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Pegasystems
(NASDAQ:PEGA)
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Rating:72Outperform
Price Target:
$37.00
▲(9.37% Upside)
Action:Upgraded
Date:09/06/26
PEGA scores solidly on the back of materially improved financial performance—strong margins, significantly lower leverage, and robust free cash flow that aligns with earnings. The score is held back by near-term growth/execution concerns highlighted on the earnings call (ACV shortfall and back-half dependence) and a technical picture that is positive but somewhat extended and still below the 200-day moving average. Valuation appears reasonable rather than a clear bargain, with limited support from a low dividend yield.
Positive Factors
Cloud subscription growth
Strong growth in Pega Cloud ACV and its rising share of total ACV support a durable shift toward recurring subscription revenue. Greater cloud adoption can deepen customer relationships, expand usage across workflows, and improve the scalability and predictability of the business model over time.
Negative Factors
Muted revenue growth and margin pressure
Flat recent revenue suggests that improved earnings are currently driven more by profitability than by expanding demand. The decline in operating profitability from 2025 also raises questions about margin sustainability, making continued growth and operating discipline important to preserving earnings quality.
Read all positive and negative factors
Positive Factors
Negative Factors
Cloud subscription growth
Strong growth in Pega Cloud ACV and its rising share of total ACV support a durable shift toward recurring subscription revenue. Greater cloud adoption can deepen customer relationships, expand usage across workflows, and improve the scalability and predictability of the business model over time.
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
$5.66B
Dividend Yield0.51%
Average Volume (3M)2.12M
Price to Earnings (P/E)17.9
Beta (1Y)1.42
Revenue Growth3.60%
EPS Growth48.92%
CountryUS
Employees5,598
SectorTechnology
Sector Strength88
IndustrySoftware - Application
Share Statistics
EPS (TTM)1.90
Shares Outstanding164,404,940
10 Day Avg. Volume2,076,308
30 Day Avg. Volume2,122,779
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 Cap<0.01
Enterprise Value/Revenue<0.01
Enterprise Value/Gross Profit<0.01
Enterprise Value/Ebitda<0.01
Forecast
1Y Price Target
$38.83Price Target Upside14.79% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering10
EPS Forecast (FY)2.43
Revenue Forecast (FY)$1.87B
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:Jul 21, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Oct 28, 2026
Earnings Call Sentiment Neutral
The call balanced meaningful operational and product strengths against near-term demand and execution challenges. Positives include strong Pega Cloud ACV growth (22% YoY), record H1 free cash flow ($288M), substantial share repurchases (~$360M), and major product releases (Infinity 26, Infinity Studio, Blueprint AI) that reinforce a differentiated, no-per-token value proposition. Negatives center on slower-than-expected ACV performance in H1 driven by buyer confusion around AI/token economics, elongated deals, and acknowledged go-to-market execution shortcomings. Management expects the back half of 2026 to be pivotal and reiterated long-term cashflow objectives (>$700M by 2028) while planning disciplined spending and efficiency moves. Overall, the company presents strong long-term positioning and cash durability but faces meaningful near-term execution and demand risks that need to be addressed in H2.Positive Updates
Pega Cloud ACV Strong Year-over-Year Growth
Pega Cloud annual contract value (ACV) increased by $165 million year-over-year, growing 22% as reported and in constant currency; Pega Cloud now represents 57% of total ACV (with management targeting ~75% over time).
Negative Updates
ACV Growth Below Expectations / First-Half Shortfall
Overall ACV growth and net new ACV were below Company expectations in H1; management assumed 1/3 of net new ACV in H1 and 2/3 in H2 but significantly underachieved the H1 portion, creating a challenging back half.
Read all updates
Q2-2026 Updates
Positive
Negative
Pega Cloud ACV Strong Year-over-Year Growth
Pega Cloud annual contract value (ACV) increased by $165 million year-over-year, growing 22% as reported and in constant currency; Pega Cloud now represents 57% of total ACV (with management targeting ~75% over time).
