Fifth Third Bancorp boosted its position in Pegasystems Inc. (NASDAQ:PEGA – Free Report) by 5,116.2% during the 1st quarter, according to its most recent 13F filing with the Securities and Exchange Commission (SEC). The institutional investor owned 32,184 shares of the technology company’s stock after purchasing an additional 31,567 shares during the quarter. Fifth Third Bancorp’s holdings in Pegasystems were worth $1,370,000 as of its most recent filing with the Securities and Exchange Commission (SEC).
Several other hedge funds have also added to or reduced their stakes in PEGA. International Assets Investment Management LLC purchased a new stake in shares of Pegasystems in the 4th quarter worth about $28,000. EFG International AG bought a new stake in shares of Pegasystems in the fourth quarter worth $32,000. Bayforest Capital Ltd lifted its stake in shares of Pegasystems by 316.6% in the 4th quarter. Bayforest Capital Ltd now owns 704 shares of the technology company’s stock worth $42,000 after purchasing an additional 535 shares during the period. Brown Brothers Harriman & Co. boosted its stake in shares of Pegasystems by 386.3% during the 4th quarter. Brown Brothers Harriman & Co. now owns 710 shares of the technology company’s stock worth $42,000 after acquiring an additional 564 shares during the last quarter. Finally, Flagship Harbor Advisors LLC bought a new stake in Pegasystems during the fourth quarter valued at about $44,000. 46.89% of the stock is owned by institutional investors.
Analyst Ratings Changes Several equities research analysts have recently issued reports on PEGA shares. KeyCorp cut shares of Pegasystems from an “overweight” rating to a “sector weight” rating in a research report on Wednesday. Rosenblatt Securities dropped their price objective on shares of Pegasystems from $58.00 to $47.00 and set a “buy” rating for the company in a research note on Thursday. Weiss Ratings downgraded Pegasystems from a “hold (c+)” rating to a “hold (c)” rating in a report on Thursday, June 4th. Royal Bank Of Canada set a $35.00 target price on shares of Pegasystems and gave the stock an “outperform” rating in a research note on Thursday. Finally, Loop Capital lowered Pegasystems from a “buy” rating to a “hold” rating and cut their price target for the company from $55.00 to $25.00 in a research note on Thursday. Six equities research analysts have rated the stock with a Buy rating and seven have issued a Hold rating to the company’s stock. Based on data from MarketBeat, Pegasystems has an average rating of “Hold” and a consensus price target of $50.10.
Get Our Latest Research Report on Pegasystems
Pegasystems Trading Up 3.1% NASDAQ:PEGA opened at $26.82 on Friday. The stock has a fifty day moving average price of $32.13 and a 200 day moving average price of $39.70. The firm has a market cap of $4.41 billion, a PE ratio of 15.15 and a beta of 0.87. Pegasystems Inc. has a 12-month low of $25.10 and a 12-month high of $68.10.
Pegasystems (NASDAQ:PEGA – Get Free Report) last issued its earnings results on Tuesday, July 21st. The technology company reported $0.35 earnings per share (EPS) for the quarter, missing the consensus estimate of $0.43 by ($0.08). Pegasystems had a net margin of 18.66% and a return on equity of 32.21%. The company had revenue of $420.72 million during the quarter, compared to analyst estimates of $427.38 million. During the same quarter in the previous year, the company posted $0.28 EPS. The company’s quarterly revenue was up 9.4% on a year-over-year basis. Equities analysts forecast that Pegasystems Inc. will post 1.93 EPS for the current year.
Pegasystems Dividend Announcement The firm also recently announced a quarterly dividend, which was paid on Wednesday, July 15th. Investors of record on Wednesday, July 1st were given a dividend of $0.03 per share. The ex-dividend date was Wednesday, July 1st. This represents a $0.12 annualized dividend and a yield of 0.4%. Pegasystems’s dividend payout ratio is 6.45%.
Insiders Place Their Bets In other Pegasystems news, CAO Efstathios A. Kouninis sold 750 shares of the business’s stock in a transaction on Monday, June 1st. The shares were sold at an average price of $36.99, for a total value of $27,742.50. Following the transaction, the chief accounting officer owned 2,144 shares in the company, valued at $79,306.56. The trade was a 25.92% decrease in their position. The sale was disclosed in a filing with the SEC, which is available through the SEC website. Also, insider Rifat Kerim Akgonul sold 4,545 shares of the stock in a transaction that occurred on Tuesday, May 19th. The shares were sold at an average price of $33.35, for a total value of $151,575.75. Following the transaction, the insider owned 107,070 shares of the company’s stock, valued at approximately $3,570,784.50. This trade represents a 4.07% decrease in their ownership of the stock. The SEC filing for this sale provides additional information. Over the last 90 days, insiders have sold 6,795 shares of company stock valued at $229,613. Insiders own 48.40% of the company’s stock.
Pegasystems Company Profile (Free Report)
Pegasystems Inc is a software company specializing in customer engagement and digital process automation solutions. Headquartered in Cambridge, Massachusetts, Pegasystems develops enterprise applications designed to help organizations streamline operations, manage customer interactions and automate complex workflows. Its platform supports a wide range of use cases, from sales and marketing optimization to case management and robotic process automation.
The core of Pegasystems’ offering is the Pega Platform, a low-code development environment that enables businesses to build and deploy applications with minimal hand-coding.
Recommended Stories Five stocks we like better than Pegasystems AMD and Cerbras Create A New Blueprint For Hardware Intel Earnings Reveal Whether the Chip Selloff Created a Buy CrowdStrike’s Cerebras Deal Puts Its AI Security Strategy to the Test Plugging In: How Kinder Morgan Powers Up Profits Want to see what other hedge funds are holding PEGA? Visit HoldingsChannel.com to get the latest 13F filings and insider trades for Pegasystems Inc. (NASDAQ:PEGA – Free Report).
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On July 24, 2026, Pegasystems Inc (PEGA) shares rose 3.1% today, closing at $26.84. This price is significantly lower than the stock's 52-week high of $68.10 an
Pegasystems (NASDAQ:PEGA) executives said the company faced a challenging first half of 2026 as customer uncertainty around artificial intelligence, a back-half-weighted renewal portfolio and go-to-market execution issues weighed on annual contract value growth.
On the company’s second-quarter earnings call, Founder and CEO Alan Trefler said the software market is undergoing a “fundamental transformation driven by AI,” but that the shift has also created confusion for enterprise buyers. He said organizations are reassessing how software should be designed, built and operated as AI pricing models evolve from low-cost or free access toward usage-based token pricing.
“This cost uncertainty is leading many organizations to sort of freeze and try to figure out what’s going on and take a more deliberate approach to technology investments,” Trefler said. He added that decision cycles have lengthened as customers seek clarity on AI strategies and the potential variability of token costs.
ACV Growth Slows as Customers Delay Decisions COO and CFO Ken Stillwell said annual contract value, or ACV, remains one of Pegasystems’ most important operating metrics because it provides a clearer view of business momentum in a subscription model.
Pega Cloud ACV increased by $165 million year over year, growing 22% both as reported and in constant currency. Stillwell said the cloud business remains the fastest-growing and most important part of the company’s subscription model, although growth moderated from 27% in constant currency at the end of the prior quarter.
