Progress Software Corporation (NASDAQ: PRGS) Q2 2025 Earnings | 7/1/2025
AI Summary
Progress Software Corporation reported strong Q2 2025 financial results, exceeding guidance due to solid execution and expense control.
Key Financial Highlights:
Total Revenue: $237 million, a 36% increase year-over-year.
Annual Recurring Revenue (ARR): Grew 46% year-over-year to $838 million, or 2% on a pro forma basis (including ShareFile in both periods).
Net Retention Rate: Remained strong at 100%.
Operating Margin: Over 40%, up from 38% in Q2 2024.
Earnings Per Share (EPS): $1.40, six cents above the high end of their guidance.
Debt Repayment: Paid down an additional $40 million on their revolving credit line, bringing the total first-half debt repayment to $70 million.
Share Repurchases: Repurchased $20 million of Progress stock in Q2, totaling $50 million for the first half of 2025.
Cash and Cash Equivalents: $102 million.
Unlevered Free Cash Flow: $52 million.
Strategic Acquisitions and Product Innovations:
Nuclea Acquisition: Progress acquired Nuclea for $20 million. Nuclea provides a self-service SaaS product for verifiable Gen AI, offering "agentic RAG as a service" AI capabilities. This acquisition is seen as a strategic investment in their product portfolio, accelerating R&D, and enabling the integration of advanced AI features into existing products like OpenEdge, MarkLogic, Semaphore, Sitefinity, and ShareFile to drive customer retention and value.
AI Integration Across Products:
New versions of Progress Telerik and Kendo UI introduce AI coding assistants to accelerate development workflows and improve code quality.
ShareFile launched powerful new AI features for faster document collection, task automation, and generating AI-driven insights, claiming documents can be gathered 3.5 times faster and insights extracted up to 25 times faster. ShareFile is also now deeply integrated with Microsoft 365.
Progress is also leveraging AI internally across engineering, IT, customer support, marketing, and sales to increase efficiency and manage costs, improving operations and freeing up teams for high-value work.
Business Performance and Customer Wins:
Strong renewals, expansions, and new customer additions were observed across all geographies and product lines, with significant strength from OpenEdge and solid performance from ShareFile.
OpenEdge saw major renewals and expansions with a world-class biotech company, a global pharmaceutical firm, a major European DIY retailer, and several OpenEdge ISVs.
An example was shared of a global pharmaceutical company improving search accuracy from 44% to 84% using Progress's WAG search solution integrated with semantic knowledge graphs, leveraging the Progress Data Platform for their generative AI efforts.
Infrastructure management products saw success with a leading sustainability company modernizing IT infrastructure automation and a European government improving cybersecurity using AIOps.
ShareFile reported strong renewals and expansions, including a Fortune 500 global producer of oil and natural gas utilizing its AI-powered document insights and collaboration tools.
ShareFile Integration Update:
The integration of ShareFile is ahead of plan, with most primary operational synergies completed and major milestones behind them.
The transition services agreement with Cloud Software Group has been completed and terminated earlier than planned.
The ShareFile business has been successfully transitioned onto Progress's billing system, a significant milestone for improving customer experience.
Outlook for Q3 and Full Year 2025:
Q3 2025 Outlook:
Revenue: $237 million to $243 million
EPS: $1.28 to $1.34
Full Year 2025 Guidance (Increased):
Revenue: $962 million to $974 million (up $4 million from prior guidance)
Operating Margin: 38% to 39% (up 50 basis points from prior guidance)
Adjusted Free Cash Flow: $228 million to $240 million (up $2 million from prior guidance)
Unlevered Free Cash Flow: $285 million to $296 million (up $2 million from prior guidance)
EPS: $5.28 to $5.40 (up 3 cents from prior guidance)
The Nuclea acquisition is not expected to materially impact financial results in the second half of 2025.
M&A Strategy:
Progress maintains a disciplined M&A strategy, seeking companies with excellent products, loyal customer bases, significant recurring revenues, and high retention rates.
With the successful integration of ShareFile, Progress now has in-house expertise in running a highly profitable SaaS business at scale, making them better positioned to evaluate a wider range of acquisition targets (SaaS or otherwise).
M&A remains the priority for capital allocation, with debt reduction focused on between deals.
About this video
Progress Software Corporation (NASDAQ: PRGS) reported its Q2 2025 results on July 1, 2025, delivering robust growth and surpassing earnings expectations. Revenue for the quarter rose 36% year-over-year to $237 million, in line with guidance, while Annualized Recurring Revenue (ARR) surged 46% to $838 million. Non-GAAP diluted EPS reached $1.40, up 28% from last year and above the high end of guidance, while GAAP diluted EPS was $0.39, a 5% increase. The company’s non-GAAP operating margin expanded to 40%, reflecting strong operational leverage and successful integration of recent acquisitions, including ShareFile. Net income for the quarter was $17.03 million, up 5% year-over-year, and adjusted free cash flow totaled $37 million. Progress Software raised its full-year 2025 guidance, now expecting revenue between $962–$974 million, non-GAAP operating margin of 38–39%, and non-GAAP EPS of $5.28–$5.40. The company also announced the acquisition of Nuclia, an agentic RAG AI solutions provider, to enhance its data platform capabilities—further strengthening its position in the AI-powered infrastructure software market. CEO Yogesh Gupta highlighted the company’s 100% net retention rate, strong performance across all geographies, and accelerated synergy realization from the ShareFile integration. Progress also paid down $40 million in debt during the quarter, demonstrating ongoing financial discipline. Outlook: FY2025: Raised revenue guidance to $962–$974 million; non-GAAP EPS guidance to $5.28–$5.40 Continued focus on AI innovation, integration of Nuclia, and margin expansion Ongoing debt reduction and operational efficiency About Inside Ticker: For more expert analysis and real-time updates on Progress Software Corporation (NASDAQ: PRGS) and other market movers, follow Inside Ticker and visit InsideTicker.com for in-depth reports, financial insights, and the latest news on leading companies. #ProgressSoftware #PRGS #Q22025 #Earnings #AI #ARR #FinancialResults #Software #Acquisition #InvestorUpdate #InsideTicker
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