Progress Software's fiscal Q3 revenue fell 1.5% to $246.0M as maintenance declined, but cost cuts, buybacks and a lower tax rate lifted diluted EPS 25% to $0.55; the debt-funded ~$400M Domo deal raises FY revenue guidance and cuts GAAP EPS guidance.
Revenue
$246M
-1.5% YoY
Net income
$23M
+17.3% YoY
Diluted EPS
$0.55
+25.0% YoY
Operating margin
18.9%
This period vs a year ago
Same period last year
This period
Revenue▼-1.5%
≈$250M
$246M
Net income▲+17.3%
≈$19M
$23M
Diluted EPS▲+25.0%
≈$0.44
$0.55
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
Revenue slipped 2%, but profit and cash rose as costs came down; the Domo deal now resets the outlook
Progress Software sells long-lived business software: the OpenEdge application platform, DataDirect data connectors, MOVEit file transfer, Chef, MarkLogic, and the ShareFile document-sharing business it bought in late 2024. In its fiscal third quarter (June 1 to August 31, 2026) revenue fell 1.5% to $246.0 million. Even so, operating income rose 6% and diluted earnings per share climbed 25% to $0.55. Lower staff and contractor costs, a lower tax rate and a 5% smaller share count explain the gap. Three weeks after the quarter ended, Progress closed its roughly $400 million purchase of Domo's AI and data platform business. It paid with borrowed money, which is why the full-year revenue forecast went up while the full-year GAAP profit forecast went down.
Period note: Progress's fiscal year ends November 30, so this is its fiscal Q3 2026, covering June through August 2026. We file it as Q3 2026 because two of its three months fall in calendar Q3.
At a glance
Revenue $246.0M, down 1.5% (down 2% at constant currency, i.e. with exchange-rate moves stripped out). Management blames the timing of multiyear subscription renewals. The core business isn't growing: no acquisition was large enough to distort the comparison.
Diluted EPS $0.55, up 25%, but only about 6 points of that came from higher operating profit. The rest came from buybacks (diluted shares down 5.1%), a lower tax rate (22.9% vs 25.9%) and slightly lower interest costs.
Total debt at face value $1.24B at quarter-end, against $113.7M of cash. The Domo purchase, funded entirely from the revolving credit facility, takes debt back to roughly $1.6B before any repayments made since.
Key figures
Metric
Q3 FY2026 (Jun–Aug 2026)
Q3 FY2025
YoY Change
Total revenue
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$246.0M
$249.8M
-1.5%
Software licenses
$63.6M
$63.4M
+0.2%
Maintenance
$100.0M
$104.8M
-4.6%
SaaS (cloud subscriptions)
$72.6M
$71.5M
+1.6%
Gross margin
82.7%
81.0%
+1.7 pts
Operating income (GAAP)
$46.6M
$43.9M
+6.1%
Operating margin (GAAP)
18.9%
17.6%
+1.3 pts
Operating margin (non-GAAP, company-defined)
42.8%
39.8%
+3.0 pts
Net income
$22.8M
$19.4M
+17.3%
Diluted EPS (GAAP)
$0.55
$0.44
+25.0%
Diluted EPS (non-GAAP)
$1.69
$1.50
+12.7%
Annualized recurring revenue (ARR)
$873M
$861M
+1%
Cash from operations
$88.0M
$73.4M
+19.8%
Operating margin is the share of revenue left after running the business, before interest and tax. ARR is the yearly value of all active subscription and maintenance contracts at quarter-end, measured at constant currency. It is the best single gauge of whether a software company's recurring base is growing.
Where the revenue went
The decline came almost entirely from maintenance, the yearly support-and-upgrade fees customers pay on licenses they already own. It fell $4.8 million (-4.6%). The filing says maintenance and professional services "decreased slightly across multiple product offerings". SaaS, Progress's cloud-hosted products (ShareFile is the largest), grew only 1.6%. License sales were flat at $63.6 million after a strong first half. License revenue for the nine months is still up 16% ($200.1M vs $172.7M), which the filing credits to "increases in our DataDirect and OpenEdge product offerings."
By region, North America (65% of revenue) fell 2.5% to $159.4M and Asia Pacific fell 5.4%. EMEA (+1.0%) and Latin America (+3.8%) grew slightly.
Organic vs acquired growth: this quarter is effectively all organic. ShareFile (bought November 2024) and Nuclia (a small AI-search startup bought June 2025 for $21.4M, which the filing calls "not significant") were in both the current and prior-year quarters. So the -1.5% is the underlying business. The two growth metrics point the same way. ARR grew 1% to $873M, and the filing says net retention rate, the ARR kept from existing customers a year later including upgrades and net of cancellations, "generally ranged between 99% and 100%." In plain terms, existing customers are spending about the same as a year ago. Growth has to come from new customers or acquisitions.
How profit rose on lower revenue
Gross profit rose $1.3M even though revenue fell $3.8M. Cost of maintenance, SaaS and services dropped 9% "primarily due to decreased contractors and personnel-related costs," and amortization of acquired technology fell 17% as older acquired assets wrote off. Operating expenses showed the same pattern:
Product development -7% ($46.1M), "due to decreased headcount related costs"
Sales and marketing -3% ($50.5M), on lower variable compensation
General and administrative -5% ($26.8M), on lower personnel costs
Together these three lines cost $6.3M less (-4.9%). That paid for $5.1M more in one-off items: MOVEit breach costs of $3.5M (vs $0.7M), Domo deal fees of $3.9M (vs $0.8M) and restructuring of $0.1M (vs $0.9M). It also left operating income $2.7M higher. Interest expense fell to $16.9M from $17.7M because the revolving credit line carried a lower average balance and rate. A revolving credit line works like a corporate credit card: the company can borrow and repay at will.
