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1. Company Snapshot

1.a. Company Description

Pegasystems Inc.develops, markets, licenses, hosts, and supports enterprise software applications in the United States, rest of the Americas, the United Kingdom, rest of Europe, the Middle East, Africa, and the Asia-Pacific.It provides Pega Platform, an application development product for clients; and Pega Infinity, a software platform that unifies customer engagement and digital process automation.


The company also offers customer engagement applications, including Pega Customer Decision Hub that enable enterprises to enhance customer acquisition and experiences across inbound, outbound, and paid media channels; Pega Sales Automation to automate and manage the sales process; and Pega Customer Service to anticipate customer needs, connect customers to people and systems, and automate customer interactions to evolve the customer service experience, as well as to allow enterprises to deliver interactions across channels and enhance employee productivity.In addition, it provides intelligent automation software; Pega Cloud that allows clients to develop, test, and deploy applications and the Pega Platform using an Internet-based infrastructure; Pega Academy, which offers instructor-led and online training to its employees, clients, and partners; and guidance, implementation, and technical support services.The company primarily markets its software and services to financial services, life sciences, healthcare, communications and media, government, insurance, manufacturing and high tech, and consumer services markets through a direct sales force, as well as partnerships with technology providers and application developers.


Pegasystems Inc.was incorporated in 1983 and is headquartered in Cambridge, Massachusetts.

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1.b. Last Insights on PEGA

Pegasystems' recent performance was driven by its strong Q3 earnings report, which beat consensus estimates. The company's AI-driven Pega Blueprint boosts cloud growth, margins, and revenue momentum. Total annual contract value increased by 14%, and Pega Cloud revenue grew 28% year-over-year. The company also expanded privacy and security capabilities for Pega Blueprint, enhancing data sovereignty. Institutional investors, such as Oppenheimer Asset Management and Ethic Inc., have shown confidence in the company, with increased stakes and new investments.

1.c. Company Highlights

2. Pegasystems' Q3 2025 Earnings: Strong AI-Driven Growth

Pegasystems reported a robust Q3 2025, with its financial performance driven by its differentiated AI strategy. The company's EPS came in at $0.3, beating estimates of $0.18. Annual contract value (ACV) grew 14% year-over-year, with Pega Cloud ACV growing 27% year-over-year. The company generated $347 million of operating cash flow and $338 million of free cash flow through the first 9 months of 2025, representing 38% growth year-over-year.

Publication Date: Oct -27

📋 Highlights
  • AI-Driven Competitive Advantage:: Pegasystems' patented workflow engine combined with LLMs for application design drives client adoption, reflected in 14% YoY ACV growth and 27% YoY Pega Cloud ACV growth.
  • Strong Cash Flow Generation:: Generated $347M operating cash flow and $338M free cash flow in Q1-Q3 2025, a 38% YoY increase, supported by disciplined management and cloud migration.
  • Pega GenAI Blueprint Impact:: Enabled new client acquisition via non-Pega partners and accelerated solutioning, with $147M net new ACV added in 9M 2025, surpassing 2024’s annual total.
  • Cloud Transition Momentum:: 85% of ACV growth in 2025 attributed to Pega Cloud, with margins approaching 80%, though term license revenue is expected to decline as clients shift to cloud.
  • Strategic Stock Buybacks:: Repurchased $393M in shares (8.7M shares) and maintained a debt-free balance sheet with $350M in cash, reinforcing capital return to shareholders and financial strength.

Financial Highlights

The company's strong financial performance was driven by its Pega Cloud business, with ACV growth of 27% year-over-year. Pega Cloud margins continue to expand, approaching 80% in Q3. The company's free cash flow yield stands at 3.91%, indicating a healthy cash generation capability.

Growth Drivers

A key growth driver for Pegasystems is its Pega GenAI Blueprint, which is generating enthusiasm among clients. The tool enables clients to design sophisticated workflows that streamline operations and improve customer service. The company is seeing a lot of energy around application modernization, particularly with its new features introduced in the last 60-90 days.

Valuation Metrics

With a P/E Ratio of 40.67 and an EV/EBITDA of 30.17, Pegasystems' valuation multiples indicate a premium valuation. However, the company's strong growth prospects and healthy cash generation capability justify the premium. The company's ROIC stands at 36.57%, indicating a strong return on invested capital.

Partnerships and Future Growth

Pegasystems' partnership with other companies to offer co-branded Blueprints is expected to unlock new use cases and expand the company's reach. The company aims to leverage the 100,000-plus sellers in its partner ecosystem to drive growth, which could lead to an order of magnitude change in growth. Analysts estimate next year's revenue growth at 6.7%, indicating a moderate growth outlook.

Industry Trends

The company is seeing a shift towards outcome-based pricing and work-based pricing in the industry. Pegasystems has been moving towards work-based pricing for several years, charging clients based on the amount of work its system performs. This approach aligns incentives between vendors and customers, encouraging efficiency and process automation.

