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Pegasystems
(NASDAQ:PEGA)
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Rating:74Outperform
Price Target:
$41.00
▲(21.19% Upside)
Action:Reiterated
Date:10/21/26
The score is driven primarily by strong financial performance—especially sharp TTM revenue acceleration, high gross margins, and a substantially de-risked balance sheet. The rating is held back by margin/FCF softening and earnings-call commentary highlighting execution issues and below-plan ACV growth. Technicals are neutral and valuation appears reasonable rather than compelling.
Positive Factors
Cloud Growth and Backlog
Strong Pega Cloud growth and a substantial backlog support recurring revenue visibility over the next several quarters. Cloud adoption also deepens customer reliance on Pegasystems’ platform, creating opportunities for expansion across workflows, decisioning, and automation.
Negative Factors
ACV Growth Below Plan
ACV growth below the original plan signals that the company is not yet converting its market opportunity into contracted recurring revenue at the expected pace. This can limit near-term revenue acceleration and makes the longer-term growth and cash-flow objectives more execution-dependent.
Read all positive and negative factors
Positive Factors
Negative Factors
Cloud Growth and Backlog
Strong Pega Cloud growth and a substantial backlog support recurring revenue visibility over the next several quarters. Cloud adoption also deepens customer reliance on Pegasystems’ platform, creating opportunities for expansion across workflows, decisioning, and automation.
Read all positive factors
Pegasystems Key Performance Indicators (KPIs)
Any
Revenue by Geography
Shows the share of sales coming from different regions (North America, EMEA, APAC). Helps investors gauge market concentration, identify regions driving growth or facing headwinds, and understand how regional performance and currency moves could influence overall revenue momentum and forecasts.
Shows the share of sales coming from different regions (North America, EMEA, APAC). Helps investors gauge market concentration, identify regions driving growth or facing headwinds, and understand how regional performance and currency moves could influence overall revenue momentum and forecasts.
Data provided by:
The Fly
The FlyPegasystems (PEGA) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$5.96B
Dividend Yield0.56%
Average Volume (3M)2.69M
Price to Earnings (P/E)20.9
Beta (1Y)1.41
Revenue Growth0.93%
EPS Growth7.44%
CountryUS
Employees5,598
SectorTechnology
Sector Strength88
IndustrySoftware - Application
Share Statistics
EPS (TTM)1.74
Shares Outstanding163,663,540
10 Day Avg. Volume4,195,543
30 Day Avg. Volume2,691,362
Financial Highlights & Ratios
PEG Ratio0.09
Price to Book (P/B)12.95
Price to Sales (P/S)5.84
P/FCF Ratio20.78
Enterprise Value/Market Cap0.90
Enterprise Value/Revenue3.07
Enterprise Value/Gross Profit4.05
Enterprise Value/Ebitda26.34
Forecast
1Y Price Target
$41.71Price Target Upside23.31% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering8
EPS Forecast (FY)2.3
Revenue Forecast (FY)$1.86B
Pegasystems Business Overview & Revenue Model
Company Description
Pegasystems Inc., founded in 1983 and headquartered in Cambridge, Massachusetts, is a global provider of enterprise software solutions. The company's operations span the United States, the wider Americas, the United Kingdom, other European nations...
How the Company Makes Money
Pegasystems makes money primarily by selling access to its software through subscription licenses and by providing related professional services.
1) Software revenue (primarily subscription): The company’s main revenue stream comes from subscript...
Pegasystems Earnings Call Summary
Earnings Call Date:Oct 20, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:Feb 17, 2027
Earnings Call Sentiment Neutral
The call presented a strong long-term strategic and product opportunity, supported by Pega Cloud growth, expanding backlog, improving pipeline maturity, customer AI outcomes, industry recognition, and a maintained long-term free cash flow target. However, these positives were tempered by acknowledged execution shortcomings, ACV growth below plan, longer sales cycles, deployment challenges, lower 2026 cash flow, and less predictable purchasing behavior. Management was confident in the opportunity but cautious about near-term execution and 2026 results.Positive Updates
Differentiated AI Workflow Strategy
Management emphasized Pega's approach of combining workflows, decisioning, governance, and AI models to deliver predictable outcomes and predictable costs. Blueprint and Pega Infinity are designed to structure AI at design time, control agent activity at runtime, reduce token usage, and support fixed case pricing with no token charge.
Negative Updates
Execution Has Not Kept Pace With the Opportunity
Alan Trefler said Pega's execution during 2026 had not kept up with the AI opportunity. He added that Q3 showed improvement from the first half but that the quarter's growth did not come close to reflecting the opportunity in front of the company.
