Donnelley’s Strategic Pivot: Can Software Drive a Share Price Recovery?

Donnelley's latest quarterly results reveal a company in the midst of a profound transformation. While a significant one-time charge weighed heavily on the bottom line, a critical milestone was reached: for the first time, software solutions generated over half of total revenue. This strategic shift raises the question of whether it can reverse the equity's persistent downward trend.

The most compelling story from the third quarter of 2025 is the accelerating success of Donnelley's software division. This segment now accounts for 51.7% of net sales, a substantial increase from 42.3% in the prior quarter and 35.3% a year ago. Revenue from software reached $90.7 million, with recurring compliance products growing at an annual rate of approximately 16%.

This growth forms the core of the company's long-term strategy, which aims to derive 60% of revenue from software by 2028. To further accelerate software sales growth, Donnelley has launched its AI-powered "Active Intelligence" compliance suite. Conversely, the traditional print and distribution business continues to contract, leading to an overall year-over-year revenue decline of 2.3% to $175.3 million.

One-Time Pension Charge Masks Underlying Performance

The company's GAAP results for the quarter were dominated by the termination of its operational pension plan. This move resulted in an extraordinary, non-cash pre-tax charge of $82.8 million and an additional cash payment of $12.5 million.

Should investors sell immediately? Or is it worth buying Donnelley?

Consequently, Donnelley reported a GAAP net loss of $40.9 million. This translates to a negative net margin of -23.3%, a stark contrast to the positive 12.1% margin recorded in the same period last year. However, the adjusted earnings per share figure of $0.86 significantly surpassed market expectations, indicating stronger operational performance beneath the one-time accounting impact.

Technical and Analytical Perspectives

From a chart perspective, the shares remain under pressure. Currently trading at $45.99, the stock is testing a key technical support level at $45.57. A sustained break below this point could signal further declines. Immediate resistance levels are situated at $46.23 and $46.53. Despite some short-term stabilization, the medium-term trend for the equity continues to be downward.

In a move to support the share price, the company's board has authorized a $150 million stock repurchase program, effective through the end of 2026. Market analysts, while acknowledging current weakness, see potential for recovery. The consensus average price target sits between $63.50 and $64.33. The expectation is that valuation will improve once the market fully digests the effects of the pension plan restructuring.