Total ACV grew 7% as reported and 8% in constant currency year over year, with gains in Pega Cloud offset by decreases in maintenance ACV and subscription license ACV. Stillwell said Pega Cloud now represents 57% of total ACV and could ultimately reach approximately 75% of the total over time.
Stillwell identified three primary reasons for the slower first-half performance:
A renewal portfolio that is significantly weighted toward the second half of the year, limiting first-half expansion opportunities. Customer uncertainty caused by rapid changes in the software market and AI economics. Slower-than-expected execution on go-to-market changes intended to deepen engagement with clients and prospects. Because a meaningful portion of Pegasystems’ net new ACV comes from cross-selling and upselling into its existing customer base, fewer renewal opportunities in the first half naturally resulted in fewer expansion opportunities, Stillwell said.
Executives Say Pipeline Remains Active Despite Longer Sales Cycles In response to analyst questions, Stillwell said Pegasystems is not seeing customers abandon transformation projects or disengage from the company. Instead, he said many opportunities have elongated rather than disappeared.
“A lot of those pipeline deals in Q2 just didn’t close,” Stillwell said. “They elongated.” He said the company’s pipeline is growing and that late-stage pipeline is “very strong” compared with last year, but acknowledged that the duration of customer uncertainty is difficult to predict.
Trefler said the company saw “movement” in customer conversations after a period of heightened uncertainty in the second quarter. He said customers are still trying to determine how AI fits into their future technology plans, but added that many have “serious things they need to get done.”
Stillwell said Pegasystems had assumed that one-third of its full-year net new ACV additions would occur in the first half of 2026 and two-thirds in the second half. He said the company underachieved that first-half expectation and will work to recover as much of the shortfall as possible, though he described that task as “very difficult.”
Pegasystems Emphasizes AI Cost Predictability A central theme of the call was Pegasystems’ positioning around AI costs. Trefler argued that enterprises are becoming more concerned about opaque token consumption, particularly “reasoning tokens” used internally by large language models. He said these costs can become unexpectedly expensive when AI agents reason through processes repeatedly at runtime.
Pegasystems is emphasizing an alternative approach that uses AI heavily at design time through Pega Blueprint AI, then runs structured workflows predictably at scale with selective AI use at runtime. Trefler compared the approach to a restaurant that designs recipes in advance rather than reinventing every dish for each customer.
“Our goal is simple,” Trefler said. “Help our clients avoid AI chaos and the mess that comes from it by delivering predictable outcomes at predictable costs.”
Stillwell said Pegasystems does not charge customers per token. Instead, he said the company’s AI monetization strategy is based on business value created on the Pega platform. Blueprint is intended to make it faster for customers to create and deploy applications, while advanced AI-powered runtime capabilities can carry a case price uplift.
New Infinity Studio Release Extends Blueprint Trefler highlighted the release of Pega Infinity 2026 and the introduction of Infinity Studio, which he said extends Blueprint AI from design into application development, deployment and ongoing evolution. He said the release allows Pega Cloud and client cloud customers to use Blueprint AI to deploy new applications and improve existing ones.
He said Pegasystems initially focused Blueprint on new customers and new applications, but Infinity 2026 makes the technology available to help existing customers reimagine and modernize current Pega applications. Trefler called Infinity Studio “a really big deal” and said the company will roll it out aggressively through the rest of the year.
Executives also discussed the company’s use of Model Context Protocol, or MCP. Trefler said every workflow in Pega is automatically available through MCP in Infinity 2026, allowing agents built on other platforms to find and invoke Pega workflows.
Free Cash Flow, Buybacks and 2028 Target Despite slower ACV growth, Stillwell emphasized Pegasystems’ cash generation. The company generated $288 million of free cash flow in the first half of 2026, which he described as a record. He said strong cash generation provides flexibility for capital allocation.
In the first half, Pegasystems repurchased 9 million shares for more than $360 million under prior authorizations. Stillwell said the cash spent on repurchases represented well over 100% of free cash flow generated during the period, and that total common shares were reduced by 6 million in the first half.
The company reiterated its expectation to generate more than $700 million of free cash flow in 2028. Stillwell said slower ACV growth in the first half of 2026 does not change that objective, but it will require the company to reevaluate certain investment priorities. He cited cloud scale, mix shift, sales productivity, gross margin improvement and disciplined investment prioritization as levers supporting the target.
Asked about the company’s free cash flow outlook for 2026, Stillwell said any ACV shortfall would put pressure on the company’s ability to reach its $575 million free cash flow outlook for the year, though he said Pegasystems continues to see cash flow durability in the business.
Trefler closed the call by acknowledging the challenging environment but said the company has navigated major technology and market shifts before. “We have a really good understanding of how to react strongly but smartly,” he said.
About Pegasystems (NASDAQ:PEGA) Pegasystems Inc is a software company specializing in customer engagement and digital process automation solutions. Headquartered in Cambridge, Massachusetts, Pegasystems develops enterprise applications designed to help organizations streamline operations, manage customer interactions and automate complex workflows. Its platform supports a wide range of use cases, from sales and marketing optimization to case management and robotic process automation.
The core of Pegasystems’ offering is the Pega Platform, a low-code development environment that enables businesses to build and deploy applications with minimal hand-coding.
Pegasystems Inc (NASDAQ:PEGA) reported worse-than-expected second-quarter financial results, after the closing bell on Tuesday.
Pegasystems reported quarterly earnings of 35 cents per share which missed the analyst consensus estimate of 43 cents per share. The company reported quarterly sales of $420.716 million which missed the analyst consensus estimate of $426.601 million.
Pegasystems shares fell 1.3% to $25.65 in pre-market trading.
These analysts made changes to their price targets on Pegasystems following earnings announcement.
Loop Capital analyst Yun Kim downgraded the stock from Buy to Hold and lowered the price target from $55 to $25. Rosenblatt analyst Blair Abernethy maintained the stock with a Buy and cut the price target from $58 to $47. Keybanc analyst Devin Au downgraded the stock from Overweight to Sector Weight. William Blair analyst Jake Roberge downgraded Pegasystems from Outperform to Market Perform. Considering buying PEGA stock? Here’s what analysts think:
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Pegasystems (NASDAQ:PEGA) shares fell about 15% following the release of its second quarter 2026 results, after the enterprise software company missed Wall Street expectations on both earnings and revenue.
The company reported adjusted earnings per share of $0.35 for the quarter, below analyst estimates of $0.43.
Revenue came in at $420.7 million, compared with consensus expectations of $427.4 million.
Revenue increased 9% year over year from $384.5 million, driven by growth in subscription-related businesses. Pega Cloud revenue rose 28% year over year to $213.9 million, while subscription services revenue increased 17% to $288.5 million. Consulting revenue declined 13% to $50.2 million.
Pegasystems highlighted growth in annual contract value (ACV), with total ACV increasing 7% year over year to $1.62 billion, or 8% on a constant currency basis. Pega Cloud ACV grew 22% year over year.
The company also reported strong cash generation during the first half of the year, with operating cash flow reaching $298 million and free cash flow totaling $288 million.
“Pega generated record first-half cash flow and returned substantial capital to shareholders,” Pegasystems’ chief operating officer and chief financial officer Ken Stillwell said in a statement.
