PRGS · Progress Software Corporation

Progress Software's Q2 FY2026 results topped expectations, with revenue of $253M (+7% YoY) exceeding the high end of guidance, driven by strength in AI-powered product offerings as highlighted by management. Software license revenue surged 36% to $69M, while recurring maintenance, SaaS, and professional services revenue edged down 1% to $184.5M, reflecting shift toward term-based subscriptions. Annualized Recurring Revenue (ARR) reached $868M, up 2% constant currency, with a net retention rate of 100%, indicating stable customer spending. GAAP operating margin improved 200 bps to 18%, benefiting from revenue mix and cost discipline, while non-GAAP operating margin held at 40%. GAAP diluted EPS of $0.50 rose 28% YoY, and non-GAAP diluted EPS of $1.62 grew 16%, both above the Q3 guidance midpoint. The balance sheet strengthened: cash stood at $103M, long-term debt was $850M, and the company repurchased $35M of shares, bringing net leverage to 2.9x. Guidance for FY2026 was raised: revenue now $990M-$1,002M (up from $988M-$1,000M), non-GAAP EPS $6.09-$6.21 (up from $5.91-$6.03), driven by AI momentum and operational efficiency. CEO Yogesh Gupta cited "broad-based demand across our portfolio" and CFO Anthony Folger noted "revenues were ahead of expectations." The guidance implies continued growth and margin expansion, with Q3 revenue expected at $244M-$250M and non-GAAP EPS $1.53-$1.59. Overall, Progress delivered a solid quarter with AI tailwinds, strong cash flow, and a raised outlook, reinforcing its position as a trusted provider of AI-powered software.