Summary
Progress Software reported revenue of $253.46 million for the second quarter of fiscal 2026, up 6.8% from the prior-year quarter and up 6% on a constant currency basis. Gross profit rose 9.7% to $208.59 million. Operating income increased 17.1% to $45.20 million, and net income was $21.07 million, up 23.7%. Diluted earnings per share came in at $0.50, up 28.2%. Gross margin expanded to 82.3%, up 2.2 percentage points, and operating margin reached 17.8%, up 1.6 points. On a non-GAAP basis, operating margin was 40% and diluted earnings per share was $1.62, up 16% from the same quarter last year. Annualized recurring revenue was $868 million, up 2% on a constant currency basis, and the net retention rate was 100%. Deferred revenue was $423.22 million, up 8.9% from the prior-year quarter, and remaining performance obligations were $518.90 million, up 4.3%. Software licenses revenue led the growth, helped by DataDirect, Chef, and MarkLogic. Management described demand as broad-based and said AI-powered offerings contributed meaningfully.
For the first six months of fiscal 2026, revenue was $501.26 million, up 5.4% from the prior-year period. Operating cash flow for the six months was $177.46 million, up 79.4%. In the quarter alone, operating cash flow was $78.84 million, up 162.8%, and capital expenditures were $1.86 million, up 276.6%. Adjusted free cash flow was $79.21 million, up 114%, and unlevered free cash flow was $91.94 million, up 78%. Days sales outstanding was 49 days, compared with 53 days in the second quarter of 2025 and 73 days in the fourth quarter of 2025. The company also reported a trailing twelve-month net leverage ratio of 2.9X, and management said collections were stronger and interest expense lower than a year earlier.
Management updated its outlook for the full fiscal year. Non-GAAP diluted earnings per share is now guided to $6.09 to $6.21, compared with prior guidance of $5.91 to $6.03. Non-GAAP operating margin is unchanged at 39%. Cash from operations is guided to $273 million to $285 million, adjusted free cash flow to $271 million to $283 million, and unlevered free cash flow to $323 million to $334 million. The non-GAAP effective tax rate is expected at 20%. For the fiscal third quarter, non-GAAP diluted earnings per share is guided to $1.53 to $1.59. Currency translation is expected to add about $8.8 million to full-year revenue and about $0.2 million to third-quarter revenue.
The MOVEit Vulnerability remains the largest open risk. The multidistrict litigation has not concluded, and the company does not expect it to finish within the next twelve months. Fact discovery is scheduled to close by September 29, 2026, and class certification briefing begins August 28, 2026. The court has dismissed, in whole or in part, 23 of the 33 claims asserted by bellwether plaintiffs. Management still expects to incur legal and professional services costs tied to the matter. Other risks the company flags include foreign currency swings, renewal rates on contracts, and the integration of acquisitions such as Nuclia and ShareFile, along with economic and geopolitical conditions that could weigh on results.
The quarter paired solid top-line growth with much stronger cash generation, and recurring revenue remains the bulk of the mix. That mix is the reason margins hold up even as operating expenses rise.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $253.5M | $247.8M | +2.3% | $237.4M | +6.8% |
| Gross profit | $208.6M | $203.9M | +2.3% | $190.1M | +9.7% |
| Gross margin | 82.3% | 82.3% | ±0.0 pp | 80.1% | +2.2 pp |
| Sales & marketing | $54.3M | $52.0M | +4.5% | $49.7M | +9.4% |
| General & administrative | $32.2M | $26.5M | +21.6% | $25.6M | +25.7% |
| Total operating expenses | $163.4M | $157.5M | +3.8% | $151.5M | +7.9% |
| Operating income (loss) | $45.2M | $46.5M | -2.7% | $38.6M | +17.1% |
| Operating margin | 17.8% | 18.8% | -0.9 pp | 16.3% | +1.6 pp |
| Net income (loss) | $21.1M | $22.8M | -7.6% | $17.0M | +23.7% |
| Net margin | 8.3% | 9.2% | -0.9 pp | 7.2% | +1.1 pp |
| Diluted EPS | $0.50 | $0.53 | -$0.03 | $0.39 | +$0.11 |
| Net retention rate | 99.0% | 99.0% | ±0.0 pp | 100.0% | -1.0 pp |
Risks
The MOVEit Vulnerability remains unresolved: the MDL has consolidated class action claims and an insurance subrogation complaint, with fact discovery set to conclude by September 29, 2026 and class certification briefing beginning August 28, 2026. Management states the MDL is not expected to conclude within the next twelve months, and cyber vulnerability response expenses, net, rose 73% in FY2026 Q2 and 79% for the first six months of FY2026 versus the prior-year periods.
The effective tax rate increased to 27% in FY2026 Q2 from 14% in FY2025 Q2, driven by changes in the jurisdictional mix of U.S. versus non-U.S. earnings and a $0.8 million discrete tax expense versus a $1.1 million discrete tax benefit a year earlier. The enacted OBBBA changes to U.S. federal tax provisions also introduce uncertainty around future tax expense and cash taxes.
Growth is increasingly dependent on license sales rather than recurring streams: software licenses revenue rose 36% in FY2026 Q2 while maintenance declined 2%, professional services declined 6%, and SaaS was up only 1% for the quarter. ARR was $868 million at May 31, 2026, up 2% year-over-year, and net retention rates have ranged only between 99% and 100%.
Foreign currency exchange rates materially affect reported results: FY2026 Q2 revenue grew 7% as reported versus 6% on a constant currency basis, and maintenance revenue declined 4% at constant currency versus 2% as reported. Management expects revenue to continue to be impacted by exchange rate fluctuations.
The company redeemed its 2026 Notes in April using a revolving line of credit that carries a higher interest rate, and repaid $110.0 million on the revolver during the first six months of FY2026 while also repurchasing $54.7 million of shares. Continued reliance on the revolver raises interest cost sensitivity and reduces remaining borrowing capacity.
The company continues to incur restructuring charges tied to a November 2025 headcount reduction action and facility closures, with restructuring expenses of $1.5 million in FY2026 Q2 (up 42% year-over-year) and $2.2 million for the first six months of FY2026. Execution risk remains around realizing the intended cost savings.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Adjusted Free Cash Flow
Annualized Recurring Revenue (ARR)
Free Cash Flow
Net Retention Rate (NRR)
Unlevered Free Cash Flow
Summary, forecast, risks and KPIs are extracted from PROGRESS SOFTWARE CORP /MA's SEC filings for Q2 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.