“As the market shifts from AI experimentation to tokenomics and reliable business outcomes, that evolution plays directly to Pega’s strengths, and we remain confident in our strategy to capitalize on the opportunity ahead.”
Pegasystems CEO Alan Trefler highlighted the company’s AI-focused product developments, including the release of Pega Infinity 26, which the company said is designed to help enterprises deploy AI with more predictable costs and outcomes.
“Pega Infinity 26 uniquely deploys the power of AI with predictable outcomes and predictable costs by applying agents at design time to optimize run-time token use,” Trefler wrote.
Pegasystems noted that changes in the artificial intelligence market have caused some customers to delay purchasing decisions, impacting ACV growth during the first half of the year. The company warned that these factors could continue to weigh on ACV growth for the remainder of 2026.
Key Takeaways Pegasystems' revenues rose 9.4%, while earnings increased 25% but missed estimates. Pega Cloud revenues jumped 28% and accounted for 51% of quarterly revenues.Pegasystems warned that delayed client decisions may pressure ACV growth and cash generation. Pegasystems (PEGA - Free Report) reported second-quarter 2026 non-GAAP earnings of 35 cents per share, missing the Zacks Consensus Estimate by 18.61%. Earnings rose 25% year over year.
Revenues rose 9.4% year over year to $420.72 million but missed the consensus mark by 1.84%. The shortfalls came despite continued cloud momentum. Pega Cloud annual contract value rose 22% year over year, while total annual contract value increased 7% or 8% in constant currency.
Backlog grew year over year, supporting longer-term revenue visibility. Total backlog increased 10% year over year to $2.02 billion as of June 30, 2026 or 11% in constant currency. Pega Cloud backlog rose 18% to $1.56 billion and accounted for 77% of total backlog, up from 72% a year earlier.
PEGA's Cloud Growth Supports Revenue ExpansionPega Cloud revenues climbed 28% year over year to $213.93 million and represented 51% of quarterly revenues, up from 43% a year earlier. Maintenance revenues declined 6% to $74.53 million.
Together, subscription services revenues advanced 17% to $288.46 million. Subscription license revenues rose 2% to $82.03 million, taking total subscription revenues up 13% to $370.49 million.
PEGA's Revenue Mix Shows Subscription StrengthConsulting revenues declined 13% year over year to $50.23 million and accounted for 12% of total revenues compared with 15% in the prior-year quarter. The decline partly offset gains across the subscription business.
Subscription revenues represented 88% of quarterly revenues, up from 85% a year earlier. The higher recurring-revenue mix supported the top-line increase, but higher operating costs and delayed client decisions limited the benefit to profitability.
Pegasystems Faces Slower ACV GrowthTotal annual contract value reached $1.62 billion at June 30, 2026, compared with $1.51 billion a year earlier. Pega Cloud ACV increased to $926.29 million from $761.05 million, highlighting the continued shift toward cloud contracts.
However, management said unprecedented changes in the AI market prompted clients to delay purchasing decisions. The company added that ACV growth slowed in the first half and warned that these factors may continue to pressure growth for the rest of the year.
PEGA's Operating DetailsGross profit rose 13.7% year over year to $312.69 million. The gross margin expanded about 280 basis points to 74.3%, driven by revenue growth and a slight decline in total cost of revenues.
Operating expenses increased 14.9% to $296.05 million. Selling and marketing expenses rose 12.4%, research and development expenses increased 6.8%, and general and administrative expenses jumped 37.6%.
GAAP operating income slipped 3.7% year over year to $16.64 million. The operating margin contracted roughly 50 basis points to 4% as expense growth outpaced revenues.
PEGA’s Balance Sheet & Cash FlowAs of June 30, 2026, cash and cash equivalents and marketable securities totaled $361.9 million, down from $474 million as of March 31, 2026.
For the first six months of 2026, cash provided by operating activities increased 2.7% year over year to $298.23 million. Free cash flow rose 0.6% to $288.26 million, even as the company cautioned that slower ACV growth could weigh on cash generation for the remainder of the year.
PEGA's Zacks Rank & Stocks to ConsiderCurrently, Pegasystems carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer and Technology sector include Agilysys (AGYS - Free Report) , Bandwidth (BAND - Free Report) and Fortinet (FTNT - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Agilysys have declined 15.3% in the year-to-date period. AGYS is set to report its first-quarter fiscal 2027 results on July 27.
Shares of Bandwidth have surged 355.4% in the year-to-date period. BAND is slated to report its second-quarter 2026 results on July 29.
Fortinet shares have gained 99.1% in the year-to-date period. FTNT is set to report its second-quarter 2026 results on July 29.
Pegasystems Inc. (PEGA) Q2 2026 Earnings Call July 22, 2026 8:00 AM EDT
Company Participants
Peter Welburn - Vice President of Investor Relations
Alan Trefler - Founder, CEO & Chairman of the Board
Kenneth Stillwell - COO & CFO
Conference Call Participants
Steven Enders - Citigroup Inc., Research Division
Raimo Lenschow - Barclays Bank PLC, Research Division
Devin Au - KeyBanc Capital Markets Inc., Research Division
Patrick Walravens - Citizens JMP Securities, LLC, Research Division
Mark Schappel - Loop Capital Markets LLC, Research Division
Patrick McIlwee - William Blair & Company L.L.C., Research Division
Presentation
Operator
Hello, everyone. Thank you for joining us, and welcome to the Pegasystems Second Quarter 2026 Earnings Call and Webcast.
[Operator Instructions] I will now hand the conference over to Peter Welburn, Vice President of Corporate Development and Investor Relations. Please go ahead.
Peter Welburn
Vice President of Investor Relations
Good morning, everyone, and welcome to Pegasystems Q2 '26 Earnings Call. Before we begin, I'd like to read our safe harbor statement. Certain statements contained in this presentation may be construed as forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, forecasts and similar expressions are intended to identify these forward-looking statements.
These statements speak only as of the date the statement was made and are based on current expectations and assumptions. Because these statements relate to future events, they are subject to certain risks and uncertainties that could cause actual results to differ materially from our current expectations for fiscal year 2026 and beyond. Factors that could cause such differences are described in the company's press release announcing our Q2 2026 results and in our filings with the Securities and Exchange Commission including our annual report on Form 10-K for the year ended December 31, 2025, as
Shares of Pegasystems (PEGA -16.10%) were moving lower today after the enterprise automation software company missed the mark in its second-quarter earnings report, coming up short on both the top and bottom lines.
As a result, the stock was down 13.6% as of 9:49 a.m. ET.
Image source: Getty Images.
Pega comes up short Pega, as the company is often known, said that revenue in the quarter was up 9% to $420.7 million, but that missed estimates at $426.6 million.
The company reported overall annual contract value (ACV) growth of 7%, and 22% ACV growth in Pega Cloud. Management explained the slowdown in ACV growth, saying, "Unprecedented changes in the AI market caused clients to delay their purchasing decisions," which seems to reflect customers spending more on AI-native tools rather than traditional cloud software.
On the bottom line, Pega's adjusted earnings per share increased from $0.28 to $0.35, though that was short of expectations at $0.43.
Pega COO and CFO Ken Stillwell gave the quarter a positive spin, saying, "As the market shifts from AI experimentation to tokenomics and reliable business outcomes, that evolution plays directly to Pega's strengths."