Read all updates
Q3-2026 Updates
Positive
Negative
Differentiated AI Workflow Strategy
Management emphasized Pega's approach of combining workflows, decisioning, governance, and AI models to deliver predictable outcomes and predictable costs. Blueprint and Pega Infinity are designed to structure AI at design time, control agent activity at runtime, reduce token usage, and support fixed case pricing with no token charge.
Read all positive updates
Company Guidance
Management expects an acceleration of growth in Q4 but does not believe it will achieve its full plan for the second half; ACV growth is expected to be up from here but not above 10% for the 2026 year, with ACV growth somewhere between where we are now and 10%. The company expects to grow from where it is now in Q3 and Q4 and into 2027, and would not anticipate it being as back-end loaded at this early stage as what 2026 looks like it is going to play out to be. The execution changes are expected to produce improvements in the early to mid part of 2027, with headcount expected to be approximately 5,000 employees during the first quarter of 2027, down a few hundred from where we sit today. Adjusted free cash flow is expected to be above $600 million next year and on to a $700 million path in 2028, while the company continues to target $700 million or more of free cash flow in 2028; Pega Cloud backlog typically comes into revenue over the next two to three quarters, and Pega Cloud current RPO should be assumed to come in a couple of quarters after it enters.Pegasystems Financial Statement Overview
Summary
Income Statement
82
Very Positive
Balance Sheet
88
Very Positive
Cash Flow
78
Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.75B | 1.75B | 1.50B | 1.43B | 1.32B | 1.21B |
| Gross Profit | 1.33B | 1.32B | 1.11B | 1.05B | 949.21M | 875.29M |
| EBITDA | 203.89M | 307.82M | 184.90M | 136.97M | -119.28M | -95.44M |
| Net Income | 294.76M | 393.44M | 99.19M | 67.81M | -345.58M | -63.04M |
Balance Sheet | ||||||
| Total Assets | 1.33B | 1.63B | 1.77B | 1.51B | 1.36B | 1.59B |
| Cash, Cash Equivalents and Short-Term Investments | 309.71M | 425.80M | 739.97M | 423.34M | 297.22M | 362.78M |
| Total Debt | 69.03M | 75.97M | 549.67M | 581.27M | 687.74M | 685.53M |
| Total Liabilities | 781.23M | 844.46M | 1.18B | 1.16B | 1.23B | 1.18B |
| Stockholders Equity | 549.06M | 787.38M | 585.48M | 353.84M | 130.84M | 416.09M |
Cash Flow | ||||||
| Free Cash Flow | 452.20M | 490.72M | 338.21M | 201.00M | -13.04M | 28.66M |
| Operating Cash Flow | 462.73M | 505.23M | 345.93M | 217.78M | 22.34M | 39.12M |
| Investing Cash Flow | 71.39M | 197.25M | -202.58M | -50.75M | 13.07M | 72.50M |
| Financing Cash Flow | -331.26M | -834.63M | -30.21M | -81.96M | -46.99M | -121.84M |
Pegasystems Technical Analysis
Positive
33.83
Price Trends
35.04
Positive
33.14
Positive
37.51
Negative
Market Momentum
0.35
Negative
56.37
Neutral
72.75
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PEGA, the sentiment is Positive. The current price of 33.83 is below the 20-day moving average (MA) of 34.77, below the 50-day MA of 35.04, and below the 200-day MA of 37.51, indicating a neutral trend. The MACD of 0.35 indicates Negative momentum. The RSI at 56.37 is Neutral, neither overbought nor oversold. The STOCH value of 72.75 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for PEGA.
Pegasystems Risk Analysis
Pegasystems disclosed 30 risk factors in its most recent earnings report. Pegasystems reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Pegasystems Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
81 Outperform | $6.75B | 16.56 | 11.28% | 0.92% | 8.08% | -18.39% | |
79 Outperform | $4.04B | 23.59 | 19.50% | ― | 15.57% | ― | |
74 Outperform | $5.96B | 20.93 | 45.30% | 0.56% | 0.93% | 7.44% | |
73 Outperform | $2.45B | 74.74 | 3.36% | ― | 8.57% | ― | |
72 Outperform | $2.81B | 49.49 | 7.49% | ― | 8.87% | 562.42% | |
64 Neutral | $1.55B | 69.91 | 4.29% | ― | 6.35% | -79.74% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% |
* Technology Sector Average
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.