Read all positive updates
Company Guidance
Management reiterated that it provides annual guidance only (no quarterly updates) and models full‑year net new ACV with a 1/3 H1 / 2/3 H2 split, cautioning that the weaker first half makes the back‑loaded year harder to achieve; key metrics cited: Pega Cloud ACV rose $165M YoY (up ~22% YoY vs. ~27% at the end of the prior quarter) and now represents 57% of total ACV (management believes it could reach ~75% over time), total ACV grew 7% reported (8% constant currency), first‑half free cash flow was $288M, the company repurchased 9M shares for >$360M (reducing outstanding shares by ~6M), management reiterated a FY2026 free cash flow target of $575M while maintaining a longer‑term objective of $700M+ FCF in 2028, and warned that ACV shortfalls would put pressure on the $575M target so they will temper spending accordingly.Pegasystems Financial Statement Overview
Summary
Income Statement
78
Positive
Balance Sheet
73
Positive
Cash Flow
85
Very Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.74B | 1.75B | 1.50B | 1.43B | 1.32B | 1.21B |
| Gross Profit | 1.31B | 1.32B | 1.11B | 1.05B | 949.21M | 875.29M |
| EBITDA | 196.90M | 307.82M | 184.90M | 136.97M | -119.28M | -95.44M |
| Net Income | 324.04M | 393.44M | 99.19M | 67.81M | -345.58M | -63.04M |
Balance Sheet | ||||||
| Total Assets | 1.38B | 1.63B | 1.77B | 1.51B | 1.36B | 1.59B |
| Cash, Cash Equivalents and Short-Term Investments | 361.91M | 425.80M | 739.97M | 423.34M | 297.22M | 362.78M |
| Total Debt | 72.02M | 75.97M | 549.67M | 581.27M | 687.74M | 685.53M |
| Total Liabilities | 823.66M | 844.46M | 1.18B | 1.16B | 1.23B | 1.18B |
| Stockholders Equity | 560.38M | 787.38M | 585.48M | 353.84M | 130.84M | 416.09M |
Cash Flow | ||||||
| Free Cash Flow | 502.47M | 490.72M | 338.21M | 201.00M | -13.04M | 28.66M |
| Operating Cash Flow | 512.96M | 505.23M | 345.93M | 217.78M | 22.34M | 39.12M |
| Investing Cash Flow | 10.08M | 197.25M | -202.58M | -50.75M | 13.07M | 72.50M |
| Financing Cash Flow | -388.29M | -834.63M | -30.21M | -81.96M | -46.99M | -121.84M |
Pegasystems Technical Analysis
Negative
33.83
Price Trends
33.79
Positive
33.01
Positive
39.37
Negative
Market Momentum
-0.25
Positive
46.46
Neutral
53.64
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PEGA, the sentiment is Negative. The current price of 33.83 is below the 20-day moving average (MA) of 35.23, above the 50-day MA of 33.79, and below the 200-day MA of 39.37, indicating a neutral trend. The MACD of -0.25 indicates Positive momentum. The RSI at 46.46 is Neutral, neither overbought nor oversold. The STOCH value of 53.64 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 |
|---|---|---|---|---|---|---|---|
82 Outperform | $3.43B | 19.46 | 19.50% | ― | 15.57% | ― | |
81 Outperform | $6.71B | 16.41 | 11.28% | 0.92% | 8.08% | -18.39% | |
73 Outperform | $2.05B | 60.26 | 3.36% | ― | 8.57% | ― | |
72 Outperform | $5.66B | 17.86 | 48.90% | 0.51% | 3.60% | 48.92% | |
72 Outperform | $2.67B | 45.21 | 7.49% | ― | 8.87% | 562.42% | |
64 Neutral | $1.21B | 54.34 | 4.29% | ― | 6.35% | -79.74% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% |
* Technology Sector Average
PEGA
Pegasystems
33.93
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-38.47%
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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.