Today's Change
(
-16.10
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-4.98
Current Price
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25.96
What's next for Pega Pegasystems does not give quarterly guidance, which increases the weight of the quarterly results. This is the second quarter in a row that Pegasystems has missed estimates, and its struggles seem to confirm the same headwinds in the enterprise automation software sector that caused IBM stock to plunge last week.
Pega stock looks cheap based on adjusted earnings expectations, but the sell-off is understandable given what seems to be AI disruption.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends International Business Machines. The Motley Fool has a disclosure policy.
Pegasystems (NASDAQ:PEGA) shares fell about 15% following the release of its second quarter 2026 results, after the enterprise software company missed Wall Street expectations on both earnings and revenue.
The company reported adjusted earnings per share of $0.35 for the quarter, below analyst estimates of $0.43.
Revenue came in at $420.7 million, compared with consensus expectations of $427.4 million.
Revenue increased 9% year over year from $384.5 million, driven by growth in subscription-related businesses. Pega Cloud revenue rose 28% year over year to $213.9 million, while subscription services revenue increased 17% to $288.5 million. Consulting revenue declined 13% to $50.2 million.
Pegasystems highlighted growth in annual contract value (ACV), with total ACV increasing 7% year over year to $1.62 billion, or 8% on a constant currency basis. Pega Cloud ACV grew 22% year over year.
The company also reported strong cash generation during the first half of the year, with operating cash flow reaching $298 million and free cash flow totaling $288 million.
“Pega generated record first-half cash flow and returned substantial capital to shareholders,” Pegasystems’ chief operating officer and chief financial officer Ken Stillwell said in a statement.
“As the market shifts from AI experimentation to tokenomics and reliable business outcomes, that evolution plays directly to Pega’s strengths, and we remain confident in our strategy to capitalize on the opportunity ahead.”
Pegasystems CEO Alan Trefler highlighted the company’s AI-focused product developments, including the release of Pega Infinity 26, which the company said is designed to help enterprises deploy AI with more predictable costs and outcomes.
“Pega Infinity 26 uniquely deploys the power of AI with predictable outcomes and predictable costs by applying agents at design time to optimize run-time token use,” Trefler wrote.
Pegasystems noted that changes in the artificial intelligence market have caused some customers to delay purchasing decisions, impacting ACV growth during the first half of the year. The company warned that these factors could continue to weigh on ACV growth for the remainder of 2026.
U.S. stock futures were lower this morning, with the Nasdaq 100 futures falling more than 200 points on Wednesday.
Pegasystems reported quarterly earnings of 35 cents per share which missed the analyst consensus estimate of 43 cents per share. The company reported quarterly sales of $420.716 million which missed the analyst consensus estimate of $426.601 million.
Pegasystems shares dipped 16% to $26.00 in pre-market trading.
Here are some other stocks moving lower in pre-market trading.
Photo via Shutterstock
Market News and Data brought to you by Benzinga APIs
Amid the "SaaS Apocalypse," These 3 Names Are Boosting BuybacksPegasystems NASDAQ: PEGA executives said the company faced a challenging first half of 2026 as customer uncertainty around artificial intelligence, a back-half-weighted renewal portfolio and go-to-market execution issues weighed on annual contract value growth.
On the company’s second-quarter earnings call, Founder and CEO Alan Trefler said the software market is undergoing a “fundamental transformation driven by AI,” but that the shift has also created confusion for enterprise buyers. He said organizations are reassessing how software should be designed, built and operated as AI pricing models evolve from low-cost or free access toward usage-based token pricing.
Get Pegasystems alerts:
3 AI and Cloud Stocks With Analyst Conviction and Long Runways“This cost uncertainty is leading many organizations to sort of freeze and try to figure out what’s going on and take a more deliberate approach to technology investments,” Trefler said. He added that decision cycles have lengthened as customers seek clarity on AI strategies and the potential variability of token costs.
ACV Growth Slows as Customers Delay Decisions COO and CFO Ken Stillwell said annual contract value, or ACV, remains one of Pegasystems’ most important operating metrics because it provides a clearer view of business momentum in a subscription model.
Time to Take Notice: PEGA’s GenAI Blueprint Delivers Huge Q3 BeatPega Cloud ACV increased by $165 million year over year, growing 22% both as reported and in constant currency. Stillwell said the cloud business remains the fastest-growing and most important part of the company’s subscription model, although growth moderated from 27% in constant currency at the end of the prior quarter.
Total ACV grew 7% as reported and 8% in constant currency year over year, with gains in Pega Cloud offset by decreases in maintenance ACV and subscription license ACV. Stillwell said Pega Cloud now represents 57% of total ACV and could ultimately reach approximately 75% of the total over time.
Stillwell identified three primary reasons for the slower first-half performance:
A renewal portfolio that is significantly weighted toward the second half of the year, limiting first-half expansion opportunities. Customer uncertainty caused by rapid changes in the software market and AI economics. Slower-than-expected execution on go-to-market changes intended to deepen engagement with clients and prospects. Because a meaningful portion of Pegasystems’ net new ACV comes from cross-selling and upselling into its existing customer base, fewer renewal opportunities in the first half naturally resulted in fewer expansion opportunities, Stillwell said.
Executives Say Pipeline Remains Active Despite Longer Sales Cycles In response to analyst questions, Stillwell said Pegasystems is not seeing customers abandon transformation projects or disengage from the company. Instead, he said many opportunities have elongated rather than disappeared.
“A lot of those pipeline deals in Q2 just didn’t close,” Stillwell said. “They elongated.” He said the company’s pipeline is growing and that late-stage pipeline is “very strong” compared with last year, but acknowledged that the duration of customer uncertainty is difficult to predict.
Trefler said the company saw “movement” in customer conversations after a period of heightened uncertainty in the second quarter. He said customers are still trying to determine how AI fits into their future technology plans, but added that many have “serious things they need to get done.”
Stillwell said Pegasystems had assumed that one-third of its full-year net new ACV additions would occur in the first half of 2026 and two-thirds in the second half. He said the company underachieved that first-half expectation and will work to recover as much of the shortfall as possible, though he described that task as “very difficult.”
Pegasystems Emphasizes AI Cost Predictability A central theme of the call was Pegasystems’ positioning around AI costs. Trefler argued that enterprises are becoming more concerned about opaque token consumption, particularly “reasoning tokens” used internally by large language models. He said these costs can become unexpectedly expensive when AI agents reason through processes repeatedly at runtime.
Pegasystems is emphasizing an alternative approach that uses AI heavily at design time through Pega Blueprint AI, then runs structured workflows predictably at scale with selective AI use at runtime. Trefler compared the approach to a restaurant that designs recipes in advance rather than reinventing every dish for each customer.
“Our goal is simple,” Trefler said. “Help our clients avoid AI chaos and the mess that comes from it by delivering predictable outcomes at predictable costs.”
Stillwell said Pegasystems does not charge customers per token. Instead, he said the company’s AI monetization strategy is based on business value created on the Pega platform. Blueprint is intended to make it faster for customers to create and deploy applications, while advanced AI-powered runtime capabilities can carry a case price uplift.
