Pegasystems Inc. Earnings Summary — Q2 FY2026

• Annual Contract Value (ACV) grew 12% year-over-year to $1.62B, led by a 29% surge in Pega Cloud ACV.
• Total revenue declined 10% YoY, primarily due to a 49% drop in front-loaded Subscription License revenue ($94.9M vs $187.7M).
• Pega Cloud revenue grew 36% YoY to $205M, now representing 48% of total quarterly revenue compared to 32% in the prior year.
• Cash flow from operations remained strong at $212M, up 4% YoY, despite the drop in GAAP net income.
• Backlog (Remaining Performance Obligations) increased 16% YoY to $2.01B, signaling strong forward visibility.
• The decline in GAAP profitability was impacted by higher legal fees ($20M vs $6.5M) and increased R&D and S&M spending.

Management indicated that Pega is well-positioned to drive ACV growth and expand cash flow margins as enterprises demand real ROI from AI; however, specific numerical guidance for FY2026 was not provided in the quarterly release supplemental. Growth is focused on Blueprint AI adoption.

Stable

While GAAP metrics show a sharp decline, the underlying fundamentals of the cloud transition (ACV and Cash Flow) remain robust. The revenue dip reflects the timing of license renewals rather than a loss of market share.

The company continues its shift toward a pure Pega Cloud model, relying on 'Blueprint' AI to differentiate its workflow engine. The high recurring revenue base (87% of total revenue is subscription-based) provides a floor for long-term cash generation.