PTC revenue fell 7% to $600.0M in the quarter ended June 30, 2026 on the Kepware/ThingWorx sale and one shortened license contract, but ARR excluding divested businesses grew 9.1% at constant currency and full-year guidance was raised.
Revenue
$600M
-6.8% YoY
Net income
$119M
-16.0% YoY
Diluted EPS
$1.03
-12.0% YoY
Operating margin
27.7%
Revenue fell 7%, but the subscription base kept growing
PTC makes the software manufacturers use to design products (Creo, its CAD — computer-aided design — tool) and to manage product data through a product's life (Windchill and Codebeamer, its PLM — product lifecycle management — tools). This report covers PTC's fiscal third quarter of 2026, the three months ended June 30, 2026 (PTC's fiscal year ends September 30), filed on Form 10-Q on July 31, 2026.
On the surface it was a weak quarter: total revenue fell 7% to $600.0 million from $643.9 million, GAAP operating income dropped 21%, and diluted earnings per share (EPS) fell 12% to $1.03. Two things explain almost all of that, and neither is a loss of customers:
PTC sold two businesses. On March 13, 2026 it sold Kepware and ThingWorx (industrial-connectivity and IoT software) to a buyer controlled by investment funds. Those businesses contributed $46 million of revenue in the year-ago quarter and nothing this quarter. Stripping that $46 million out of last year's $643.9 million leaves about $597.9 million — so the business PTC still owns brought in roughly the same revenue as a year ago (our calculation from the 10-Q's disclosed figures).
A single large contract shortened the license line. The 10-Q attributes lower license revenue "primarily to the shortened duration of a single large contract renewal and expansion." That matters because of how PTC books revenue: under the accounting rule ASC 606, when a customer signs a multi-year on-premises subscription, the license portion of the whole term is recognized up front, on the start date. A shorter contract therefore books less revenue in the quarter it starts, even if the customer's annual spend doesn't change.
The number PTC itself steers investors to is ARR (Annual Run Rate) — the annualized value of all active subscription and support contracts at quarter-end, i.e. roughly what customers are paying per year right now. ARR is not affected by the up-front-recognition timing described above. Excluding the divested businesses, ARR grew 7% to $2,412 million (9.1% at constant currency, meaning with exchange rates held fixed), above the top of PTC's 8%–9% guidance range.
Key figures
Metric
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Source: PTC Form 10-Q for the quarter ended June 30, 2026, and the Q3 FY2026 earnings release (8-K Exhibit 99.1, July 29, 2026). "Non-GAAP" figures are PTC's own adjusted measures, which exclude stock-based compensation, amortization of acquired intangibles and deal-related charges.
Takeaway: The 7% revenue drop is an accounting and divestiture artifact, not a demand problem. Excluding the businesses PTC sold, revenue was roughly flat and the recurring subscription base (ARR) grew 9.1% at constant currency — faster than PTC's own guidance — so the quarter's weak GAAP profit numbers say more about the timing of one contract than about the health of the franchise.
Where the growth came from: CAD and PLM
PTC splits its software into two product groups:
Product group
Q3 FY26 software revenue
Q3 FY25
YoY
ARR growth YoY (constant currency)
PLM (Windchill, Codebeamer, etc.)
$335.8M
$382.1M
-12%
-2% as reported; +10% excluding divested businesses
CAD (Creo, etc.)
$240.9M
$239.2M
+1%
+8%
PLM carried the whole revenue decline. The 10-Q attributes it "primarily" to the divestiture (Kepware and ThingWorx were part of PLM), "as well as lower license revenue in Europe." Underneath, PLM ARR excluding divested businesses grew 8% (10% constant currency), "primarily driven by Windchill and Codebeamer," with growth in all three regions: Americas +9%, Asia Pacific +9% (+16% constant currency) and Europe +6% (+9% constant currency).
CAD revenue was flat "due to lower license revenue," while CAD ARR grew 6% (8% constant currency), "primarily driven by Creo" in every region.
The pattern is consistent across both groups: the recurring base is growing in the high single digits, and the quarter's reported revenue was held back by license timing.
