PEGA earnings analysis
What we found in PEGA's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
Pegasystems delivered 9% year-over-year Q2 revenue growth to $420.716 million, powered by a 28% increase in Pega Cloud revenue, but revenue was down from $430 million in Q1 2026. GAAP EPS of $0.08 and a 4.0% operating margin both deteriorated sequentially, with legal costs contributing $11.5 million of incremental expense. While six-month free cash flow remained strong at $288.258 million, management warned that AI-driven delays in customer purchasing may pressure ACV growth and cash generation through the rest of 2026.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- Cloud-led revenue growth
- Q2 revenue rose 9% year over year to $420.716 million, led by Pega Cloud revenue growth of 28% to $213.934 million. Revenue nevertheless declined 2% from Q1 2026 revenue of $430 million.
- Cloud ACV and backlog expanded
- Pega Cloud ACV increased 22% year over year to $926.290 million, lifting total ACV 7% to $1.620 billion; backlog also increased 10% to $2.019 billion.
- Year-over-year gross-margin recovery
- Gross profit increased 14% to $312.687 million and gross margin improved to 74.3% from 71.5% in Q2 2025, although it declined from 75.2% in Q1 2026.
- Cash generation remained strong
- Six-month operating cash flow grew 3% to $298.225 million, and free cash flow increased 1% to $288.258 million. Capex was $9.967 million, equal to 3.3% of operating cash flow.
- Large shareholder-return program
- The company repurchased $367.200 million of stock in the first six months and retained $875.054 million of repurchase authorization as of June 30, 2026.
- No revolver borrowings
- Liquidity remained substantial, with $361.907 million of cash, cash equivalents and marketable securities and no cash borrowings under the $100 million revolving credit facility at June 30, 2026.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- Profitability deteriorated sequentially
- GAAP diluted EPS fell to $0.08 from $0.18 in Q1 2026 and $0.17 in Q2 2025. Operating margin fell to 4.0% from 8.6% sequentially as operating expenses increased 14% to $296.051 million.
- Client delays are slowing ACV growth
- Management said AI-market disruption delayed client purchases; total ACV growth slowed to 7% to $1.620 billion. Subscription-license ACV declined 6% to $422.316 million and maintenance ACV declined 10% to $271.328 million.
- Legal costs materially increased
- General and administrative expense rose 38% to $43.740 million, driven mainly by an $11.5 million increase in legal fees and related expenses. Management expects to continue incurring additional costs for these proceedings.
- Buybacks reduced cash balance
- Cash, cash equivalents and marketable securities declined $63.892 million from $425.799 million at December 31, 2025 to $361.907 million, while first-half share repurchases totaled $367.200 million.
- Services and maintenance revenues contracted
- Consulting revenue declined 13% to $50.226 million due to lower Americas consultant billable hours, while maintenance revenue declined 6% to $74.528 million as clients moved to cloud offerings.
- No formal risk-factor update
- Item 1A contained no newly enumerated risk-factor changes and referred investors to the annual report for the year ended December 31, 2025; however, management explicitly warned that the 7% ACV growth rate could be adversely affected for the rest of 2026.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $0.08
- Gross margin
- 74.3%
- Operating margin
- 4.0%
- Segment
- Pega Cloud revenue: $213.934 million, up 28% year over year
- Segment
- Maintenance revenue: $74.528 million, down 6% year over year
- Segment
- Subscription license revenue: $82.028 million, up 2% year over year
- Segment
- Consulting revenue: $50.226 million, down 13% year over year
What they said about what is next.
The 10-Q provided no numeric revenue or EPS outlook. Management said AI-market changes caused delayed client purchasing decisions and may adversely affect ACV growth and cash-flow generation for the remainder of 2026.
The filing reads worse than the one before it.
What came before.
- 10-Q · April 21, 2026
- Pegasystems reported revenue of $429,973,000 for the quarter (three months ended March 31, 2026), down versus the prior year quarter and prior quarter, with gross margin compressing and operating profit falling sharply.…
- 10-Q · October 21, 2025
- Revenue improved to $381,350,000 in Q3 2025 (+$56,300,000 vs Q3 2024) and the company returned to operating profitability with operating income of $14,469,000 and net income of $43,364,000 (diluted EPS $0.24). Cash and…
- 10-K · February 12, 2025
- Pegasystems reports full-year 2024 revenue of $1,497,180,000 (up from $1,432,616,000 in 2023) with gross profit of $1,106,515,000 and net income of $99,189,000. The company ended 2024 with $739,973,000 of cash, cash…
- 10-K · February 14, 2024
- Pegasystems returned to profitability in 2023 with revenue of $1,432,616,000 and net income of $67,808,000 (diluted EPS $0.73), driven by recurring subscription services and improved operating performance. The company…
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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