Progress Software (PRGS) CEO on Scaling With AI

Software continues to struggle as markets worry whether AI will be able to take over the sector. Still, there must be humans at the wheel telling AI what to make – and some software companies are quickly adapting. One of them is Progress Software (PRGS), which is integrating AI into its business software offerings. CEO Yogesh Gupta joined Trading 360 to talk through the latest financials and how they’re scaling their AI use.

Progress stresses cybersecurity within their suite of products, along with workflow automation and a broad management suite. Its Kendo UI allows developers to build custom tools on top of their platform, and they offer e-commerce integration, among other features. The company says it serves 80% of the Fortune 500 and boast a 99% customer retention rate.

Recent clients include the Los Angeles County MTA, the Institute of Cancer Research, and Kearny Bank, representing a broad swath of sectors. The success stories Progress offers on its website often revolve around creating a straightforward, centralized database and custom applications, as well as offering faster speed and security with their data centers.

In December, Progress announced Agentic AI as part of their Telerik and Kendo UI offerings, saying that “What once took days can now take hours.” They added coding assistants, debugging, and the ability for users to communicate with their apps in “natural language.”

After covering several software companies for this column, it seems more like the SaaS-pocalypse could be a labor issue rather than a sector issue. It seems like a lot of software companies are able to rapidly adapt, and it is extremely expensive and time-consuming for big companies to migrate to different system vendors. Instead, being able to talk to the AI, or “vibecode,” to some extent removes the need for complex coding knowledge.

However, coders and engineers are likely to adapt into system architects, as organization and structure remain a human job. Humans need to know the end point they’re looking for to use AI most effectively.

It does seem that the market, and clients, expect every software provider to have an AI option. This puts the onus on software companies to integrate AI and be responsible for all the challenges that lie therein, including accuracy and security. If AI, as it has before, deletes a database or exposes sensitive information, the providers might be blamed, creating risk.

Turning to the financials, in 1Q26, Progress reported adjusted EPS of $1.60 and revenue of $247.8 million, both of which beat Street estimates. Annualized recurring revenue hit $863 million, +2% year-over-year. Operating margins were around 19%, with free cash flow of $98.6 million.

Breaking down the revenue, Progress makes three times as much revenue from maintenance, software-as-a-service, and professional services than licensing their software. Investors may want to gauge the level of AI replacement risk for services, or whether AI is a value enhancement.

For the full year, Progress raised its adjusted earnings outlook to $5.91-$6.03 vs FactSet expectations of $5.88. They also lifted the bottom of their revenue guidance, now projecting $988 million to $1 billion.

Multiple analysts lowered their price targets after the report. Wedbush wrote that their AI strategy is still in early innings, and “conservatism” is the watchword amid broader pressure on the SaaS sector. However, Wedbush also called it an “under the radar software play” and kept an Outperform rating.

The stock has declined sharply since the end of 2024, falling from a height of $70.56 to around $25/share. It’s down almost 60% year-over-year and has continued to move lower after earnings. The intense pressure has pushed the stock into oversold territory on a technical level.

Sector sell-offs can create opportunities for the discerning stock picker. Investors may want to comb through software as it is battered both by AI and the broader market backdrop if they believe in a bounce back.

Watch the full interview below:

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