​Progress Software Corporation (NASDAQ:PRGS) is one of the Best Small Cap Stocks Ready to Explode in 2026. Wall Street is bullish on the stock since the company released its fiscal Q4 2025 earnings on January 20. Recently, on January 22, Fatima Boolani from Citi raised the firm’s price target on the stock from $54 to $60, with a Buy rating. Earlier, on January 21, Lucky Schreiner from D.A. Davidson also reiterated a Buy rating on Progress Software Corporation (NASDAQ:PRGS) with a $70 price target. ​Durin ...

Company Overview - Progress Software Corporation specializes in software products for the development, deployment, and management of AI-powered applications and digital experiences, with a diverse product portfolio including Chef, Corticon, Data Direct, and more [7] Options Trading Activity - Recent options trading activity has identified over 9 transactions on Progress Software, with a cumulative value of $766,228, including 2 puts valued at $203,320 [1] - Significant investors are targeting a price range of $42.5 to $50.0 for Progress Software over the past three months [2] - The mean open interest for options trades today is 572, with a total volume of 5,484 [3] Options Trade Details - Notable options trades include bullish sweeps for calls and puts, with the largest call trade at a strike price of $47.50 totaling $165,000 and a put trade at $50.00 totaling $151,700 [6] Market Position and Analyst Insights - Progress Software's stock price is currently at $45.15, reflecting a 16.96% increase, with upcoming earnings expected in 68 days [9] - Analysts have provided an average target price of $56.33, with individual targets ranging from $45 to $70 [8][9]

Core Insights - Progress Software (PRGS) is expected to release its fourth-quarter 2025 results on January 20, 2026, with anticipated non-GAAP revenues between $250 million and $256 million and non-GAAP earnings projected between $1.29 and $1.35 per share, reflecting a 1.5% year-over-year decline in earnings [1][2] Revenue and Earnings Expectations - The consensus estimate for revenues stands at $252.68 million, indicating a year-over-year growth of 17.55% [2] - Progress Software has consistently beaten the Zacks Consensus Estimate in the past four quarters, achieving an average earnings surprise of 14.74% [2] Performance Drivers - The company's performance in Q4 2025 is expected to benefit from a diversified product portfolio, including ShareFile, OpenEdge, DevTools, MarkLogic, WhatsUp Gold, Sitefinity, and Corticon, supported by solid customer retention rates [3] - Progress Software reported a net retention rate of 100% in Q3 2025, indicating strong customer loyalty and expansion, which is anticipated to continue into the upcoming quarter [3] AI Integration and Growth - The integration of AI capabilities across its product suite, such as retrieval augmented generation (RAG)-enabled MarkLogic and AI coding assistants for developer tools, is expected to enhance customer retention and acquisition [4] - The acquisition of ShareFile has significantly contributed to the company's Annual Recurring Revenue (ARR), which grew 47% year-over-year to $849 million in Q3 2025, with AI features driving customer adoption and retention [5] Cost Management and Economic Environment - Stringent cost management practices are expected to support bottom-line growth despite challenges posed by persistent inflation, higher interest rates, and a difficult macroeconomic environment [6] Earnings Prediction Model - According to the Zacks model, Progress Software currently has an Earnings ESP of 0.00% and a Zacks Rank of 3 (Hold), indicating that the odds of an earnings beat are not favorable at this time [7]

Financial Data and Key Metrics Changes - Revenues for Q3 2025 reached $250 million, exceeding previous guidance and representing approximately 40% year-over-year growth [20][6] - Earnings per share were $1.50, significantly above the high end of guidance and up 19% from the prior year [21][6] - Annualized recurring revenue (ARR) grew 47% year-over-year, closing at $849 million [19][5] - Operating margin was 40%, slightly down from 41% in the previous year [20][21] Business Line Data and Key Metrics Changes - The ShareFile business showed improved net retention rates as customers adopted AI capabilities, contributing to better-than-expected ARR and top-line growth [8][19] - Other products such as OpenEdge, MarkLogic, Sitefinity, WhatsUp Gold, and DevTools also exceeded expectations, indicating strong performance across the portfolio [9][19] Market Data and Key Metrics Changes - The demand for AI-related products is driving growth, with customers increasingly looking for solutions that deliver clear ROI [7][5] - The integration of ShareFile has been successful, with over 3,000 customers using the new AI document assistant [8][7] Company Strategy and Development Direction - The company is focused on innovation, particularly in AI capabilities, to enhance product value and customer success [10][11] - M&A remains a key growth strategy, with ongoing evaluations of potential acquisitions in application platforms, digital experience, and infrastructure management [17][56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued demand for products driven by AI initiatives, expecting this trend to persist beyond fiscal 2025 [7][5] - The company plans to maintain disciplined capital allocation, focusing on debt repayment and share repurchases based on market conditions [23][24] Other Important Information - The company repurchased $15 million of shares in Q3, with a total of $65 million repurchased year-to-date [23][6] - The board authorized an increase in share repurchase authorization by $200 million, bringing the total to $242 million [23][6] Q&A Session Summary Question: AI strategy and its impact on net retention rate and pricing power - Management indicated that AI capabilities are expected to first impact monthly recurring revenue (MRR) and net retention rates, with potential for indirect pricing opportunities through product upgrades [28][30][32] Question: EBIT guidance and conservatism in outlook - Management clarified that the guidance reflects a strong Q3 performance but maintains a conservative approach for Q4, which is typically a strong quarter [34][36] Question: Surprises from ShareFile acquisition - Management noted challenges in integration but highlighted positive aspects such as strong team engagement and customer reliance on ShareFile [40][41] Question: Monetization of Agentic RAG product - The initial monetization strategy focuses on cross-selling opportunities within the existing customer base while also targeting new customers [46][47] Question: Gross margin performance - Management explained that gross margin improvements are due to better operational efficiencies across SaaS products, despite the growing share of SaaS revenue [48][49] Question: M&A attractiveness in the current environment - Management expressed interest in all three business categories, emphasizing the growing importance of data platforms and digital experiences in the context of AI [52][55]

