Last Update 08 Feb 26

PRGS: AI Tools And Buybacks Will Support Cautious But Balanced Outlook

Analysts have nudged their price target on Progress Software modestly higher by $6 overall, reflecting updated assumptions around discount rates, revenue growth, profit margins, and future P/E after a mix of recent target increases and reductions in Street research.

Analyst Commentary

Recent research around Progress Software reflects a mixed but generally cautious tone, even with the modest net increase in the overall price target figure. Behind that headline number, there is a combination of both upward and downward target revisions, which signals that not everyone on the Street is comfortable with the current risk and reward setup.

Bearish analysts have issued lower price targets in quick succession, suggesting that a closer look at valuation, growth visibility, and execution is top of mind. The latest $6 upward adjustment at Citi stands out, yet it comes shortly after earlier target trims from multiple firms, which keeps sentiment more balanced than the headline change alone might suggest.

Overall, the message for investors is that expectations on discount rates, revenue growth, margins, and future P/E are under active review. Some analysts see enough support to raise targets, while others are leaning conservative and building in more room for potential missteps.

Bearish Takeaways

Bearish analysts who recently lowered their targets are signaling that previous assumptions on revenue growth and profitability may have been too optimistic, which can weigh on how much they are willing to pay on a P/E basis.
The cuts suggest concern that execution risks, such as delivering on product roadmaps or integration plans, could limit upside to future earnings, leading to more restrained valuation multiples.
Some of the cautious updates appear to reflect sensitivity to discount rates and risk premiums, indicating that these analysts want a wider margin of safety before assigning higher price targets.
The quick sequence of both upward and downward revisions points to a lack of strong conviction around the growth profile, with bearish analysts preferring to temper expectations rather than assume a smooth improvement in key financial metrics.

What's in the News

From September 1, 2025 to November 30, 2025, Progress Software repurchased 889,095 shares for $39.98 million, bringing total buybacks under its March 30, 2016 authorization to 12,818,339 shares, or 28.66%, for $581.06 million (company buyback tranche update).
Progress Software was included as one of nine vendors in The Forrester Wave: Digital Experience Platforms, Fourth Quarter 2025. The company received the highest score of 5.0 in the Search criterion, supported by its Progress Agentic RAG capability (product related announcement).
The company released its fourth quarter 2025 updates for Progress Telerik and Progress Kendo UI, introducing an Agentic UI Generator and new AI driven features that aim to support faster development, cost reductions and higher application quality for users of these toolsets (product related announcement).
Progress Agentic RAG, the company's SaaS RAG platform focused on generative AI and AI agents, became available in AWS Marketplace, giving AWS customers a new way to purchase and deploy the platform within their existing environments (client announcement).
Progress announced early access for Progress Agentic RAG for Sitefinity, a capability that combines RAG with real time content assembly inside the Sitefinity platform to support multilingual, personalized digital experiences and generative engine optimization for enterprise content (product related announcement).

Valuation Changes

Fair Value: Kept steady at $45.00, indicating no change in the central valuation anchor used in the model.
Discount Rate: Adjusted slightly lower from 10.68% to 10.57%, reflecting a modest shift in the assumed risk profile or required return.
Revenue Growth: Tweaked slightly higher from 1.50% to 1.52%, a small upward move in the assumed top line trajectory.
Net Profit Margin: Edged up from 7.84% to 7.87%, implying a minor refinement in expected profitability.
Future P/E: Trimmed slightly from 29.68x to 29.48x, suggesting a marginally more conservative multiple applied to future earnings.

Heavy reliance on acquisitions and legacy products exposes Progress Software to margin pressures, integration challenges, and risks from shifting enterprise technology trends.
Cloud migration, competition from hyperscale vendors, and customer consolidation threaten recurring revenue streams and future top-line growth.
Reliance on acquisitions, legacy product risks, and cloud-native competition threaten sustainable growth and profitability as innovation and customer retention costs rise.