3. NewsRoom

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American Century Companies Inc. Purchases 254,293 Shares of Pegasystems Inc. $PEGA

Dec -03

Source: defenseworld.net

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Pegasystems Inc. (PEGA) Presents at UBS Global Technology and AI Conference 2025 Transcript

Dec -02

Source: seekingalpha.com

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Pega and Moody's Collaborate to Streamline Customer Lifecycle Management and KYC Processes for Financial Services

Dec -02

Source: businesswire.com

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Boston Partners Acquires New Stake in Pegasystems Inc. $PEGA

Nov -29

Source: defenseworld.net

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ADBE vs. PEGA: Which Enterprise Software Stock is a Better Buy Now?

Nov -27

Source: zacks.com

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Why Is Pegasystems (PEGA) Down 17.6% Since Last Earnings Report?

Nov -20

Source: zacks.com

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Pegasystems Inc. (PEGA) Presents at Global Technology, Internet, Media & Telecommunications Conference 2025 Transcript

Nov -18

Source: seekingalpha.com

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Pega Named a Leader in Real-Time Interaction Management Software by Independent Research Firm

Nov -17

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.58%)

6. Segments

Subscription Services

Expected Growth: 5.5%

Pegasystems' Subscription Services growth of 5.5% is driven by increasing adoption of cloud-based solutions, expansion into new industries, and growing demand for digital transformation. Additionally, the company's strategic partnerships, innovative product offerings, and strong customer retention rates contribute to this growth.

Subscription License

Expected Growth: 6.2%

Pegasystems' Subscription License growth of 6.2% is driven by increasing demand for digital transformation, adoption of cloud-based solutions, and expansion into new industries. Additionally, the company's strategic partnerships, innovative product offerings, and strong sales execution contribute to this growth.

Consulting

Expected Growth: 4.8%

Pegasystems Inc.'s 4.8% growth in consulting is driven by increasing demand for digital transformation, adoption of cloud-based solutions, and growing need for customer experience improvement. Additionally, the company's strong partnerships, innovative products, and expanding presence in emerging markets contribute to its growth momentum.

Perpetual License

Expected Growth: 3.5%

Pegasystems' Perpetual License growth is driven by increasing demand for digital transformation, low-code development, and customer engagement solutions. The 3.5% growth rate is fueled by expanding adoption in industries such as financial services, healthcare, and government, as well as the company's strategic partnerships and investments in emerging technologies like AI and cloud computing.

7. Detailed Products

Pega Platform

A business process management (BPM) and customer relationship management (CRM) platform that enables organizations to digitize and automate business processes, and deliver personalized customer experiences.

Pega Customer Service

A customer service platform that enables organizations to deliver personalized, omnichannel customer experiences, and provides a unified view of customer interactions.

Pega Marketing

A marketing automation platform that enables organizations to deliver personalized, omnichannel marketing campaigns, and provides real-time customer insights.

Pega Sales Automation

A sales automation platform that enables organizations to automate and optimize sales processes, and provides real-time sales insights.

Pega Customer Decision Hub

A customer decision hub that enables organizations to make data-driven decisions, and provides real-time customer insights.

Pega Workforce Intelligence

A workforce intelligence platform that enables organizations to optimize workforce operations, and provides real-time workforce insights.

8. Pegasystems Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Pegasystems Inc. has a medium threat of substitutes due to the presence of alternative BPM and CRM solutions in the market.

Bargaining Power Of Customers

Pegasystems Inc. has a low bargaining power of customers due to its strong brand reputation and customer loyalty.

Bargaining Power Of Suppliers

Pegasystems Inc. has a medium bargaining power of suppliers due to its dependence on a few key suppliers for technology and services.

Threat Of New Entrants

Pegasystems Inc. has a high threat of new entrants due to the growing demand for digital transformation and BPM solutions.

Intensity Of Rivalry

Pegasystems Inc. operates in a highly competitive market with intense rivalry among established players, leading to a high intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 59.24%
Debt Cost 3.95%
Equity Weight 40.76%
Equity Cost 9.18%
WACC 6.08%
Leverage 145.37%

11. Quality Control: Pegasystems Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Pegasystems

A-Score: 5.1/10

Value: 1.3

Growth: 8.0

Quality: 9.1

Yield: 0.0

Momentum: 9.0

Volatility: 3.3

1-Year Total Return ->

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Stock-Card
Workiva

A-Score: 4.9/10

Value: 6.5

Growth: 6.7

Quality: 6.5

Yield: 0.0

Momentum: 6.0

Volatility: 3.7

1-Year Total Return ->

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Stock-Card
Dynatrace

A-Score: 4.7/10

Value: 1.0

Growth: 8.9

Quality: 8.6

Yield: 0.0

Momentum: 3.0

Volatility: 7.0

1-Year Total Return ->

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Stock-Card
Smartsheet

A-Score: 4.1/10

Value: 2.5

Growth: 7.4

Quality: 4.6

Yield: 0.0

Momentum: 5.0

Volatility: 5.3

1-Year Total Return ->

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Stock-Card
Braze

A-Score: 3.6/10

Value: 4.8

Growth: 6.1

Quality: 4.5

Yield: 0.0

Momentum: 3.0

Volatility: 3.0

1-Year Total Return ->

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Stock-Card
Zeta Global

A-Score: 2.6/10

Value: 3.1

Growth: 4.4

Quality: 4.8

Yield: 0.0

Momentum: 1.0

Volatility: 2.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

57.0$

Current Price

57$

Potential

-0.00%

Expected Cash-Flows