Cellebrite (CLBT 6.65%) reported its second quarter 2025 earnings on Aug. 14, 2025, disclosing 21% year-over-year annual recurring revenue (ARR) growth to $419 million (non-GAAP), 18% non-GAAP revenue growth to $113.3 million, and a record free cash flow margin of 25.6% (non-GAAP). Management reduced full-year 2025 non-GAAP guidance to reflect ongoing timing headwinds in U.S. Federal orders but highlighted accelerating traction in cloud and software-as-a-service (SaaS) solutions, which reached 20% of total ARR with over 50% year-over-year growth (non-GAAP), robust execution in international markets, and strategic expansion through the Keryllium acquisition.

Insight #1: Cloud and SaaS ARR surpasses 20% for Cellebrite

Cellebrite’s cloud and SaaS-based products delivered over 50% year-over-year growth on a non-GAAP basis, with Guardian ARR (non-GAAP) more than doubling for the fourth consecutive quarter, and total cloud/SaaS now accounting for one-fifth of total annual recurring revenue (ARR) (non-GAAP). This transition occurs as Guardian expands from U.S. state and local government (SLG) into new geographies, including recent deals in Latin America, the UK, and Australia, while its European pipeline accelerates.

"Second, we continue to see strong adoption of our cloud and SaaS-based solutions, which are now 20% of total ARR. More specifically, Guardian continues to gain traction with customers. This product has outstanding market fit, enabling more efficient management of the examination process, greater collaboration, and strong chain of custody. ARR for Guardian grew by more than 100% year on year now for the fourth consecutive quarter. Much of Guardian's growth to date is from U.S. SLG customers, but it's been further bolstered by inroads this quarter in Latin America and the UK, while also closing the first Guardian deal in Australia. Our pipeline for Guardian also remains strong and is accelerating as we position the strategic offering for other European markets over the coming quarters."
-- Tom Hogan, CEO

The sustained, geographically diverse growth in Guardian and cloud ARR (non-GAAP) signals the rising scalability and stickiness of Cellebrite’s SaaS revenue base.

Insight #2: Cellebrite to accelerate growth with strategic Keryllium acquisition

In June, Cellebrite announced the $150 million acquisition of Keryllium, an ARM virtualization and mobile vulnerability company, with an immediate ARR contribution of approximately $15 million as of June 2025 and the first large intelligence customer sale closing within two weeks of a reseller agreement. Keryllium’s technology had already been deployed internally for the past five years, and post-announcement customer momentum includes significant federal and European agency pipeline interest.

"Keryllium's ARM virtualization technology brings vulnerability and penetration testing to the wide range of ARM-based endpoints, including smartphones, tablets, laptops, drones, and IoT devices. We know firsthand just how powerful Keryllium's technology is. For the past five years, our internal mobile research teams have been using Keryllium's mobile vulnerability solution to efficiently evolve and advance our lawful access capabilities. Keryllium's mobile vulnerability research solution clearly expands our addressable market and specifically in the defense and intelligence sector. Based on the nearly immediate post-announcement interest in the Keryllium solutions, we quickly executed a reseller agreement, which we closed roughly three weeks ago. And within two weeks of closing that reseller agreement, closed our first sale with a European intelligence agency for nearly $500,000."
-- Tom Hogan, CEO

Keryllium unlocks substantial addressable market expansion not just in core government verticals but also increases cross-sell opportunities in enterprise and private sector channels.

Insight #3: Margin expansion and disciplined cost management support resilient profitability

Quarterly gross margin (non-GAAP) reached 85% with adjusted EBITDA (non-GAAP) up 29% year-over-year to $27.9 million and a 24.6% adjusted EBITDA margin, driven by better operating leverage and a proactive hiring pause. AI-driven internal productivity gains helped maintain delivery commitments despite federal timing headwinds, and annualized free cash flow reached $150 million trailing twelve months, with expectations of a 30% full-year free cash flow margin for fiscal year 2025.

"Some of the steps we've taken there have enabled us to maintain our delivery commitments, with the same or similar amounts of people, which is different from what we planned at the beginning of the year. So and by the way, this isn't just the obvious thing people point to is, hey, are you using AI for code development in R and D? Yes. And that's still early innings. But it's not just R and D. If I asked Marcus, he can talk about some really amazing things that our CIO is driving right now with AgenTeq bots and assistance to help drive productivity and efficiency in our sales forecasting and our sales operations area. If I ask Dave and Dana, they're doing work and they're finding areas to apply AI in the financial operations space. So that's across the board and it's just getting started."
-- Tom Hogan, CEO

This disciplined approach to cost and capital allocation, combined with meaningful AI-based efficiency, strengthens Cellebrite’s capacity to sustain high-margin growth and strong free cash flow even during periods of short-term demand volatility (non-GAAP).

Looking Ahead

Management guides for third quarter 2025 ARR (non-GAAP) of $435 million-$445 million (17%-20% year-over-year growth) and full-year ARR (non-GAAP) of $460 million-$475 million (16%-20% year-over-year growth) for 2025. Full-year revenue (non-GAAP) is expected in the $465 million-$475 million range (16%-18% year-over-year) for fiscal year 2025, with adjusted EBITDA margin of 25%-26% for full-year 2025 (non-GAAP) and free cash flow margin of approximately 30% for full-year 2025. FedRAMP High Authorization to Operate (ATO) sponsorship by the U.S. Department of Justice remains on track, and Keryllium is poised for incremental growth impact in private and public sector channels.