Catalysts

About Progress Software

Develops, deploys, and manages artificial intelligence (AI) powered applications and digital experiences in the United States and internationally.What are the underlying business or industry changes driving this perspective?

While Progress Software's integration of ShareFile and the acquisition of Nuclia suggest an ability to leverage cutting-edge GenAI and SaaS across their portfolio-potentially improving customer retention and supporting top-line growth-the accelerating migration of enterprise workloads to cloud-native and SaaS platforms could erode demand for Progress's legacy on-premise solutions, threatening long-term maintenance revenue.
Although the company benefits from surging global requirements for data analytics and scalable infrastructure, an overreliance on M&A for product innovation and portfolio expansion introduces ongoing integration risk and heightens the possibility of margin dilution, which could negatively affect sustained earnings growth and margin stability.
Despite strong secular tailwinds in AI-driven development tools and heightened cybersecurity needs, the rise of hyperscale cloud vendors and the widespread adoption of low-code/no-code platforms poses a risk to Progress's traditional middleware and developer tools, potentially depressing average selling prices and lowering future recurring revenue streams.
While Progress has demonstrated disciplined expense management and uses AI internally to drive operational efficiency-reflected in robust operating margins near 40%-intensifying regulatory and global compliance demands may result in rising R&D and support costs, which could eventually compress net margins if revenue growth does not accelerate.
Even as subscription-based licensing and cross-sell opportunities through new SaaS offerings like ShareFile increase revenue visibility, the ongoing consolidation among large enterprise customers may shrink Progress's addressable customer pool and empower major clients to demand discounts, increasing churn risk and putting pressure on future revenue growth.

Progress Software Earnings and Revenue Growth

Progress Software Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

This narrative explores a more pessimistic perspective on Progress Software compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
The bearish analysts are assuming Progress Software's revenue will grow by 5.9% annually over the next 3 years.
The bearish analysts assume that profit margins will increase from 6.6% today to 14.8% in 3 years time.
The bearish analysts expect earnings to reach $152.3 million (and earnings per share of $3.28) by about September 2028, up from $57.6 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 21.9x on those 2028 earnings, down from 31.7x today. This future PE is lower than the current PE for the US Software industry at 36.2x.
Analysts expect the number of shares outstanding to grow by 0.47% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.8%, as per the Simply Wall St company report.

Progress Software Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company's organic growth appears modest, with ARR increasing only 2 percent year-over-year on a pro forma basis when accounting for acquisitions like ShareFile, which raises long-term concerns about sustaining revenue growth without continued deal-making.
Heavy reliance on acquisitions to drive growth and diversification, while historically managed with discipline, exposes Progress Software to integration risks and possible dilution of operating margins and earnings quality over the long term, especially as the M&A environment becomes more competitive.
Progress has significant legacy exposure with products such as OpenEdge, which face obsolescence risk as customers accelerate migration to cloud-native and SaaS platforms, potentially threatening recurring maintenance revenue and increasing churn.
The expanding dominance of hyperscale cloud vendors and the shift toward integrated, cloud-native, or low-code/no-code development platforms could erode Progress's market share in traditional development tools and middleware, resulting in downward pressure on revenues and pricing.
Increasing R&D investment and customer acquisition costs to stay technologically competitive in areas such as AI may squeeze net margins if topline sales from these innovations fail to accelerate proportionally, risking deterioration in overall profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

The assumed bearish price target for Progress Software is $57.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Progress Software's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $83.0, and the most bearish reporting a price target of just $57.0.
In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $1.0 billion, earnings will come to $152.3 million, and it would be trading on a PE ratio of 21.9x, assuming you use a discount rate of 10.8%.
Given the current share price of $42.39, the bearish analyst price target of $57.0 is 25.6% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystLowTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystLowTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystLowTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Cloud Migration Risks Will Erode Margins Yet Prompt Renewal