Progress Software Q3 EPS Tops Guidance as Domo Deal Reshapes Outlook

Progress Software Corporation (NASDAQ: PRGS) reported fiscal third-quarter 2026 earnings above its prior guidance range and updated its full-year outlook after closing the $400 million acquisition of Domo. Quarterly revenue remained within guidance, while a 43% non-GAAP operating margin and strong cash generation supported non-GAAP diluted earnings per share of $1.69.

For the quarter, Progress recorded $246 million in revenue, compared with its previous forecast of $244 million to $250 million. Non-GAAP diluted EPS exceeded the prior range of $1.53 to $1.59, while GAAP diluted EPS of $0.55 also came in above the company’s $0.35-to-$0.41 outlook.

GAAP operating margin was 19%, compared with 43% on a non-GAAP basis. Progress generated $88 million in GAAP operating cash flow, $87 million in adjusted free cash flow and $101 million in unlevered free cash flow.

Annualized recurring revenue reached $873 million, up 1% year over year on the company’s constant-currency basis. The calculation includes ShareFile in all periods and excludes Domo. Net retention rate was 99%, indicating that expansion from existing customers nearly offset contraction and attrition over the trailing 12 months.

Revenue mix and updated outlook

GAAP revenue totaled $246.0 million, compared with $249.8 million in the year-earlier quarter. License revenue was broadly stable at $63.6 million, while maintenance revenue declined to $100.0 million from $104.8 million. SaaS revenue increased to $72.6 million from $71.5 million, and professional-services revenue decreased to $9.8 million from $10.0 million.

North America remained the largest region, contributing $159.4 million, versus $163.4 million a year earlier. EMEA revenue was $69.0 million, Latin America generated $6.5 million, and Asia-Pacific contributed $11.2 million.

Progress now expects fiscal 2026 revenue of $1.044 billion to $1.052 billion, compared with its previous outlook of $990 million to $1.002 billion. Its non-GAAP diluted EPS forecast is $6.15 to $6.23, versus the prior range of $6.09 to $6.21.

The company lowered its fiscal-year GAAP diluted EPS outlook to $1.18 to $1.28 from $1.60 to $1.74 and expects a 13% GAAP operating margin, compared with 16% previously. The non-GAAP operating-margin forecast is 38%, down from the prior 39% estimate.

Progress forecasts GAAP operating cash flow of $274 million to $282 million, adjusted free cash flow of $275 million to $283 million and unlevered free cash flow of $330 million to $338 million for the year.

For the fourth quarter, the company expects revenue of $297 million to $305 million and non-GAAP diluted EPS of $1.24 to $1.33. GAAP diluted EPS is projected to be a loss of $0.41 to $0.32.

Domo acquisition raises leverage

Progress completed its all-cash purchase of Domo on September 22 for $400 million, drawing $390 million on its revolving credit facility. Net leverage was about 3.8 times at closing on an actual trailing-12-month basis and approximately 2.9 times after giving effect to Domo’s EBITDA.

Domo reported fiscal 2026 revenue of $318.9 million, including $289.4 million in subscription revenue and $29.5 million in professional services. Progress estimates Domo’s steady-state annual revenue at $280 million to $290 million, reflecting lower professional-services activity and planned churn in legacy seat-based offerings. More than 85% of Domo’s ARR is consumption-based, according to the presentation.

Progress expects Domo’s stand-alone non-GAAP operating margin to be slightly below 30% in fiscal 2027. The company illustrated a fiscal 2027 non-GAAP operating margin of 36% to 37% with Domo, compared with 38% to 39% before the transaction. It expects 100 to 200 basis points of synergies to restore the margin to 38% to 39% after integration.

The acquisition is expected to add about $21 million of fiscal 2027 interest expense, assuming debt repayments and a 6% rate. Progress characterized these estimates as mechanical transaction effects rather than formal guidance and said it plans to provide fiscal 2027 guidance in January.

The company repaid $60 million of debt during the third quarter and $170 million through the first nine months of the year. It also repurchased $17 million of shares in the quarter and $72 million year to date. Management continues to prioritize acquisitions, debt reduction and repurchases intended to offset equity-program dilution.

Progress said its strategy remains focused on product investment, customer retention and acquisitions of infrastructure-software businesses with recurring revenue. Its product positioning emphasizes trusted enterprise data, governance and contextual information for artificial-intelligence applications.

Key uncertainties include economic and geopolitical conditions, foreign-exchange movements, transaction timing, contract renewal rates and acquisition integration. Progress also said the outcome of inquiries, investigations and legal claims related to the MOVEit vulnerability remains uncertain and could result in material losses in a particular period. Additional risks include cybersecurity incidents, software vulnerabilities and unanticipated costs associated with future acquisitions.