8-K: Progress Software Reports Q3 2026 Results, Acquires Domo AI

Progress Software announced its third quarter 2026 financial results, highlighting a 1% year-over-year increase in ARR to $873 million and a 25% rise in diluted EPS, alongside the successful closure of the Domo AI and Data Platform acquisition.

Summary

• Progress Software reported third quarter 2026 revenue of $246 million, a 2% decrease year-over-year.
• Annualized Recurring Revenue (ARR) grew 1% year-over-year to $873 million on a constant currency basis.
• Diluted earnings per share (EPS) increased by 25% to $0.55, and non-GAAP diluted EPS rose 13% to $1.69.
• Operating margin was 19% (GAAP) and 43% (non-GAAP).
• Cash from operations increased 20% to $88 million, and adjusted free cash flow grew 17% to $87 million.
• The acquisition of Domo's AI and Data Platform business was successfully closed.
• Updated full-year 2026 guidance was provided, with revenue projected between $1,044 million and $1,052 million.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a cautiously positive report, with strong EPS growth and successful acquisition integration, though revenue saw a slight year-over-year dip.

Positives

• Diluted earnings per share (EPS) saw a significant 25% increase year-over-year, reaching $0.55.
• Non-GAAP diluted EPS also showed strong growth, up 13% to $1.69.
• Annualized Recurring Revenue (ARR) demonstrated resilience, growing 1% year-over-year to $873 million.
• Cash from operations increased by 20% to $88 million.
• Adjusted free cash flow (non-GAAP) grew by 17% to $87 million.
• The acquisition of Domo's AI and Data Platform business was successfully completed.
• Days sales outstanding improved significantly to 42 days from 55 days in the prior year quarter.

Negatives

• Total revenue for the quarter was $246 million, a 2% decrease compared to the same period last year.
• License revenue decreased slightly year-over-year for the three months ended August 31, 2026.

Risks

• Economic, geopolitical, and market conditions could adversely affect business, results of operations, and financial condition.
• International sales and operations expose the company to risks related to foreign currency fluctuations.
• Failure to achieve financial forecasts due to delays or size reductions in transactions, currency fluctuations, or declining renewal rates.
• Security breaches or cyber-attacks on the company's infrastructure or software offerings could lead to reputational harm and financial exposure.
• Uncertainty remains regarding the ultimate resolution of inquiries, investigations, and legal claims related to the MOVEit Vulnerability.
• Future acquisitions may not be successful or could involve unanticipated costs or integration issues.

Future Outlook

For the fiscal year ending November 30, 2026, Progress Software updated its guidance to project revenue between $1,044 million and $1,052 million, with non-GAAP diluted EPS expected to be between $6.15 and $6.23. For the fourth quarter of fiscal 2026, revenue is projected between $297 million and $305 million, with non-GAAP diluted EPS between $1.24 and $1.33.

Management Comments

• "This quarter's results reflect the strength of our strategy, the resilience of our business model, and the value our differentiated software portfolio delivers to customers worldwide," said Yogesh Gupta, CEO.
• "As organizations seek the context and control required to realize the full potential of AI, Progress is uniquely positioned to help them drive business outcomes with confidence."
• "We delivered steady growth in ARR and earnings through strong execution and disciplined expense management, while continuing to improve our balance sheet."
• "With the recent close of the Domo AI and Data platform acquisition, we are further strengthening our ability to help customers unlock the value of their data and accelerate AI-powered innovation."
• "Our execution in the third quarter was very strong with year-over-year growth in ARR and adjusted free cash flow of more than 1% and 17%, respectively," said Anthony Folger, Progress CFO.
• "All of this is a testament to the stability and durability of our business and the efficiency of our operating model."

Industry Context

StockSavvy.ai notes that Progress Software's focus on AI infrastructure and data platforms aligns with current industry trends emphasizing the need for organizations to manage and leverage AI effectively. The acquisition of Domo's AI and Data Platform business positions Progress to capitalize on this demand, integrating AI capabilities into its existing offerings.

Legal Proceedings

• The results of inquiries, investigations, and legal claims regarding the MOVEit Vulnerability remain uncertain, and their ultimate resolution could result in material losses.

Stakeholder Impact

• Shareholders: Potential for increased value through successful integration of Domo acquisition and continued EPS growth, offset by slight revenue decline.
• Employees: Continued focus on execution and integration may create opportunities and challenges.
• Customers: Benefit from enhanced AI capabilities and data platform integration, potentially leading to improved business outcomes.
• Creditors: Increased leverage due to the Domo acquisition, with a pro forma net leverage ratio of approximately 2.9x at close.

Next Steps

• Integrate the acquired Domo AI and Data Platform business.
• Continue to deliver on the Total Growth Strategy.
• Provide formal fiscal 2027 guidance in January.

Key Dates

Recommendation

The report shows mixed results: strong EPS growth and successful acquisition integration are positives, but the slight year-over-year revenue decline warrants a cautious approach. The updated guidance is largely in line with expectations, and the company's strategic focus on AI is promising, but the integration of Domo and its impact on future performance need to be closely monitored.

Keywords

AI infrastructure, Data Platform, Annual Recurring Revenue, Earnings Per Share, Financial Results, Acquisition, Software, Cloud