PTC Inc. (NASDAQ: PTC) reported a robust start to its fiscal 2026 during its first-quarter earnings call, showcasing significant growth in annual recurring revenue (ARR) and free cash flow. The company’s CEO, Neil Barua, emphasized a 9% year-over-year increase in constant-currency ARR when excluding the Kepware and ThingWorx segments, while including these businesses resulted in an 8.4% rise. Chief Financial Officer Jen DiRico, in her inaugural earnings call with PTC, noted that both operating cash flow and free cash flow rose by 13% compared to the previous year, with free cash flow reaching $267 million despite incurring $10 million in costs related to divestitures.
Barua characterized PTC’s current phase as a “turning the corner” moment in its transformation journey. He cited improvements across product development, go-to-market strategies, and customer engagement as key indicators of momentum. The company’s “Intelligent Product Lifecycle” strategy is designed to address increasing complexity in product development, with a focus on connected systems of record and enterprise-wide cloud access to product data, enhanced by AI integration.
Product Innovations and AI Integration
During the earnings call, executives highlighted several recent product releases and integration efforts within PTC’s portfolio. Barua described the integration between Creo and Windchill as “gold standard” connectivity, and mentioned ongoing progress in linking Windchill with other platforms like Codebeamer, ServiceMax, and Onshape. The launch of Codebeamer 3.2 in December aimed to enhance the Windchill connection, while an update to Windchill in October introduced a new user interface and improved change management capabilities.
On the AI front, Barua noted that customers are increasingly seeking AI solutions embedded within trusted systems rather than standalone tools. In December, PTC introduced Codebeamer AI to enhance requirements quality and compliance support, and Windchill AI Parts Rationalization was released in January to assist in identifying duplicate parts. Barua highlighted ongoing efforts to establish a common AI infrastructure across its product lines, which will streamline the use of product data across various systems while ensuring governance and security standards.
Deferred ARR and Long-Term Growth Strategy
Management consistently referenced deferred ARR as a sign of demand capture that has not yet been reflected in immediate ARR growth. Barua explained that PTC has increased its seller capacity, improved quota attainment, and seen productivity among ramping representatives more than double year-over-year. This growth is attributed to strategic adjustments in territory balancing, enhanced enablement measures, and a focus on specific verticals.
The company recorded a record-setting first quarter in large deal volume and anticipates that many of these contracts will begin converting to ARR in the fourth quarter of fiscal 2026, with the majority ramping in fiscal 2027 and 2028. Barua indicated that the deferred ARR expected to commence in Q4 of fiscal 2026 is approximately three times higher than what PTC had entering Q4 of the previous year.
DiRico confirmed an increase in deferred ARR in Q1 compared to the previous quarter, attributing this dynamic primarily to strategic, cross-product deals and competitive displacements. A notable example included an expansion with Garrett Motion, which is modernizing its infrastructure using a cloud-first, AI-ready approach, selecting Windchill+ for product lifecycle management and Codebeamer+ for application lifecycle management.
PTC’s commitment to returning capital to shareholders was also highlighted. DiRico noted that the company repurchased $200 million of common stock during the first quarter under its $2 billion authorization and plans to repurchase approximately $250 million in the upcoming second quarter. The expected fully diluted share count is projected to decline to about 119 million shares from 121 million shares a year earlier.
Looking forward, PTC maintained its fiscal 2026 constant-currency ARR growth outlook, projecting an increase of around 7.5% to 9.5% when excluding Kepware and ThingWorx, and 7% to 9% when including these segments. The company anticipates free cash flow for Q2 to range between $310 million and $315 million, incorporating the divestiture costs.
In conclusion, PTC raised its fiscal 2026 revenue guidance to between $2.675 billion and $2.940 billion, while also increasing its non-GAAP EPS guidance to between $6.69 and $9.15. The company experienced revenue growth that outpaced ARR growth for the second consecutive quarter, which DiRico clarified was not a result of changes in revenue recognition practices.
Founded in 1985, PTC has established itself as a global technology leader in software solutions for manufacturers, focusing on areas such as product lifecycle management, Internet of Things, augmented reality, and industrial connectivity.
