US ▾
PRGS
Earnings call · Aug 2026 (Q3 FY26)

PROGRESS SOFTWARE Q3 FY26 earnings call PRGS

Sep 30, 2026 Source

Executive summary

Progress Software Q3 FY26 — Strong Performance and Strategic Domo Acquisition

Progress Software delivered a solid Q3 FY26, marked by strong financial performance and the strategic acquisition of Domo's AI and data platform business. The company exceeded earnings expectations and generated excellent cash flow, while also integrating Domo to enhance its AI-ready data layer. Management is focused on leveraging Domo's consumption-based model and realizing significant synergies by the end of FY27.

Highlights

5

  • ARR was up over 1% in constant currency to $873 million.

  • Operating margins were exceptionally strong at 43%, up 300 basis points from a year ago.

  • Earnings per share increased 13% to $1.69, exceeding the high end of guidance.

  • Adjusted free cash flow grew 17% to $87 million for the quarter.

  • Net leverage ratio improved to approximately 2.7 times on a trailing 12-month basis.

Concerns

4

  • Domo's seat-based business is expected to see significant churn.

  • Domo's services business will be deemphasized and decline further.

  • Domo's operating margin for FY27 will likely run slightly below 30%, resulting in 100 to 200 basis points compression of Progress's overall FY27 operating margin.

  • Incremental interest expense in FY27 is expected to be approximately $21 million due to funding the Domo acquisition.

Guidance & targets

CategoryTargetConfidence
Revenue
$297M - $305M
high materiality
High
Earnings per share
$1.24 - $1.33
high materiality
High
Full-year Revenue
$1.044B - $1.052B
high materiality
High
Full-year Operating Margin
38%
high materiality
High
Full-year Adjusted Free Cash Flow
$275M - $283M
medium materiality
High
Full-year Unlevered Free Cash Flow
$330M - $338M
medium materiality
High
Full-year Earnings per share
$6.15 - $6.23
high materiality
High
Domo Operating Margin
slightly below 30%
medium materiality
Medium
Overall Operating Margin Compression
100 to 200 basis points
medium materiality
Medium
Incremental Interest Expense
$21M
medium materiality
High
Domo Steady State Revenue
$280M - $290M
high materiality
Medium
Domo EBITDA Contribution
well over $100M annually
high materiality
Medium
Domo Integration Completion
end of FY '27
medium materiality
High

PRGS operating KPIs by quarter

PRGS operating KPIs stated on its earnings calls, by fiscal quarter
KPI May 2026 Q2 FY26This call Aug 2026 Q3 FY26Change vs prior quarter
Annual recurring revenue (ARR)
$868M Revenue of $253 million was up 7% year-over-year, with ARR of $868 million, up 2% year-over-year in constant currency. Source transcript
$873M We delivered another solid quarter as ARR was up over 1% in constant currency to $873 million, and net retention rate finished at 99% within our expected range of 99% to 100% consistent over the last several quarters. Source transcript
+0.6%
Net revenue retention rate
100% We also generated approximately $79 million of adjusted free cash flow and delivered a net retention rate of 100%. Source transcript
99% We delivered another solid quarter as ARR was up over 1% in constant currency to $873 million, and net retention rate finished at 99% within our expected range of 99% to 100% consistent over the last several quarters. Source transcript
-1 pt

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

ARR $873M Q3 FY26 end

up over 1% pro forma year-over-year growth on a constant currency basis

Net Retention Rate 99% Q3 FY26

Within expected range of 99% to 100%.

Domo annualized top line (pre-acquisition) ~$300M Pre-acquisition

Includes consumption-based, seat-based, and services revenue.

Domo steady state revenue (post-integration) $280M - $290M Post-integration

Expected to largely come from the consumption-based model after planned churn and services decline.

Domo consumption-based platform ARR >85% Pre-acquisition

Represents more than 85% of Domo's ARR, carries significantly higher net retention rates.

Domo consumption-based net retention rate >100% Historic

Customers leveraging Domo for the AI portion are expanding.

Product announcements

ProductTypeDetails
Domo new releaselaunch

Deals & partnerships

Domo Acquisition of Domo's AI and data platform business. $400M cash (headline), $390M actual cash outlay

The acquisition of Domo's AI and data platform business closed last week. Progress funded the acquisition by drawing on its revolving credit facility, with an intention to delever quickly. The acquisition is expected to significantly enhance Progress's AI-ready data layer and contribute meaningfully to earnings and free cash flow.