Takeaway: Progress is a no-growth software business run for cash. Revenue is shrinking slightly, customers renew at about 99–100% of their prior spending, and earnings growth comes from cost cuts, buybacks and a lower tax rate. Domo is a bet that buying growth will fix the top line. For now it makes the company more indebted and, on a GAAP basis, less profitable.
What the headline numbers hide
The 25% EPS gain is mostly financial engineering, not operations. Operating income grew 6.1%. Pre-tax income grew 12.7% thanks to lower interest. Net income grew 17.3% because the effective tax rate fell to 22.9% from 25.9%. The filing cites the mix of U.S. and non-U.S. earnings and a $2.0M one-off tax charge in last year's quarter. At last year's tax rate, net income would have been up about 13%. Diluted shares fell 5.1% to 41.5M as Progress bought back 2.2M shares for $71.6M over nine months, which lifted the rest of the per-share growth.
GAAP vs "non-GAAP" is a wide gap. The company's preferred (non-GAAP) EPS of $1.69 is three times GAAP EPS of $0.55. The excluded items are amortization of acquired intangibles ($35.1M, the ongoing accounting charge for the value of past acquisitions), stock-based compensation ($16.1M, a real cost paid in shares rather than cash), MOVEit breach costs ($3.5M), deal fees ($3.9M) and restructuring ($0.1M). Leaving out amortization is common practice. Stock pay recurs every quarter, though, and MOVEit costs have recurred since the 2023 breach.
Cash conversion looks spectacular partly because collections caught up. Nine-month cash from operations was $265.5M against net income of $66.7M, a 4x gap. Most of the gap is non-cash charges (amortization $104.6M, stock pay $55.1M). Another $55.1M came from collecting receivables. Days sales outstanding, the average number of days customers take to pay, dropped to 42 from 55 a year earlier and 73 at fiscal year-end. That is a one-time release that won't repeat at the same scale. Bad-debt charges rose to $10.0M from $3.5M over nine months, and G&A mentions "additional reserves related to our receivables". So some of the receivables shrink is write-down rather than collection.
Most of the balance sheet is acquired goodwill. Goodwill and intangible assets total $1.79B against total assets of $2.30B and shareholders' equity of $530M.
MOVEit is still a live liability. As of August 31 there is "no remaining insurance recovery available" to offset breach costs, so every future dollar hits earnings. In the multidistrict litigation, the court has dismissed 23 of the 33 claims brought by the lead (bellwether) plaintiffs, but class certification was filed on August 28, 2026, and the case "is not expected to conclude within the next twelve months."
Debt and the acquisition strategy
Progress has grown mainly by buying mature software products and running them for cash: Chef, MarkLogic, ShareFile, Nuclia and now Domo. The pattern shows up in the debt.
In April 2026 it repaid $360M of convertible notes due 2026, borrowing on the revolver to do so. Convertible notes are bonds the holder can swap for shares. The 2026 notes were replaced with revolver debt at a higher rate (5.44% at quarter-end, vs the 3.5% coupon on the remaining 2030 convertibles).
It then paid the revolver down by $170M over nine months. Face-value debt went from $1.41B at November 30 to $1.24B ($790M revolver plus $450M of 3.5% notes due 2030).
On September 22, 2026 it closed the ~$400M Domo purchase, "funded with borrowings under our existing revolving credit facility". That takes debt back to roughly $1.6B, before any repayment made since.
Over the last nine months, adjusted free cash flow (the company's measure: operating cash flow minus capital spending, with restructuring payments added back) was $265.2M. The business can carry this debt. The question is whether cash goes to paying it down or to the next deal, while $130.7M of buyback authorization remains.
Outlook
Management updated full-year (fiscal 2026, ending November 30) guidance in the Q3 earnings release, now including Domo:
FY2026 guidance
Updated (Sep 30)
Prior (Jun 30)
Revenue
$1,044–1,052M
$990–1,002M
GAAP diluted EPS
$1.18–1.28
$1.60–1.74
Non-GAAP diluted EPS
$6.15–6.23
$6.09–6.21
GAAP operating margin
13%
16%
Non-GAAP operating margin
38%
39%
For fiscal Q4 (September–November) the company guides revenue of $297–305M, a GAAP loss of $0.41–0.32 per share and non-GAAP EPS of $1.24–1.33. Our arithmetic: the prior guidance implied Q4 revenue of about $243–255M, so the roughly $50M increase is mostly Domo's first ten weeks in the results. The release does not break out Domo's contribution. The GAAP loss reflects what the release calls "preliminary estimates relating to the valuation of intangible assets acquired from Domo and restructuring expenses". Domo therefore adds revenue but lowers the margin, and the integration will include another round of cost cuts.
Our read: the standalone business is stable but not growing. ARR is up 1%, net retention is around 99–100% and quarterly revenue is down. Earnings growth has relied on cost cuts and buybacks, which can't continue indefinitely. Domo, an AI and data-analytics platform, is a bet on growth rather than on another mature cash-generating product, and it comes with more debt. Things to watch in the fiscal Q4 (full-year) report: whether ARR growth picks up once Domo's subscriptions are counted, how much of Domo's revenue survives the restructuring, how fast revolver debt comes down, and whether MOVEit costs keep rising now that insurance has run out.