Why profit fell more than revenue
Gross profit fell by $43 million, but total operating expenses were essentially unchanged at $324.0 million. That's why the operating margin — the share of revenue left after running the business, before interest and tax — dropped from 32.6% to 27.7%. Software has high fixed costs: when revenue dips for timing reasons, costs don't shrink to match, so the hit falls almost dollar-for-dollar on profit.
Within expenses, the 10-Q notes that income PTC receives under its Transition Services Agreement (fees the buyer of Kepware/ThingWorx pays PTC to keep providing back-office services for a while) reduced operating expenses, offset by higher stock-based compensation (up to $59.4 million from $54.0 million) and higher travel costs. General and administrative expense still rose to $60.0 million from $54.1 million.
Net income fell 16%, but diluted EPS fell only 12%, for two reasons visible in the filing:
Fewer shares. Diluted share count dropped 4.6% to 115.0 million from 120.5 million, because of heavy buybacks (below). Each dollar of profit is split among fewer shares.
A lower tax rate. The effective tax rate was about 22% versus about 27% a year ago (our calculation from the income statement), which the 10-Q attributes to "changes in the geographic mix of income before taxes."
Buybacks, funded partly by debt
PTC repurchased about $525 million of stock in the quarter (4.3 million shares in the open market; $500 million of cash paid in-quarter), more than twice what it had planned. CFO Jen DiRico said the company "identified what we viewed as a compressed valuation of our stock." That came on top of a $375 million accelerated share repurchase agreed in March, under which PTC received 2.7 million shares across Q2 and Q3. To help pay for this, PTC borrowed a net $225 million on its credit facility; debt rose to $1.42 billion from $1.20 billion at the end of September 2025. PTC now expects about $1.625 billion of buybacks for the full fiscal year and roughly 116 million diluted shares, down from 121 million in FY2025.
Separately, PTC made a $50 million contribution to a solar energy equity investment during the quarter.
Cash generation held up: operating cash flow rose 7% to $260.6 million, and free cash flow (operating cash flow minus capital spending) rose 3% to $249.3 million. Free cash flow grew more slowly because capital spending jumped to $11.3 million from $1.9 million, mostly for moving a major R&D center to a new office — a cost PTC says won't recur.
Nine-month picture looks very different
For the first nine months of FY2026, revenue rose 12% to $2,060.2 million and diluted EPS more than doubled to $7.43 from $3.20. That jump is mostly one-off: it includes a $463 million gain on the Kepware/ThingWorx sale recognized in the previous quarter. PTC's non-GAAP EPS, which excludes that gain, was $6.21 versus $4.53 — still up strongly, driven by license revenue up 24% earlier in the year. The same up-front license accounting that hurt Q3 helped Q1 and Q2.
Guidance and outlook
PTC raised its full-year FY2026 guidance (fiscal year ending September 30, 2026):
FY2026 guidance
Previous
Updated
Constant-currency ARR growth (ex-divested)
7.5%–9.5%
9%–9.5%
Revenue
$2,580M–$2,820M
$2,690M–$2,750M
GAAP EPS
$7.21–$9.70
$8.46–$9.18
Non-GAAP EPS
$6.65–$8.90
$7.87–$8.42
Free cash flow
~$850M
~$850M (reaffirmed)
For the fourth quarter it guides revenue of $630–$690 million and GAAP EPS of $0.94–$1.70. Q4 free cash flow guidance is only about $15 million, because PTC expects to pay roughly $92 million of one-time taxes on the divestiture gain plus about $26 million of divestiture-related costs in that quarter.
Our read: The quarter is best judged on ARR, and ARR did what PTC said it would, and slightly better. Narrowing the ARR guidance range toward its top end with one quarter left signals management has visibility into Q4 renewals. The risks are the ones the filing itself flags: customers in manufacturing are exposed to tariffs and geopolitical uncertainty, which could slow new subscriptions, and PTC's case for faster growth rests on customers modernizing their product data to use AI tools — a bet that is still early. The balance sheet is also carrying more debt than it did a year ago to fund buybacks. With the divestiture now fully in the comparison base from Q3 FY2027 onward, reported revenue and ARR growth should become easier to read directly.