Inve US ▾
PTPTC

PTC (PTC) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q2 FY26)· Information Technology· May 6, 2026

Source: earnings call transcript

Executive summary

PTC Q2 FY26 — Strong ARR Growth and AI-Driven Modernization Demand

PTC delivered a strong quarter, driven by robust constant currency ARR growth and exceeding free cash flow guidance. The company is now fully focused on its intelligent product life cycle vision following a recent divestiture, with AI serving as a key catalyst for customer modernization demand. Go-to-market transformation efforts are gaining traction, leading to improved rep productivity and a high-quality pipeline, positioning PTC for continued momentum in the second half of the fiscal year.

Highlights

5

  • Constant currency ARR grew 8.5% year-over-year, reaching $2.388 billion, at the high end of guidance.

  • Free cash flow grew 14% year-over-year, exceeding guidance.

  • Repurchased $250 million of common stock in Q2, with an additional $375 million deployed via ASR from divestiture proceeds.

  • Board authorized a new $2 billion share repurchase program effective October 1, 2026, through FY28.

  • Raised fiscal '26 revenue guidance to $2.580 billion-$2.820 billion and non-GAAP EPS guidance to $6.65-$8.90.

Concerns

2

  • Macro uncertainty persists, though management is confident in controllable factors.

  • Kepware and ThingWorx divestiture impacts year-over-year growth calculations for cash flow, revenue, and EPS due to non-recast historicals.

Guidance & targets

CategoryTargetConfidence
Constant currency ARR growth (excluding Kepware and ThingWorx)
7.5% to 9.5%
high materiality
High
Net new ARR (midpoint)
$195 million
high materiality
High
Constant currency ARR growth (excluding Kepware and ThingWorx)
8% to 9%
medium materiality
High
Net new ARR
$40 million to $55 million
medium materiality
High
Free cash flow
$850 million
high materiality
High
Free cash flow (baseline for FY27 growth)
$950 million
high materiality
High
Free cash flow
$240 million to $245 million
medium materiality
High
Revenue
$2.580 billion to $2.820 billion
high materiality
High
Non-GAAP EPS
$6.65 to $8.90
high materiality
High
Share repurchase program
$2 billion
high materiality
High
Share repurchase
$1.225 billion to $1.325 billion
high materiality
High
Fully diluted share count
115 million to 116 million shares
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
PLM
Forward-looking indicators (demand capture, renewal rates, pipeline growth) are very positive, driven by customer incentives to modernize with Windchill and Codebeamer. Expected to see growth accelerate as deferred ARR flows into P&L.
—expected to accelerate——
Europe
Strong performance noted despite macro uncertainty.
—8% constant currency——

Orderbook & backlog

Deferred ARR significant step-up Q4 FY26

Clear visibility into a significant step-up in deferred ARR starting in Q4.

Deferred ARR balance making very good progress FY27 and beyond

Building the deferred ARR balance, especially for '27 and beyond.

Product announcements

ProductTypeDetails
Creoupdate
AI Native Productslaunch
Windchill+update
Onshape AIupdate
ServiceMax AIupdate
Codebeamerupdate

Deals & partnerships

Kepware and ThingWorx Sale of non-core assets

Divestiture completed on March 13, Q2 is the first quarter reporting as a more focused business.

Leading automotive supplier Displacement of a competitor with Windchill+

Won because Windchill manages authoritative product data and offers a clear roadmap for AI agents to drive productivity across PLM workflows. Customer recognized the need to modernize product data foundation for AI.

U.S. Army Adoption of Windchill as standard for PLM systems

U.S. Army put a stamp of approval that Windchill is the standard for PLM systems, serving as a calling card for other agencies.

Hamilton Medical Customer win for Codebeamer (ALM)

Another displacement win for Codebeamer, indicating strength in the ALM segment.

Risks & headwinds

Macro uncertainty ongoing

not quantified

Mitigation:Focusing on controllable factors: execution, discipline, and serving customers.

Global economic strains ongoing

war going on and energy prices have escalated to levels no one's seen before in the long time

Mitigation:Acknowledged as factors requiring navigating approval processes, but internal improvements and AI thrust are strong tailwinds.

What to watch in Q3 FY26

Net new ARR step-up

Q4 FY26
Current $40M-$55M in Q3 FY26
Target more significant step-up in Q4 FY26

Why it matters

Indicates the effectiveness of go-to-market execution and conversion of deferred ARR into recognized revenue, crucial for future growth.

Looking at the second half of the year, consistent with what we said last quarter, our intent is to grow net new ARR in Q3 on a year-over-year basis and then deliver a more significant step-up in Q4.

Find out whether PTC delivers this. Inve re-checks your case every morning.

Q&A highlights

How confident is management in achieving double-digit ARR growth in the mid-term, given current trends and macro uncertainty?

Management is confident due to continued customer demand for AI modernization, strong go-to-market execution, and progress in building deferred ARR. They expect growth to increase next year even with no incremental performance from the go-to-market team, supported by current visibility.

“if we see no more incremental performance from what we saw this year from our go-to-market team, coupling that with the deferred ARR balance that we have visibility to, we'll see growth increase.”

asked by Saket Kalia · answered by Jennifer DiRico

2 min read 6 chapters

Detailed narrative

AI as a Catalyst for Modernization Demand

PTC is experiencing significant momentum driven by AI, primarily by accelerating customer demand for modernizing product data foundations. Customers recognize that a strong product data foundation is crucial for leveraging AI effectively, leading them to upgrade to the latest versions of Windchill, Creo, and Codebeamer. This modernization is seen as foundational infrastructure for AI, as general-purpose AI models cannot access the specialized product data managed by PTC's systems.

Product Innovation and Accelerated Releases

PTC is aggressively scaling its AI capabilities, nearly doubling AI releases in 2026 compared to 2025, including its first AI-native products. The company is embedding specialized AI agents across its portfolio, such as Creo and Onshape agents, which can access underlying mathematical and geometric parameters for complex 3D product design. This focus on highly relevant product releases, coupled with the necessity for customers to consolidate their PLM estate, is driving increased adoption and displacement wins.

Go-to-Market Transformation Gaining Traction

The go-to-market organization, which underwent a major transformation 15-16 months ago to become more vertical-focused, is now showing positive results. Rep productivity and renewal rates are improving, and the company has built a large, high-quality pipeline. This transformation, combined with a clear messaging strategy and vertical expertise, is contributing to increased demand capture and overall business momentum.

Vertical Strength and Displacement Wins

PTC is seeing particular strength in the electronics and high-tech vertical, driven by data center modernization, and in federal, aerospace, and defense (FA&D), exemplified by the U.S. Army adopting Windchill as its PLM standard. The automotive sector is also showing differentiation with Codebeamer, Windchill, and Onshape, especially as software-defined vehicles accelerate. These trends are leading to significant displacement wins against competitors, with customers consolidating onto PTC's solutions.

Windchill+ and SaaS Adoption

Windchill+, PTC's SaaS version of its PLM solution, is gaining significant traction, primarily driving net new customer acquisitions and displacements. While many customers still prioritize modernizing their on-premise solutions, the simplified and cleaner tech stack offered by Windchill+ is appealing. PTC's AI releases are available for both on-premise and SaaS solutions, ensuring flexibility for diverse customer needs.

Capital Allocation and Shareholder Returns

PTC repurchased $250 million of common stock in Q2 and deployed $375 million from divestiture proceeds into an accelerated share repurchase program. The Board authorized a new $2 billion share repurchase program through FY28, replacing the current one. Management views share buybacks as a good use of capital given the current stock valuation and the long-term durability of the company, alongside organic and inorganic investments.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.