Eight years ago, BlackBerry (TSX:BB) exited the smartphone segment to focus on its higher-margin software and services business. However, despite this pivot, BlackBerry stock has been down over 60% since December 2016 as it continues to wrestle with sluggish sales and negative cash flows.

The company's sales have fallen from US$1.30 billion in fiscal 2017 (ended in February) to US$637 million in the last four quarters. Further, it continues to report a free cash outflow, which indicates that BlackBerry is struggling with a higher cost base and unsustainable profit margins.

Is BlackBerry stock a good buy right now?

BlackBerry, valued at $2.2 billion by market cap, provides intelligent security software and services to enterprises. In the fiscal second quarter (Q2) of 2025, BlackBerry reported revenue of US$145 million, an increase of 9.8% compared to the year-ago period.

BlackBerry's Internet of Things (IoT) business grew by 12% year over year to US$55 million, while cybersecurity sales were up 10% to US$87 million. It reported an operating loss of US$4 million, while its cash usage stood at US$13 million, compared to US$56 million in the year-ago period.

BlackBerry emphasized that its IoT business reported a gross margin of 82% in Q2, an increase of 100 basis points sequentially due to strong production-based royalties and multiple new ADAS (Advanced Driver Assistance System) wins.

Notably, sales of its core cybersecurity products increased 24%, and the segment ended Q2 with an annual recurring revenue of US$279 million. While the net retention rate for this segment improved to 88%, it suggests that existing customers reduced spending by 12% over the last 12 months.

A focus on cost management allowed BlackBerry to reduce operating expenses by 24% year over year to US$99 million in Q2. The company expects to report a positive adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) in fiscal 2025 and return to positive cash flow by the end of Q4.

Despite its improving financials, BlackBerry remains a high-risk investment as it faces competition from established peers that are growing much faster. BlackBerry is part of multiple growth segments such as cybersecurity, artificial intelligence, and IoT but is struggling to grow at the top line, which suggests it is losing market share.

Buy this AI stock instead

Investors looking to buy undervalued AI stocks can consider gaining exposure to UiPath (NYSE:PATH). Valued at US$8.12 billion by market cap, UiPath provides an end-to-end automation platform that offers robotic process automation (RPA) solutions in the U.S. and other international markets. It offers enterprise-facing solutions to build, manage, rub, engage, measure, and govern automation within an organization.

Sales have risen from US$336.2 million in fiscal 2020 (which ended in January) to US$1.4 billion in the last 12 months. However, its growth story is far from over, given that analysts expect UiPath sales to rise to US$1.58 billion in fiscal 2026 and US$1.75 billion in 2027.

Unlike BlackBerry, UiPath is reporting consistent free cash flow. Wall Street projects its free cash flow to surpass US$400 million in fiscal 2027, compared to a free cash outflow of US$34 million in 2023.

Priced at less than 30 times forward earnings, PATH stock is quite cheap, given its growth estimates. Analysts remain bullish on the AI stock and expect it to gain close to 10% from current levels, given consensus price target estimates.