Progress Software Corporation (NASDAQ: PRGS) experienced a decline in after-hours trading on Tuesday, even after reporting fiscal second-quarter results that surpassed analyst expectations. The company's shares closed the regular session at $33.58, down 0.8%, and later fell to $32.51 in after-hours trading, according to Google Finance.
The software developer reported revenue of $253.5 million for the quarter ended May 31, 2026, a 7% increase from $237.4 million in the same period last year. This exceeded the company's own guidance range of $240 million to $246 million. Non-GAAP diluted earnings per share came in at $1.62, up 16% year-over-year and above the guided range of $1.47 to $1.53.
However, the composition of revenue growth raised concerns among investors. Software license revenue surged 35.8% to $69 million, accounting for 27.2% of total revenue. This increase alone contributed $18.2 million to the top line, surpassing the total revenue gain of $16.1 million. In contrast, maintenance revenue declined 2.2% to $101.2 million, SaaS revenue edged up just 1.2% to $73 million, and professional services fell 6.4% to $10.3 million.
Chief Financial Officer Anthony Folger emphasized that annualized recurring revenue (ARR), which increased 2% to $868 million, provides the clearest view of the company's top-line momentum. He noted that first-half growth was partially influenced by deal timing and that subscription renewal timing had a meaningful one-time impact on Q2 revenue.
CEO Yogesh Gupta attributed the quarter's results to continued momentum in AI-powered products, including the recent launch of Chef Enterprise Management for NVIDIA's (NASDAQ: NVDA) DGX Spark, priced at $189 per system per year.
The company raised its full-year revenue guidance to a range of $990 million to $1.002 billion, up from $988 million to $1.000 billion, and lifted its non-GAAP EPS outlook to $6.09 to $6.21 from $5.91 to $6.03. For the fiscal third quarter, Progress expects revenue between $244 million and $250 million and non-GAAP EPS of $1.53 to $1.59.
Cash flow from operations improved significantly to $78.8 million from $30 million a year ago. The company repurchased 1.2 million shares for $34.7 million during the quarter and had $147.5 million remaining on its buyback authorization, representing about 10% of its $1.43 billion market capitalization.
Debt remains a significant factor, with total debt of approximately $1.29 billion, including $850 million in long-term debt and $442.1 million in convertible senior notes. The company repaid $110 million on its revolving credit facility during the first half, which carries an interest rate of 5.37%.