Financial Data and Key Metrics Changes - The company reported revenues of $250 million for Q3 2025, exceeding previous guidance and representing approximately 40% year-over-year growth [20][6] - Earnings per share for Q3 were $1.50, significantly above the high end of guidance and up 19% compared to the prior year [21][6] - Annualized recurring revenue (ARR) reached $849 million, reflecting a 47% year-over-year growth [19][6] - Operating margin was 40%, slightly down from 41% in the previous year [20][21] Business Line Data and Key Metrics Changes - The ShareFile business showed strong performance with improved net retention rates as customers adopted new AI capabilities [8][19] - Other products such as OpenEdge, MarkLogic, Sitefinity, WhatsUp Gold, and DevTools also exceeded expectations, contributing to overall ARR growth [9][19] - The integration of ShareFile was highlighted as a successful acquisition, with all major milestones met ahead of schedule [7][8] Market Data and Key Metrics Changes - The company experienced solid market demand driven by customer investments in AI initiatives, which are expected to continue as businesses are in the early stages of AI adoption [5][7] - The net retention rate was solid at 100%, indicating strong customer loyalty and satisfaction [5][19] Company Strategy and Development Direction - The company emphasized innovation as a foundational pillar of its growth strategy, focusing on delivering new AI capabilities across its product portfolio [10][11] - M&A remains a key growth strategy, with ongoing evaluations of potential acquisition targets in application and development platforms, digital experience, and infrastructure management [16][17] - The company is actively looking for SaaS opportunities, having reduced hesitancy towards acquiring SaaS companies following the successful integration of ShareFile [56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of demand for products and the ability to execute well through fiscal 2025 and beyond [5][7] - The company raised its full-year revenue guidance, expecting total revenue between $975 million and $981 million for 2025 [24][25] - Management noted that the integration of AI capabilities is expected to enhance customer retention and potentially drive pricing power through product upgrades [30][32] Other Important Information - The company repurchased $15 million of its shares in Q3, with a total of $65 million repurchased year-to-date [23] - The board authorized an increase in the share repurchase program by $200 million, bringing the total available for repurchase to $242 million [23] Q&A Session Summary Question: AI strategy and its impact on net retention rate and pricing power - Management indicated that AI capabilities are expected to first impact monthly recurring revenue (MRR) and net retention rates, with potential for indirect pricing opportunities through product upgrades [30][32] Question: EBIT guidance and conservatism in outlook - Management explained that the guidance reflects a strong Q3 performance but maintains a conservative approach for Q4, which is typically a strong quarter [34][36] Question: Surprises from ShareFile acquisition - Management noted challenges in integration but highlighted positive aspects such as strong team engagement and customer reliance on ShareFile products [40][41] Question: Monetization of Agentic RAG product - Management stated that the initial monetization strategy focuses on cross-selling opportunities within the existing product portfolio [47] Question: Gross margin performance - Management attributed the gross margin increase to better operational efficiencies and the blending of different product margins [49] Question: M&A attractiveness in the current environment - Management expressed interest across all three business categories, emphasizing the growing importance of data platforms and digital experiences in the context of AI [55][56]

