PTC (NASDAQ:PTC) reported what executives described as a “strong” fiscal 2026 second quarter, highlighted by 8.5% constant-currency annual recurring revenue (ARR) growth at the high end of guidance and 14% year-over-year free cash flow growth that exceeded the company’s outlook.
Chief Executive Officer Neil Barua said the company is moving forward as “a more focused company” following the divestiture of Kepware and ThingWorx, which was completed in March. Barua said PTC is now fully concentrated on its “intelligent product lifecycle vision,” and he pointed to improving renewal rates and sales productivity as the go-to-market transformation continues.
Q2 performance and post-divestiture focus
DiRico added that operating cash flow and free cash flow both grew 14% year-over-year, with free cash flow landing above the guidance range.
She also cautioned investors about comparability in reported financials following the divestiture, noting that Kepware and ThingWorx did not qualify for discontinued operations treatment. As a result, historical financial statement amounts were not recast, which affects year-over-year comparisons for cash flow, revenue, and EPS because fiscal 2026 includes Kepware and ThingWorx until March 13, while fiscal 2025 included them for the full year.
AI cited as a demand catalyst, with modernization at the center
Barua framed artificial intelligence as a key driver of PTC’s momentum in two ways: first, by pushing customers to modernize their product data foundation; and second, by enabling an “intelligence layer” of specialized AI agents embedded across PTC’s portfolio.
As an example from Q2, Barua said PTC displaced a competitor with Windchill+ at a leading automotive supplier. He attributed the win to PTC’s positioning around authoritative product data management and an AI agent roadmap designed to drive productivity gains across product lifecycle management (PLM) workflows. According to Barua, customers increasingly recognize that “to take advantage of AI, they first need to modernize their product data foundation.”
Barua described PTC’s CAD, PLM, ALM, and SLM offerings as systems of record that are evolving into “systems of action” in an AI environment. He discussed a vision in which AI agents reason across product lifecycle data and execute work across teams, compressing engineering change cycles. He also argued that PTC has an advantage in AI for CAD because of access to proprietary geometric and mathematical parameters within Creo and Onshape.
Barua said PTC is “nearly doubling” AI releases in 2026 versus 2025 and expects to introduce its “first AI native products.” Later in the Q&A, he said the company had delivered eight AI releases last year and expects 14 more AI releases in 2026, including an “AI native first-product release” planned to be shown at PTC’s PTCx event in Chicago in June.
On monetization, DiRico said it will “take some time,” adding that PTC expects to see “some monetization in 2027, but not overly material.” She said PTC is “largely seat-based right now” because that is how customers are asking to buy, while also indicating the company expects to support hybrid approaches as customers’ needs evolve.
Go-to-market transformation and pipeline commentary
Barua said the company’s go-to-market transformation is gaining traction, with improved rep productivity, higher renewal rates, and a “large, high-quality pipeline for the second half” that he said is balanced across geographies, verticals, and products. He also said PTC has continued to structure deals “for PTC’s long-term benefit,” increasing deferred ARR for fiscal 2027 and beyond.
Addressing sales productivity, Barua said PTC brought in a new chief revenue officer roughly 16 months ago and made “major surgery” changes to move to a vertical-focused go-to-market model. He said management had expected improvement to take 18 to 24 months to show up, and that the organization is now “starting to hum,” citing demand capture, renewal rates, pipeline generation, and customer feedback on messaging and vertical expertise.
Barua also addressed pipeline quality and velocity, saying higher-quality pipeline has increased compared with last year due to better internal execution and more relevant customer conversations driven by AI. While he noted customers still face approval processes and macro strains, he said PTC is seeing increased engagement because customers are concluding that AI “does not work well” without a strong product data foundation.
Guidance updates, ARR cadence, and deferred ARR visibility
DiRico reiterated full-year fiscal 2026 constant-currency ARR growth guidance (excluding Kepware and ThingWorx) of approximately 7.5% to 9.5%, with a midpoint of $195 million in net new ARR. For Q3, she guided to constant-currency ARR growth of approximately 8% to 9%, corresponding to net new ARR of $40 million to $55 million.
DiRico said the company expects net new ARR to grow year-over-year in Q3 and then deliver a more significant step-up in Q4. She pointed to “clear visibility into a significant step-up in deferred ARR starting in Q4” as a key confidence factor for the second half.
On an analyst question about the implied second-half ARR cadence, DiRico said PTC expects about $127 million of net new ARR in the second half, or roughly $7 million more than the second half of last year. She added that the expected step-up is “much more around the deferred ARR that we already have banked,” and said the company’s performance expectations for the sales team are roughly in line with last year’s second-half execution.
DiRico also raised fiscal 2026 revenue and non-GAAP EPS guidance, citing Q2 upside tied to renewals with longer durations and recent currency moves. She said revenue growth in Q2 benefited from those longer-duration renewals, which drove revenue and EPS results above the guidance range.
For cash flow, DiRico said PTC expects $850 million of free cash flow in fiscal 2026. She also cited four items embedded in that number that net to a $100 million impact in fiscal 2026 and “won’t recur in future years,” which she said implies a $950 million baseline when modeling fiscal 2027. For Q3 2026, she guided to free cash flow of $240 million to $245 million.
Capital return and share repurchases
PTC emphasized an active capital return program. DiRico said the company repurchased $250 million of common stock in Q2 and deployed the full $375 million of net after-tax proceeds from the Kepware and ThingWorx divestiture into an accelerated share repurchase program. She said PTC intends to repurchase approximately $250 million more in Q3 2026.
DiRico said the company expects fully diluted share count to decline to approximately 115 million to 116 million shares, compared with 120 million in Q3 2025. For the full year, she said PTC expects total share repurchases of approximately $1.225 billion to $1.325 billion.
In addition, DiRico said PTC’s board authorized a new $2 billion share repurchase program effective October 1, 2026 through the end of fiscal 2028, replacing the current authorization at fiscal year-end. Discussing capital allocation, she said management evaluates three pillars—organic investment, M&A, and share buybacks—and said repurchases have been “a very good use of capital” given the company’s view on long-term durability and the stock’s current level, while noting the authorization provides flexibility in fiscal 2027.
About PTC (NASDAQ:PTC)
PTC Inc (NASDAQ: PTC) is a global technology company that develops software and services to help manufacturers design, operate, and service physical products. Founded in 1985 as Parametric Technology Corporation, PTC pioneered parametric, feature-based CAD with its Pro/ENGINEER product (now marketed as Creo) and has since expanded its portfolio to address product lifecycle management, Internet of Things (IoT), augmented reality (AR) and industrial connectivity.
Key product lines include Creo for 3D CAD; Windchill for product lifecycle management (PLM); ThingWorx, an IoT platform for connecting devices and building industrial applications; Vuforia, an AR platform for creating immersive service and training experiences; and Kepware, a suite for industrial connectivity and protocol translation.