New Infinity Studio Release Extends Blueprint Trefler highlighted the release of Pega Infinity 2026 and the introduction of Infinity Studio, which he said extends Blueprint AI from design into application development, deployment and ongoing evolution. He said the release allows Pega Cloud and client cloud customers to use Blueprint AI to deploy new applications and improve existing ones.
He said Pegasystems initially focused Blueprint on new customers and new applications, but Infinity 2026 makes the technology available to help existing customers reimagine and modernize current Pega applications. Trefler called Infinity Studio “a really big deal” and said the company will roll it out aggressively through the rest of the year.
Executives also discussed the company’s use of Model Context Protocol, or MCP. Trefler said every workflow in Pega is automatically available through MCP in Infinity 2026, allowing agents built on other platforms to find and invoke Pega workflows.
Free Cash Flow, Buybacks and 2028 Target Despite slower ACV growth, Stillwell emphasized Pegasystems’ cash generation. The company generated $288 million of free cash flow in the first half of 2026, which he described as a record. He said strong cash generation provides flexibility for capital allocation.
In the first half, Pegasystems repurchased 9 million shares for more than $360 million under prior authorizations. Stillwell said the cash spent on repurchases represented well over 100% of free cash flow generated during the period, and that total common shares were reduced by 6 million in the first half.
The company reiterated its expectation to generate more than $700 million of free cash flow in 2028. Stillwell said slower ACV growth in the first half of 2026 does not change that objective, but it will require the company to reevaluate certain investment priorities. He cited cloud scale, mix shift, sales productivity, gross margin improvement and disciplined investment prioritization as levers supporting the target.
Asked about the company’s free cash flow outlook for 2026, Stillwell said any ACV shortfall would put pressure on the company’s ability to reach its $575 million free cash flow outlook for the year, though he said Pegasystems continues to see cash flow durability in the business.
Trefler closed the call by acknowledging the challenging environment but said the company has navigated major technology and market shifts before. “We have a really good understanding of how to react strongly but smartly,” he said.
About Pegasystems (NASDAQ:PEGA)Pegasystems Inc is a software company specializing in customer engagement and digital process automation solutions. Headquartered in Cambridge, Massachusetts, Pegasystems develops enterprise applications designed to help organizations streamline operations, manage customer interactions and automate complex workflows. Its platform supports a wide range of use cases, from sales and marketing optimization to case management and robotic process automation.
The core of Pegasystems' offering is the Pega Platform, a low-code development environment that enables businesses to build and deploy applications with minimal hand-coding.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].
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Pegasystems (PEGA - Free Report) came out with quarterly earnings of $0.35 per share, missing the Zacks Consensus Estimate of $0.43 per share. This compares to earnings of $0.28 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of -18.61%. A quarter ago, it was expected that this business software company would post earnings of $0.76 per share when it actually produced earnings of $0.46, delivering a surprise of -39.47%.
Over the last four quarters, the company has surpassed consensus EPS estimates two times.
Pegasystems, which belongs to the Zacks Computer - Software industry, posted revenues of $420.72 million for the quarter ended June 2026, missing the Zacks Consensus Estimate by 1.84%. This compares to year-ago revenues of $384.51 million. The company has topped consensus revenue estimates two times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.
Pegasystems shares have lost about 46.9% since the beginning of the year versus the S&P 500's gain of 8.7%.
What's Next for Pegasystems?While Pegasystems has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?
There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.
Ahead of this earnings release, the estimate revisions trend for Pegasystems was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.62 on $484.54 million in revenues for the coming quarter and $2.73 on $1.98 billion in revenues for the current fiscal year.
Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Computer - Software is currently in the top 37% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
One other stock from the same industry, OptimizeRx Corp. (OPRX - Free Report) , is yet to report results for the quarter ended June 2026.
This company is expected to post quarterly earnings of $0.11 per share in its upcoming report, which represents a year-over-year change of -54.2%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.
OptimizeRx Corp.'s revenues are expected to be $20.48 million, down 29.8% from the year-ago quarter.
Pegasystems (PEGA - Free Report) reported $420.72 million in revenue for the quarter ended June 2026, representing a year-over-year increase of 9.4%. EPS of $0.35 for the same period compares to $0.28 a year ago.
The reported revenue represents a surprise of -1.84% over the Zacks Consensus Estimate of $428.61 million. With the consensus EPS estimate being $0.43, the EPS surprise was -18.61%.
While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expectations to determine their next course of action, some key metrics always provide a better insight into a company's underlying performance.
As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately.
Here is how Pegasystems performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts:
Revenue- Subscription: $370.49 million compared to the $386.54 million average estimate based on two analysts. The reported number represents a change of +13.7% year over year.Revenue- Consulting: $50.23 million compared to the $55.03 million average estimate based on two analysts. The reported number represents a change of -13.1% year over year.Revenue- Pega Cloud: $213.93 million versus the two-analyst average estimate of $221.77 million. The reported number represents a year-over-year change of +28.3%.View all Key Company Metrics for Pegasystems here>>>
Shares of Pegasystems have returned +7.9% over the past month versus the Zacks S&P 500 composite's -0.6% change. The stock currently has a Zacks Rank #3 (Hold), indicating that it could perform in line with the broader market in the near term.
WALTHAM, Mass.--(BUSINESS WIRE)--Pegasystems Inc. (NASDAQ: PEGA), the Enterprise Transformation Company™, released its financial results for the second quarter of 2026.
"Pega Infinity™ 26 uniquely deploys the power of AI with predictable outcomes and predicable costs by applying agents at design time to optimize run-time token use,” said Alan Trefler, founder and CEO, Pega. "Letting language models do everything is risky and expensive, and using AI to write mountains of code creates significant barriers to the ongoing change that enterprise clients require. Pega structures business applications in a way that makes sense to business and IT to Build for Change®.”
"Pega generated record first-half cash flow and returned substantial capital to shareholders,” said Ken Stillwell, COO and CFO, Pega. “As the market shifts from AI experimentation to tokenomics and reliable business outcomes, that evolution plays directly to Pega’s strengths, and we remain confident in our strategy to capitalize on the opportunity ahead.”
Financial and performance metrics (1)
Unprecedented changes in the AI market caused clients to delay their purchasing decisions. As a result, our ACV growth rate significantly slowed during the six months ended June 30, 2026, as compared to the same period last year. These factors may continue to adversely affect the ACV growth rate for the rest of the year.
Reconciliation of ACV and Constant Currency ACV
(in millions, except percentages)
June 30, 2025
June 30, 2026
1-Year Change
ACV
$
1,514
$
1,620
7
%
Impact of changes in foreign exchange rates
—
10
Constant currency ACV
$
1,514
$
1,630
8
%
Note: Constant currency ACV is calculated by applying the June 30, 2025 foreign exchange rates to current period shown.
Cash Flow Growth
As a result of the factors discussed under ACV above, our cash flow generation may continue to be adversely affected for the rest of the year.
