Pegasystems Q4 Earnings Surpass Estimates, Revenues Increase Y/Y

Pegasystems PEGA reported fourth-quarter 2025 non-GAAP earnings of 76 cents per share, which beat the Zacks Consensus Estimate by 5.56% but decreased 5% year over year.

Revenues of $504.32 million beat the Zacks Consensus Estimate by 4.04% and increased 3% year over year.

Pegasystems’ strong fourth-quarter 2025 performance is driven by its unique innovation, along with bold ideas led by the Pega Blueprint platform. Growth was fueled by AI-integrated workflows, rising cloud subscriptions and disciplined execution, resulting in higher ACV, backlog and margin gains. 
 
PEGA stock has dropped 29.5% in the trailing 12 months, underperforming the Zacks Computer and Technology sector’s growth of 23.1%

PEGA’s Quarterly Performance

Subscription services revenues, comprising Pega Cloud and Maintenance, generated $272.8 million (contributing 54.1% to total revenues), up 18.1% on a year-over-year basis.

Subscription license revenues (35.3% of total revenues) were $178.2 million, representing a 14% year-over-year decline.

Total Subscription revenues, consisting of both subscription services and subscription licenses, rose 3% year over year to $451 million (contributing 89.4% to total revenues).

Consulting revenues (10.6% of the total revenues) were $53.3 million. The reported figure is up 0.9% year over year.

Pega Cloud’s Annual Contract Value (ACV) increased 33% year over year to $867 million.

Maintenance and Subscription licenses, collectively referred to as Client Cloud ACV, rose approximately 2.9% year over year to $741 million.

The company reported that Total ACV increased 17% year over year on a reported and 14% on a constant-currency basis, reaching $1.608 billion.

The company's backlog grew 28% year over year on a reported basis and 23% on a constant currency basis, underscoring the sustained demand for its services and products and future revenue visibility.

Pegasystems’ Q4 Operating Results

In the fourth quarter of 2025, gross margin expanded 30 basis points (bps) year over year to 79.5%.

Total operating expenses increased 20.8% year over year to $296.5 million. As a percentage of revenues, operating expenses increased 880 bps.

The company reported an operating income of $104.4 million, down 27% year over year. The operating margin contracted 840 bps from the year-ago quarter to 20.7%.

PEGA’s Balance Sheet & Cash Flow

As of Dec. 31, 2025, cash and cash equivalents and marketable securities were $425.8 million compared with $351.3 million as of Sept. 30, 2025.

Operating cash flow rose more than 45% year over year to $505 million, while free cash flow grew 45% to approximately $491 million.

PEGA’s Zacks Rank & Stocks to Consider

Currently, Pegasystems carries a Zacks Rank #3 (Hold).

Analog Devices ADI, Applied Materials AMAT, and MKS MKSI are some better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector.

Analog Devices' shares have gained 59.8% in the past 12-month period. ADI currently carries a Zacks Rank #2 (Buy). The company is scheduled to release first-quarter 2026 results on Feb. 18, 2026. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Applied Materials shares have gained 79.6% in the past 12-month period. AMAT is scheduled to release its first-quarter 2026 results on Feb. 12, 2026. Applied Materials carries a Zacks Rank #2.

MKS shares have gained 128.2% in the past 12-month period. MKSI is set to report its fourth-quarter 2025 results on Feb. 17, 2026. The company currently sports a Zacks Rank #1.

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This article originally published on Zacks Investment Research (zacks.com).

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