PTC Inc.'s trailing twelve-month free cash flow grew 10.1% through the period covered by its fiscal 2026 third-quarter filing. Net income over the same twelve months grew 138.7%. This year they have not.
The gap is visible in the margin lines beneath revenue. PTC's operating margin reached 37.8% of revenue on a trailing twelve-month basis, up 7.8 percentage points from a year earlier, according to its quarterly filings. Net margin, at 41.4% of revenue, now runs above the operating margin. That ordering points to something below the operating line, taxes, interest or another non-operating item, lifting reported profit faster than the underlying business has improved. Gross margin over the same period reached 84.5%.
Free cash flow did not move at the same pace. Operating cash flow grew 10.9% on a trailing twelve-month basis, close to the free-cash-flow growth rate, because capital spending also rose: capital expenditure rose 65.3% year over year, even though it remains a small part of the business at 0.7% of revenue. The free-cash-flow margin, at 31.7% of revenue, fell 2.7 percentage points from a year earlier. It still sits in the 94th percentile of PTC's own history across more than sixty prior quarterly observations, so the company is converting an unusually high share of revenue into cash. It is simply doing so a little less efficiently than twelve months ago, on a different track from net income entirely.
Revenue growth itself has slowed, which puts the net income jump in context. Trailing twelve-month revenue growth of 19.5% is down 8.3 percentage points from the prior quarter's pace. A business converting revenue growth of under 20% into net income growth of close to 140% is leaning on operating leverage, non-operating items, or both, rather than on a matching acceleration in sales.
PTC has also returned a substantial amount of cash to shareholders. Share repurchases over the trailing twelve months totalled $1.4 billion, according to the company's cash flow statements, while the diluted share count fell 2.0% over the same period. The filings used here do not state that the lower share count was caused by the buyback programme, so the two figures are reported separately.
| Metric (TTM) | Value | Change YoY |
|---|---|---|
| Free cash flow growth | 10.1% | — |
| Net income growth | 138.7% | — |
| Revenue growth | 19.5% | −8.3pp vs prior quarter |
| Operating margin | 37.8% | +7.8pp |
| FCF margin | 31.7% | −2.7pp |
| Capex growth | 65.3% | — |
| Share repurchases | $1.4bn | — |
The alternative reading
The straightforward reading is that reported earnings have temporarily outrun the cash the business generates, and that free cash flow, still near a record share of revenue, is the steadier guide to PTC's underlying performance. A different reading is also defensible. Net margin running ahead of operating margin could reflect something durable, a lower effective tax rate or reduced interest expense, rather than a one-off item. The filings reviewed here do not break out the segment-level or below-the-line drivers of the gap, so a reader who wants the specific cause of the jump in net income should look to PTC's detailed MD&A disclosures rather than to the trailing twelve-month totals alone. For PTC's full financial history, see the PTC company page.
What it means for value
Our discounted cash flow model is built from normalised free cash flow rather than from reported net income, so the earnings surge by itself moves the model's output less than the growth and margin inputs that feed the cash line. The base case uses a stage-one growth assumption of 19.5%, taken from trailing revenue growth. If that assumption is cut by 5 percentage points, modelled value falls 24.4%; if it is raised by 5 percentage points instead, modelled value rises 31.3%. A 1 percentage point increase in the discount rate used in the model lowers value by 16.4%.
Margin moves are smaller individually but still material. Each 1 percentage point lost from free-cash-flow margin takes −3.1% of modelled value, and if the past year's −2.7 percentage points decline in FCF margin were to persist, modelled value would fall 7.7%. Growth assumptions move the model by a wider margin than a single point of FCF margin, consistent with a company whose free-cash-flow margin, even after its recent dip, remains close to the top of its own range. These are model values under stated assumptions, not a comparison with the share price.