Financial Data and Key Metrics Changes - Revenues for Q3 2025 reached $250 million, exceeding previous guidance and representing approximately 40% year-over-year growth [20] - Earnings per share were $1.50, significantly above the high end of guidance and up 19% from the prior year [21] - Annualized recurring revenue (ARR) grew 47% year-over-year, closing at $849 million [19] - Operating margin was 40%, slightly down from 41% in the previous year [20] Business Line Data and Key Metrics Changes - ShareFile business showed improved net retention rates as customers adopted AI capabilities, contributing to better-than-expected ARR and top-line growth [8] - Other products such as OpenEdge, MarkLogic, Sitefinity, WhatsUp Gold, and DevTools also exceeded expectations, indicating strong performance across the portfolio [9] Market Data and Key Metrics Changes - The demand for AI-related products is driving growth, with customers increasingly looking for solutions that deliver clear ROI [7] - The integration of ShareFile has been successful, with over 3,000 customers using the new AI document assistant [8] Company Strategy and Development Direction - The company emphasizes innovation as a core growth strategy, focusing on delivering AI capabilities across its product lines [10] - M&A remains a key growth strategy, with ongoing evaluations of potential acquisitions in application development, digital experience, and infrastructure management [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued demand for products driven by customers' AI initiatives, expecting this trend to persist beyond fiscal 2025 [7] - The company plans to maintain disciplined capital allocation, focusing on debt repayment and share repurchases based on market conditions [23][24] Other Important Information - The company repaid $40 million of debt in Q3 and increased its revolver capacity from $900 million to $1.5 billion, enhancing financial flexibility [6][22] - Adjusted free cash flow for the quarter was $74 million, a 29% increase from the previous year [22] Q&A Session Summary Question: AI strategy and its impact on net retention rate and pricing power - Management indicated that AI capabilities are expected to first impact net retention rates, with potential for pricing power through product upgrades [30][32] Question: EBIT guidance and conservatism in outlook - Management clarified that the guidance reflects strong Q3 performance but maintains a conservative approach for Q4, anticipating continued momentum [34][36] Question: Insights from ShareFile integration - Management noted challenges in integration but highlighted positive cultural fit and strong customer reliance on ShareFile products [40][41] Question: Monetization of Agentic RAG product - The initial monetization strategy focuses on cross-selling opportunities within the existing customer base [47] Question: Gross margin performance - Management explained that gross margin improvements are due to better operational efficiencies across SaaS products [49] Question: M&A attractiveness in the context of AI - Management expressed interest in all three business categories for potential acquisitions, emphasizing the growing importance of data platforms and digital experiences [55][56]

Financial Data and Key Metrics Changes - The company reported revenues of $250 million for Q3 2025, exceeding previous guidance and representing approximately 40% year-over-year growth [21][26] - Earnings per share for Q3 were $1.50, up $0.24 or 19% compared to the prior year quarter, driven by the addition of ShareFile [22] - Annualized recurring revenue (ARR) reached $849 million, reflecting a 47% year-over-year growth [20][26] - Operating margin was 40%, slightly down from 41% in the year-ago quarter [21] Business Line Data and Key Metrics Changes - The ShareFile business showed improved net retention rates as customers adopted AI capabilities, contributing to better-than-expected ARR and top-line growth [9][10] - Other products such as OpenEdge, MarkLogic, Sitefinity, WhatsUp Gold, and DevTools also exceeded expectations, indicating strong performance across the portfolio [10] Market Data and Key Metrics Changes - The company experienced solid market demand, particularly for products related to AI initiatives, which are driving customer investments [5][7] - The integration of ShareFile has been successful, with over 3,000 customers using the new AI document assistant [9] Company Strategy and Development Direction - Innovation is a foundational pillar of the company's growth strategy, with a focus on delivering AI capabilities across products [11] - The company is actively pursuing M&A opportunities, particularly in the areas of application and development platforms, digital experience, and infrastructure management [18][54] - The company aims to leverage AI to enhance customer experiences and operational efficiencies [12][54] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued demand for products driven by customer AI initiatives, expecting this trend to persist beyond fiscal 2025 [7][19] - The company plans to maintain disciplined capital allocation, focusing on debt repayment and share repurchases based on market conditions [25][27] Other Important Information - The company repurchased $15 million of its shares in Q3, with a total of $65 million repurchased year-to-date [6][25] - The board authorized an increase in share repurchase authorization by $200 million, bringing the total to $242 million [25] Q&A Session Summary Question: AI strategy and its impact on net retention rate and pricing power - Management indicated that AI capabilities are expected to first impact monthly recurring revenue (MRR) and net retention rates, with potential for indirect pricing opportunities through product upgrades [29][34] Question: EBIT guidance and conservatism in outlook - Management clarified that the guidance reflects strong Q3 results and maintains expectations for Q4, emphasizing confidence in the overall performance [36][38] Question: Surprises from ShareFile acquisition - Management noted challenges in integration but highlighted positive aspects such as strong team engagement and customer reliance on ShareFile [40][43] Question: Monetization of Agentic RAG product - The initial monetization strategy focuses on cross-selling opportunities with existing products, while also targeting new customers [46][47] Question: M&A environment and SaaS opportunities - Management expressed interest in acquiring both SaaS and non-SaaS companies, noting a reduced hesitancy towards SaaS acquisitions following the ShareFile experience [52][55]