(Dollars in thousands,
except per share amounts)
Three Months Ended
June 30,
Six Months Ended
June 30,
2026
2025
Change
2026
2025
Change
Total revenue
$
420,716
$
384,512
9
%
$
850,689
$
860,145
(1
)%
Net income - GAAP
$
13,334
$
30,077
(56
)%
$
46,098
$
115,499
(60
)%
Net income - non-GAAP
$
59,533
$
50,151
19
%
$
142,601
$
190,693
(25
)%
Diluted earnings per share - GAAP
$
0.08
$
0.17
(53
)%
$
0.26
$
0.63
(59
)%
Diluted earnings per share - non-GAAP
$
0.35
$
0.28
25
%
$
0.81
$
1.04
(22
)%
(Dollars in thousands)
Three Months Ended
June 30,
Change
Six Months Ended
June 30,
Change
2026
2025
2026
2025
Pega Cloud
$
213,934
51
%
$
166,743
43
%
$
47,191
28
%
$
418,965
49
%
$
317,866
37
%
$
101,099
32
%
Maintenance
74,528
18
%
79,271
21
%
(4,743
)
(6
)%
149,845
18
%
155,639
18
%
(5,794
)
(4
)%
Subscription services
288,462
69
%
246,014
64
%
42,448
17
%
568,810
67
%
473,505
55
%
95,305
20
%
Subscription license
82,028
19
%
80,674
21
%
1,354
2
%
176,880
21
%
268,395
31
%
(91,515
)
(34
)%
Subscription
370,490
88
%
326,688
85
%
43,802
13
%
745,690
88
%
741,900
86
%
3,790
1
%
Consulting
50,226
12
%
57,824
15
%
(7,598
)
(13
)%
104,999
12
%
118,245
14
%
(13,246
)
(11
)%
Total revenue
$
420,716
100
%
$
384,512
100
%
$
36,204
9
%
$
850,689
100
%
$
860,145
100
%
$
(9,456
)
(1
)%
Quarterly conference call
A conference call and audio-only webcast will be conducted at 8:00 a.m. EDT on Wednesday, July 22, 2026.
Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1 (833) 461-5787 (domestic) or 1 (626) 884-3620 (international) and using Conference ID 421269211, or via https://events.q4inc.com/attendee/421269211 by logging onto www.pega.com at least five minutes prior to the event's broadcast and clicking on the webcast icon in the Investors section.
Discussion of non-GAAP financial measures
Our non-GAAP financial measures should only be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We believe that these measures help investors understand our core operating results and prospects, which is consistent with how management measures and forecasts our performance without the effect of often one-time charges and other items outside our normal operations. Management uses these measures to assess the performance of the company's operations and establish operational goals and incentives. They are not a substitute for financial measures prepared under U.S. GAAP. Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.
Forward-looking statements
Certain statements in this press release may be "forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, including statements about the growth and development of our business and market.
Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, positions, forecasts, guidance, likely, and usually or variations of such words and other similar expressions identify forward-looking statements. These statements represent our views only as of the date the statement was made and are based on current expectations and assumptions.
Forward-looking statements deal with future events and are subject to risks and uncertainties that are difficult to predict, including, but not limited to:
our future financial performance and business plans; the adequacy of our liquidity and capital resources; the successful execution of investments in artificial intelligence; the timing of revenue recognition; variation in demand for our products and services; reliance on key personnel; potential legal and financial liabilities, as well as damage to our reputation, due to cyber-attacks; security breaches and security flaws; our ability to protect our intellectual property rights, costs associated with defending such rights, intellectual property rights claims, and other related claims by third parties against us, including related costs, damages, and other relief that may be granted against us; our ongoing litigation with Appian Corp. and associated legal proceedings; our client retention rate; and management of our growth. These risks and others that may cause actual results to differ materially from those expressed in such forward-looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2025, and other filings we make with the SEC.
Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the results included in such statements will be achieved. Although subsequent events may cause our view to change, except as required by applicable law, we do not undertake and expressly disclaim any obligation to publicly update or revise these forward-looking statements, whether as the result of new information, future events, or otherwise.
Any forward-looking statements in this press release represent our views as of July 21, 2026.
About Pegasystems
Pega delivers the platform to reimagine, run, and evolve the processes and decisions an enterprise can't afford to get wrong. We combine AI with proven architecture to keep mission-critical operations governed, scalable, and continuously adaptable. Since 1983, the world's largest organizations have trusted Pega to turn transformation ambition into durable results. Learn more at www.pega.com.
All trademarks are the property of their respective owners.
(1) Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended
June 30,
Six Months Ended
June 30,
2026
2025
2026
2025
Revenue
Subscription services
$
288,462
$
246,014
$
568,810
$
473,505
Subscription license
82,028
80,674
176,880
268,395
Consulting
50,226
57,824
104,999
118,245
Total revenue
420,716
384,512
850,689
860,145
Cost of revenue
Subscription services
53,941
41,510
103,390
79,638
Subscription license
267
364
738
752
Consulting
53,821
67,700
110,655
131,634
Total cost of revenue
108,029
109,574
214,783
212,024
Gross profit
312,687
274,938
635,906
648,121
Operating expenses
Selling and marketing
165,408
147,131
321,011
285,200
Research and development
84,168
78,784
166,215
153,070
General and administrative
43,740
31,788
92,313
65,616
Restructuring
2,735
(44
)
2,582
(33
)
Total operating expenses
296,051
257,659
582,121
503,853
Income from operations
16,636
17,279
53,785
144,268
Foreign currency transaction (loss) gain
(1,364
)
(14,008
)
486
(19,333
)
Interest income
2,500
3,248
5,454
8,583
Interest expense
(45
)
(1
)
(89
)
(1,028
)
(Loss) on capped call transactions
—
—
—
(223
)
Other income (loss), net
786
18,729
(1,418
)
19,290
Income before provision for (benefit from) income taxes
18,513
25,247
58,218
151,557
Provision for (benefit from) income taxes
5,179
(4,830
)
12,120
36,058
Net income
$
13,334
$
30,077
$
46,098
$
115,499
Earnings per share
Basic
$
0.08
$
0.18
$
0.28
$
0.67
Diluted
$
0.08
$
0.17
$
0.26
$
0.63
Weighted-average number of common shares outstanding
Basic
165,613
170,776
167,206
171,287
Diluted
171,765
182,160
175,294
185,477
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, 2026
December 31, 2025
Assets
Current assets:
Cash and cash equivalents
$
185,110
$
212,447
Marketable securities
176,797
213,352
Total cash, cash equivalents, and marketable securities
361,907
425,799
Accounts receivable, net
143,213
264,713
Unbilled receivables, net
154,029
166,478
Other current assets
102,559
121,305
Total current assets
761,708
978,295
Long-term unbilled receivables, net
77,947
102,544
Goodwill
81,265
81,506
Long-term deferred income taxes
176,903
175,472
Other long-term assets
286,220
294,027
Total assets
$
1,384,043
$
1,631,844
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
52,964
$
12,924
Accrued expenses
92,295
44,847
Accrued compensation and related expenses
87,583
148,797
Deferred revenue
462,532
509,275
Other current liabilities
23,886
21,935
Total current liabilities
719,260
737,778
Long-term operating lease liabilities
56,996
60,825
Other long-term liabilities
47,403
45,860
Total liabilities
823,659
844,463
Total stockholders’ equity
560,384
787,381
Total liabilities and stockholders’ equity
$
1,384,043
$
1,631,844
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six Months Ended
June 30,
2026
2025
Net income
$
46,098
$
115,499
Adjustments to reconcile net income to cash provided by operating activities
Non-cash items
125,635
123,170
Change in operating assets and liabilities, net
126,492
51,827
Cash provided by operating activities
298,225
290,496
Cash provided by investing activities
25,832
212,995
Cash (used in) financing activities
(349,030
)
(646,316
)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(2,299
)
7,407
Net (decrease) in cash, cash equivalents, and restricted cash
(27,272
)
(135,418
)
Cash, cash equivalents, and restricted cash, beginning of period
216,360
341,529
Cash, cash equivalents, and restricted cash, end of period
$
189,088
$
206,111
PEGASYSTEMS INC.
