Progress Software stock has fallen 36% in 2025.
This result seems to violate one of my basic rules of investing: The stock price of companies that beat expectations and raise guidance each quarter, usually rise.
Despite dutifully beating and raising in each of its 2025 quarterly reports, according to MarketBeat, Progress’s shares are way down. This raises a question:
Does The 36% Drop Make $PGRS A Bargain?
In my view, the bear case for $PGRS is more compelling than the bull one.
Progress is a 44-year old Burlington, Mass.-based provider of business software whose growth strategy hinges on acquisitions. Progress has acquired database, file transfer, document collaboration and other business software companies whose customers are unwilling to incur the switching costs of moving their business onto more modem platforms.
The company has 3,000 employees and 86,000 customers and generated about $250 million in third quarter revenue with an average revenue per customer of $3,000. Customers are small businesses – such as accounting firms, law firms, pharmacies, and doctor’s offices – in need of help with collections and business information, Progress CEO Yogesh Gupta told me in a November 10 interview.
Perhaps the biggest uncertainty for the company’s future is a lawsuit. More specifically, in May 2023 a Russian hacker group exploited a breach in Progress’s MOVEit’s file transfer app used by its customer’s supply chains – potentially exposing the personal data of 95.8 million individuals across 2,773 organizations, according to Emsisoft.
The financial liability of the legal proceedings – which alleges negligence, breach of contract, unjust enrichment, and violation of local consumer protection statutes, noted a July 2025 legal ruling — could cost Progress an uncertain amount of cash – ranging from $30 million to over $500 million.
Why $PGRS Could Rise
The bull case hinges on Progress’s high margins, low valuation, and recurring revenue in enterprise software. More specifically, the company’s stock is valued at a low 8x earnings with 40% non-generally accepted accounting principles operating margins and 47% annual recurring revenue growth.
If the MOVEit litigation settles for a manageable amount – for example, Progress has already settled one case for $2.8 million — the legal overhang would lift.
Meanwhile, the company’s operations could improve. Progress’s integration of ShareFile – which the company acquired in September 2024 for $875 million – is proceeding ahead of schedule; the company plans to reduce debt by $160 million this year, and its new AI capabilities could increase pricing power and customers wins, noted a company release.
Progress’s ability to slough off investor pessimism may hinge on whether the company can grow much faster than expected. AI could help make that happen.
The company now provides value to customers in the form of content-centric collaboration. “Our customers are sharing information with other parts of the external world, we keep their information safe, secure, and reliable and we track how documents change,” Gupta said.
Progress gives its customers the benefit of AI without charging a high price point. “We enable clients to use generative AI to suggest which marketing documents to send to which clients,” Gupta explained. Generative AI “helps customers do their jobs better so they can get more done. They are happy and we have a customer satisfaction rate of 93% to 94%.”
Progress’s value proposition is to use AI to help small businesses boost productivity. “We can help the same number of lawyers get a few more tax filings done,” he said.
“We help the largest do-it-yourself retailer use AI to find out what is going on in the warehouse and what to recommend to the customer. For technical support, within 30 days we helped a company with 300,000 customers to handle 33% of requests automatically. Customers are happy and they get faster response. If they have a question at 2 AM, it will be answered promptly,” he added.
AI also helps Progress Software customers to bring out new products faster. “Vibe coding is great for prototyping,” Gupta said. “We can help companies get something done in less than three months that used to take three years.”
Vibe coding is less effective when businesses are dependent on complex software because the cost of switching to newly-minted AI generated software is very high. “It is complex to add new capabilities to an existing product with 40 or 50 capabilities,” Gupta argued.
“We make sure the new features connect securely to the existing product. Our chief AI officer created a new development methodology to make this work. If you don’t learn AI, you won’t be as good as you could be,” he concluded.
Why $PGRS Could Fall Further
Some 12% of Progress shares are sold short. Here are the key reasons short sellers could be enriched as $PGRS falls further:
- High debt and acquisition risks. Progress’s growth has come at the cost of substantial debt. With total liabilities topping $1.9 billion followed acquisitions, interest expense has increased with cash flow covering interest at a modest 2.9x multiple. If ShareFile customers defect or post-merger cost savings fall below investor expectations, earnings might disappoint – sending the stock down further.
- Weak organic growth outlook. With Progress’s growth from new products near zero, this year’s 35% to 40% reported growth from acquisitions is a melting ice cube. Next year, growth from the ShareFile deal may be fully-digested – meaning Progress risks suffering much lower revenue growth unless the company makes new acquisitions or achieves growth from its AI initiatives.
- Competitive and technological challenges. Progress is not a leader in many of the product categories in which it competes – where if faces both giants and innovative upstarts. For example, in DevOps, Progress Chef significantly trails rivals in usage share, noted 6sense. Moreover, in application development, AWS, Azure, and other cloud-native platforms have largely overtaken Progress’s on premises or hybrid products. Investors question whether Progress can offer enough value to justify its license fees to customers.
- Quality of earnings questions. Another investor concern is the decline of Progress’s GAAP operating margin from 25% in Q3 2024 to 18% in Q3 2025, according to the previously cited earnings release. In addition, Progress’s non-GAAP earnings add back so much amortization and stock compensation that the ratio between non-GAAP add backs and GAAP profit is sometimes between two and three times, reported Reddit.
How Much Will MOVEit Litigation Cost Progress Software?
There is vast uncertainty about how much Progress will pay to resolve the MOVEit litigation. Below are three scenarios:
- Optimistic (a range from $30 million to $75 million). The litigation could be resolved by 2027 if Progress can limit the size of the class of injured parties; regulators do not impose major fines, insurance covers most legal costs and Progress settles for small percentage of the $15.8 billion estimated ecosystem damages, per the above-linked Emsisoft report.
- Most Likely Scenario ($100 million to $250 million). The most likely scenario is a negotiated settlement by 2028 – roughly matching Equifax’s per-capita impact at lower scale, complete exhaustion of $8.8 million in remaining insurance, and continued legal defense costs ranging from $3 million to $5 million annually.
- Pessimistic Scenario ($350 million to more than $500 million). By 2030, Progress could pay a penalty as high as 30% of its market capitalization if plaintiff-favorable verdicts in current litigation establish a new precedent of software vendor liability. This scenario would feature a much broader class of plaintiffs, regulatory penalties, and repaying insurers for claims already collected.
Wall Street seems to be optimistic about Progress stock. Four Wall Street analysts set an average price target of $66.25 – representing 61% upside for $PGRS, noted TipRanks.