Risks & headwinds

Domo's seat-based business churn ongoing

significant churn

Mitigation:Conversion of remaining seat-based customers to the consumption-based model; focus on maximizing customer retention in ARR.

Domo's services business decline ongoing

will decline further

Mitigation:Shift delivery towards partners, which is margin accretive.

Operating margin compression due to Domo integration FY27

100 to 200 basis points compression

Mitigation:Synergies are expected to fully ramp into fiscal '28, reversing the margin dilution.

Incremental interest expense from Domo acquisition funding FY27

approximately $21M

Mitigation:Deleveraging quickly and aggressively by paying down the revolving credit facility.

Potential slight drag on gross margin from SaaS mix shift ongoing

slight drag

Mitigation:Better retention and a much higher mix of SaaS revenue as part of overall revenue are expected to offset this.

What to watch in Q4 FY26

Domo integration progress and margin ramp

Next quarter and throughout FY27
Current Domo running roughly break-even at close; FY27 operating margin for Domo likely below 30% initially, causing 100-200 bps overall compression.
Target Evidence of synergy realization and ramp towards Progress's historical margin levels for Domo.

Why it matters

Successful integration and margin expansion of Domo are key to the acquisition's financial benefits and overall company profitability.

For the full year '27, Domo will likely run slightly below 30% operating margin as the synergies ramp. And that will result in some compression of Domo's overall '27 operating margin, 100 to 200 basis points.

Q&A highlights

Where will Progress gain the most leverage in improving Domo's margins, specifically from public company cost elimination, G&A, sales and marketing, or restructuring?

Yogesh Gupta explained that significant savings would come from eliminating redundant public company costs, leveraging existing G&A infrastructure (financial, HR systems), and optimizing go-to-market expenses as Domo's aggressive top-line growth strategy differs from Progress's. Additionally, shifting professional services to partners will improve margins.

“Definitely, G&A is an area where there are significant savings because because we're able to leverage our existing G&A structure, integrate their business into ours, use our financial systems, use our HR systems, and all that stuff, right? So there is significant synergies there.”

asked by Lawrence Fenske (Guggenheim Securities) · answered by Yogesh Gupta

2 min read 5 chapters

Detailed narrative

Q3 Performance Highlights

Progress Software reported a strong Q3 FY26 with ARR growth over 1% constant currency to $873 million and a net retention rate of 99%. Revenue reached $246 million, aligning with guidance, while operating margins were robust at 43%, a 300 basis point increase year-over-year. EPS significantly exceeded expectations at $1.69, up 13% year-over-year, driven by disciplined cost management and strong cash flow generation.

Strategic Rationale for Domo Acquisition

The acquisition of Domo's AI and data platform business is a defining strategic development, aimed at enhancing Progress's AI-ready data layer. Domo's capabilities in real-time data integration, transformation, analytics, and agent orchestration complement Progress's existing strengths in ontology management, unstructured data, and automated workflows. This combination is expected to deliver a more complete solution for AI-driven outcomes.

Domo Integration and Financial Outlook

Progress acquired Domo for $400 million in cash, with an actual cash outlay of $390 million. The company anticipates Domo's top line to stabilize at $280 million to $290 million post-integration, primarily from its consumption-based model, as seat-based and services revenue decline. By the end of FY27, Domo is projected to add over $100 million in annual EBITDA, with operating margins expected to normalize to Progress's levels after initial compression due to integration timing.

Customer Engagement and AI Momentum

Progress continues to see strong customer engagement, with major enterprises and government agencies recommitting and expanding their relationships, particularly in highly regulated environments. There is growing interest in AI-enabled capabilities, as customers leverage Progress products for context and control in AI, ensuring reliable outcomes and secure, governed infrastructure. Products like OpenEdge, DataDirect, MOVEit, and LoadMaster showed notable strength.

Consumption-Based Model Strategy

Management is actively analyzing Domo's consumption-based model for potential application across its broader product portfolio. The shift towards consumption is seen as a positive trend, aligning with the increasing volume of data and AI workloads, and offering a more value-aligned metric compared to traditional seat-based models which are under pressure. This strategy aims to capitalize on the growing value derived from the amount of information processed.

AI-generated summary of the company's earnings call. Not investment advice.