RECONCILIATION OF SELECTED GAAP AND NON-GAAP MEASURES
(in thousands, except percentages and per share amounts)
Three Months Ended
June 30,
Six Months Ended
June 30,
2026
2025
Change
2026
2025
Change
Net income - GAAP
$
13,334
$
30,077
(56
)%
$
46,098
$
115,499
(60
)%
Stock-based compensation (1)
36,226
36,730
82,041
78,155
Legal fees
17,950
6,409
37,914
12,953
Amortization of intangible assets
237
675
1,020
1,376
Restructuring
2,735
(44
)
2,582
(33
)
Foreign currency transaction loss (gain)
1,364
14,008
(486
)
19,333
Interest on convertible senior notes
—
—
—
394
Capped call transactions
—
—
—
223
Other
(700
)
(18,729
)
1,533
(19,480
)
Income taxes (2)
(11,613
)
(18,975
)
(28,101
)
(17,727
)
Net income - non-GAAP
$
59,533
$
50,151
19
%
$
142,601
$
190,693
(25
)%
Diluted earnings per share - GAAP
$
0.08
$
0.17
(53
)%
$
0.26
$
0.63
(59
)%
non-GAAP adjustments
0.27
0.11
0.55
0.41
Diluted earnings per share - non-GAAP
$
0.35
$
0.28
25
%
$
0.81
$
1.04
(22
)%
Diluted weighted-average number of common shares outstanding - GAAP
171,765
182,160
(6
)%
175,294
185,477
(5
)%
Capped call transactions
—
—
—
(2,412
)
Diluted weighted-average number of common shares outstanding - non-GAAP
171,765
182,160
(6
)%
175,294
183,065
(4
)%
Our non-GAAP financial measures reflect the following adjustments:
Stock-based compensation: We have excluded stock-based compensation from our non-GAAP operating expenses and profitability measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to our revenues recognized during the periods presented and is expected to contribute to our future revenues, we continue to evaluate our business performance, excluding stock-based compensation. Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance. Amortization of intangible assets: We have excluded the amortization of intangible assets from our non-GAAP operating expenses and profitability measures. Amortization of intangible assets fluctuates in amount and frequency and is significantly affected by the timing and size of acquisitions. Investors should note that intangible assets contributed to our revenues recognized during the periods presented and are expected to contribute to future revenues. Amortization of intangible assets is likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods. Restructuring: We have excluded restructuring from our non-GAAP financial measures. Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as these amounts are not representative of our core business operations and ongoing operational performance. Foreign currency transaction loss (gain): We have excluded foreign currency transaction gains and losses from our non-GAAP profitability measures. Foreign currency transaction gains and losses fluctuate in amount and frequency and are significantly affected by foreign exchange market rates. Foreign currency transaction gains and losses are likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods. Interest on convertible senior notes: In February 2020, we issued convertible senior notes (the “Notes”), due March 1, 2025, in a private placement. The Notes accrued interest at an annual rate of 0.75%, paid semi-annually in arrears on March 1 and September 1. The outstanding Notes were repaid in their entirety at maturity. We believe that excluding the amortization of issuance costs provides a useful comparison of our operational performance in different periods. Capped call transactions: We have excluded gains and losses related to our capped call transactions held at fair value under U.S. GAAP. The capped call transactions were expected to reduce common stock dilution and/or offset any potential cash payments we must make, other than for principal and interest, upon conversion of the Notes. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance. Other: We have excluded gains and losses from our venture investments and other one-time, non-operating items. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance. Diluted weighted-average number of common shares outstanding: Capped call transactions: In periods of GAAP net income, the shares calculated by applying the if-converted method related to our Notes are included in the diluted weighted-average shares outstanding if they are dilutive. The capped call transactions were expected to reduce common stock dilution and/or offset any potential cash payments we must make, other than for principal and interest, upon conversion of the Notes. We believe that including the expected impact of the capped call transactions in our non-GAAP financial measures provides a useful comparison of our operational performance in different periods. (1) Stock-based compensation:
Three Months Ended
June 30,
Six Months Ended
June 30,
(Dollars in thousands)
2026
2025
2026
2025
Cost of revenue
$
6,752
$
7,288
$
14,628
$
15,111
Selling and marketing
14,555
14,378
33,009
30,159
Research and development
7,943
7,490
17,962
15,875
General and administrative
6,976
7,574
16,442
17,010
$
36,226
$
36,730
$
82,041
$
78,155
Income tax benefit
$
(7,091
)
$
(566
)
$
(16,255
)
$
(1,153
)
(2) Effective income tax rates:
Six Months Ended
June 30,
2026
2025
GAAP
21
%
24
%
non-GAAP
22
%
22
%
Our GAAP effective income tax rate is subject to significant fluctuations due to several factors, including our stock-based compensation plans, research and development tax credits, and the valuation allowance on our deferred tax assets in the U.S. and U.K. We determine our non-GAAP income tax rate using applicable rates in taxing jurisdictions and assessing certain factors, including historical and forecasted earnings by jurisdiction, discrete items, and ability to realize tax assets. We believe it is beneficial for our management to review our non-GAAP results consistent with our annual plan’s effective income tax rate as established at the beginning of each year, given tax rate volatility.
PEGASYSTEMS INC.
RECONCILIATION OF FREE CASH FLOW (1) AND OTHER METRICS
(in thousands, except percentages)
Six Months Ended
June 30,
Change
2026
2025
Cash provided by operating activities
$
298,225
290,496
3
%
Investment in property and equipment
(9,967
)
(4,015
)
Free cash flow (1)
$
288,258
$
286,481
1
%
Supplemental information (2)
Legal fees
$
9,188
$
10,020
Restructuring
11,449
1,354
Interest paid on convertible senior notes
—
1,754
Other
(689
)
—
Income taxes, net of refunds
10,842
(702
)
$
30,790
$
12,426
PEGASYSTEMS INC.
ANNUAL CONTRACT VALUE
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WALTHAM, Mass.--(BUSINESS WIRE)--Pegasystems Inc. (NASDAQ: PEGA), the enterprise AI software company for mission-critical work, today announced the general availability of Pega Infinity™ 26, Pega's AI suite of products designed to help enterprises scale AI with confidence. By combining advanced agentic AI with built-in governance and a pricing model that eliminates consumption-based AI charges, Pega Infinity 26 enables organizations to achieve both predictable AI outcomes and predictable costs.
WALTHAM, Mass.--(BUSINESS WIRE)--Pegasystems Inc. (NASDAQ: PEGA), the enterprise AI software company for mission-critical work, today announced it will report financial results for the second quarter of 2026 on Tuesday, July 21, 2026, after market close. A conference call and audio-only webcast will be conducted at 8:00 a.m. EDT on Wednesday, July 22, 2026. Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1 (833) 461-.
