies C$180 billion in defence procurement opportunities and C$290 billion in defence-related capital investment, creating significant opportunities for Canadian companies across the defence supply chain.
The strategy also seeks to address long-standing challenges in Canada’s defence procurement system, which the government says has historically been too slow, complex, and reliant on international suppliers, which has limited the growth of domestic defence industries.
Founded in 2008, Kraken Robotics produces underwater sensors, batteries, and robotic systems for the marine industry. The Newfoundland-based company has grown into one of Newfoundland’s most valuable technology companies and was ranked the best-performing company on the TSX Venture 50.
Covelya Group was formed in 2020 by its largest operating company, Sonardyne International, a 55-year-old underwater technology firm. Through its six subsidiaries—including Sonardyne, EIVA A/S, Forcys, Wavefront Systems, Voyis Imaging, and Chelsea Technologies—the group designs and manufactures underwater technology for maritime defence and commercial customers worldwide. Covelya employs nearly 750 people across 12 facilities in North America, South America, Europe, and the Asia-Pacific region.
Kraken said the combined company will employ approximately 1,200 people globally and operate more than 450,000 square feet of production capacity. The businesses will be organized into two market-facing units focused on defence and commercial subsea technology.
Kraken CEO Greg Reid said expanding the company’s product portfolio will make it “a more attractive partner to naval system integrators at a time when industry demand is growing rapidly.” Based on preliminary results, the combined companies generated between C$351 million and C$379 million in revenue in 2025.
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