SummaryPegasystems earns a buy rating for its strong capital growth and dividend potential, supported by robust cash flow, AI-driven products, and minimal leverage.PEGA leads its peer group with a 51% ROE and demonstrates a compelling recovery in margins and EPS, with analyst consensus forecasting 29% EPS growth this year.While the stock remains in a bearish technical trend and underperforms the S&P500, its low D/E ratio, asset-light model, and undervalued forward P/E present an attractive risk-reward profile.Key risk centers on subscriber retention, as sustained cash flow and growth depend on continued platform adoption amid intensifying AI competition. Luis Alvarez/DigitalVision via Getty Images
Overview: A Software Stock to Add to Your Growth Ideas This Summer It's been a while since I covered a dividend-paying tech stock, so this time around I picked Pegasystems (PEGA) to initiate
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WALTHAM, Mass.--(BUSINESS WIRE)--Pegasystems Inc. (NASDAQ: PEGA), the enterprise AI software company for mission-critical work, today announced a quarterly cash dividend of $0.03 per share, maintaining the company's current dividend program. The Q3 2026 dividend will be paid on July 15, 2026, to shareholders of record as of July 1, 2026. About Pega Pega delivers the platform to reimagine, run, and evolve the processes and decisions an enterprise can't afford to get wrong. We combine AI with pro.
On May 13, 2026, Pegasystems Inc (PEGA) shares fell 3.8% to a current price of $32.72. This decline follows a trend where the stock has dropped 45.1% year-to-da
WALTHAM, Mass.--(BUSINESS WIRE)--Pegasystems Inc. (NASDAQ: PEGA), The Enterprise Transformation Company™, today announced that an in-person Investor Session will be held at PegaWorld, Pega's annual user conference held at the MGM Grand in Las Vegas, hosted by Ken Stillwell, COO and CFO, Pega. The Investor Session is scheduled for Monday, June 8, 2026 at 12:00 p.m. PDT (3:00 p.m. EDT). A live audio-only webcast of the Session will be available at https://app.webinar.net/w7kxZ4g89Jz. A replay wil.
Enterprise automation and AI-driven workflow software remain among the most important themes in enterprise technology spending in 2026. As companies attempt to modernize legacy systems, automate complex workflows and operationalize artificial intelligence safely, platforms that combine process orchestration with AI capabilities are gaining strategic importance.
Software M&A is heating up again as private equity dry powder collides with depressed SaaS (software as a service) multiples and AI-driven stack consolidation among hyperscalers.
LAS VEGAS--(BUSINESS WIRE)---- $PEGA #AI--Pegasystems Inc. (NASDAQ: PEGA), the enterprise AI software company for mission-critical work, today at PegaWorld® launched Pega Infinity Studio™, an intuitive, AI-powered development environment for quickly building mission-critical applications without AI coding risks or extended learning curves. Pega Infinity Studio infuses the architectural and industry best practices of the Pega Blueprint AI™ workflow design agent into a reimagined, AI-first developer interface.
LAS VEGAS--(BUSINESS WIRE)--Organizations delivering agentic artificial intelligence (AI) successfully do so by rethinking existing processes to support a culture of collaboration and innovation that maximizes project benefits, according to new research from Pegasystems Inc. (NASDAQ: PEGA), the enterprise AI software company for mission-critical work. The study, conducted with research firm Savanta, was unveiled at PegaWorld®, the company's annual conference in Las Vegas. It identified more tha.
LAS VEGAS--(BUSINESS WIRE)---- $PEGA #AI--Pegasystems Inc. (NASDAQ: PEGA), the enterprise AI software company for mission-critical work, today at PegaWorld® announced the Pega Blueprint AI™ application design agent will be integrated within Amazon Web Services (AWS) Transform to help organizations modernize mainframe applications faster and with minimal friction. This integration simplifies enterprise transformation, allowing clients to extract and analyze their legacy COBOL code with AWS Transform and reima.
LAS VEGAS--(BUSINESS WIRE)---- $PEGA #AI--Pegasystems Inc. (NASDAQ: PEGA), the enterprise AI software company for mission-critical work, today at PegaWorld® announced clients can now design, build, and run their agentic workflows across Pega Infinity™ 26 without paying per token. The Pega Predictable AI™ architecture shifts the heavy AI reasoning to design time, so runtime agents are fast, reliable, and dramatically cheaper to run. This directly addresses two of the most pressing obstacles for enterprises try.
LAS VEGAS--(BUSINESS WIRE)--Pegasystems Inc. (NASDAQ: PEGA), the enterprise AI software company for mission-critical work, today at PegaWorld® announced the Pega Solution Designer Initiative, establishing a new generation of Solution Designers to overcome the biggest barrier to AI success: the gap between business intent and production-ready execution. Expanding the proven results of Pega's Blueprint Delivered™ methodology, this initiative will scale Pega Blueprint AITM-led engagements by equip.
LAS VEGAS--(BUSINESS WIRE)---- $PEGA #AI--Pegasystems Inc. (NASDAQ: PEGA), the enterprise AI software company for mission-critical work, today at PegaWorld® announced new capabilities that enable enterprises to use their custom-built AI agents to drive essential business processes without sacrificing governance, compliance, or cost controls. With added support for the open MCP (Model Context Protocol) standard, Pega processes can now be discovered and executed by authorized third-party agents, including thos.
LAS VEGAS--(BUSINESS WIRE)--Pegasystems Inc. (NASDAQ: PEGA), the enterprise AI software company for mission-critical work, today announced the winners of the 2026 Pega Partner Awards at its annual PegaWorld® user conference in Las Vegas. The awards recognize partners across Pega's global ecosystem for leading enterprise-grade AI innovation and delivering exceptional client outcomes through high-value industry solutions, personalizing customer experiences, and modernizing critical systems. Pega.
LAS VEGAS--(BUSINESS WIRE)--Pegasystems Inc. (NASDAQ: PEGA), the enterprise AI software company for mission-critical work, today at PegaWorld® announced Pega Customer Engagement StudioTM, a new agentic user experience for Pega Customer Decision HubTM (CDH), the AI decisioning platform for scaling personalized experiences. Customer Engagement Studio brings together Pega and third-party agents in an intuitive workspace, helping marketers move from marketing brief to live personalized actions in m.
LAS VEGAS--(BUSINESS WIRE)--Pegasystems Inc. (NASDAQ: PEGA), the enterprise AI software company for mission-critical work today, announced the recipients of the 2026 Pega Industry Awards at its annual PegaWorld® user conference. The Pega Industry Awards celebrate organizations and individuals harnessing Pega's technology, including Pega Blueprint AI™, the company's generative AI-powered application design tool to drive enterprise transformation, moving beyond AI experimentation to deliver impac.
NEW YORK, June 8, 2026 /PRNewswire/ -- Blend360, a premier AI services provider, has been honored with the Customer Decision Hub Award from Pegasystems Inc. (NASDAQ: PEGA), The Enterprise Transformation Company™. The award, announced at the PegaWorld Partner Summit on June 7, recognizes Blend's ability to turn first-party data into intelligent, real-time customer engagement using Pega Customer Decision Hub™ (CDH).
On June 10, 2026, Pegasystems Inc (PEGA) shares fell 3.7% to $32.90, continuing a downward trend that has seen the stock decline 44.8% year-to-date and 34.9% ov
