Financial Performance - ACV (Annual Contract Value) grew by 16%, or 14% in constant currency, reaching $1.514 billion as of June 30, 2025[60, 62] - Pega Cloud ACV experienced significant growth of 28%, or 25% in constant currency[21, 71, 75] - Free cash flow year-to-date (YTD) reached $286 million[21] - Total backlog increased by 31% to $1.835 billion[84] - Net ACV add for the first half of 2025 was $99 million, a 60% increase compared to the first half of 2024[78, 79] Market and Business Strategy - Pega is targeting a large market opportunity, estimated at over $90 billion in FY25 and projected to exceed $150 billion by FY29[26, 56] - The company is focused on a recurring subscription model and aims to drive ACV growth and leverage Pega Cloud[54, 66] - Pega emphasizes its technology leadership in customer engagement and intelligent automation[26] Technology and Solutions - Pega's platform offers enterprise AI decisioning and workflow automation[11] - Key solutions include 1:1 Customer Engagement, Customer Service, and Workflow Automation[12, 30] - Pega's architecture is designed for scalability and rapid innovation, featuring the Situational Layer Cake and Pega Express[13, 14]

Core Insights - Pegasystems reported revenue of $384.51 million for the quarter ended June 2025, reflecting a year-over-year increase of 9.5% and surpassing the Zacks Consensus Estimate by 4.27% [1] - The company's EPS for the quarter was $0.28, up from $0.26 in the same quarter last year, exceeding the consensus estimate of $0.24 by 16.67% [1] Revenue Breakdown - Subscription services revenue was $246.01 million, below the average estimate of $251.35 million, but showed a year-over-year increase of 14.7% [4] - Subscription license revenue reached $79.96 million, exceeding the average estimate of $53.75 million, but represented a decline of 5.5% compared to the previous year [4] - Total subscription revenue was $325.98 million, surpassing the average estimate of $305.08 million, with a year-over-year growth of 9% [4] - Perpetual license revenue was reported at $0.71 million, significantly higher than the average estimate of $0.07 million, marking a year-over-year increase of 1875% [4] - Maintenance revenue was $79.27 million, falling short of the average estimate of $106.67 million [4] - Consulting revenue was $57.82 million, slightly above the average estimate of $54.62 million, with an 11.1% increase year-over-year [4] - Pega Cloud revenue was $166.74 million, below the average estimate of $172.96 million [4] Stock Performance - Pegasystems' shares have returned +2.8% over the past month, compared to a +5.9% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 1 (Strong Buy), indicating potential for outperformance in the near term [3]

Core Insights - Pegasystems (PEGA) reported quarterly earnings of $0.28 per share, exceeding the Zacks Consensus Estimate of $0.24 per share, and showing an increase from $0.26 per share a year ago, resulting in an earnings surprise of +16.67% [1] - The company achieved revenues of $384.51 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 4.27% and up from $351.15 million year-over-year [2] - Pegasystems has consistently outperformed consensus EPS estimates over the last four quarters, achieving this four times [2] Financial Performance - The earnings surprise of +230.43% in the previous quarter, where actual earnings were $0.76 compared to an expected $0.23, indicates strong performance [1] - The current consensus EPS estimate for the upcoming quarter is $0.20, with expected revenues of $358.58 million, and for the current fiscal year, the EPS estimate is $1.88 on revenues of $1.67 billion [7] Market Position - Pegasystems shares have increased by approximately 10.2% since the beginning of the year, outperforming the S&P 500's gain of 7.2% [3] - The company holds a Zacks Rank 1 (Strong Buy), indicating expectations for the stock to outperform the market in the near future [6] Industry Outlook - The Computer - Software industry, to which Pegasystems belongs, is currently ranked in the top 20% of over 250 Zacks industries, suggesting a favorable environment for performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________ FORM 10-Q _____________________________________ ☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2025 (Registrant's telephone number, including area code) ____________________________ OR ☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 1-11859 ____________________ ...

EXHIBIT 99.1 Pega's AI Strategy Powers Continued Acceleration in Q2 2025 WALTHAM, Mass. — July 22, 2025 — Pegasystems Inc. (NASDAQ: PEGA), the Enterprise Transformation Company™, released its financial results for the second quarter of 2025. "Our unique approach to AI was a key driver of our strong first half results," said Alan Trefler, Pega founder and CEO. "Pega harnesses AI's creative potential where it can best drive transformation—during workflow design with Pega Blueprint. This drives consistent exec ...

Core Insights - Pegasystems (PEGA) is expected to report second-quarter 2025 results on July 22, with revenue growth projected at 5.02% year-over-year to $368.77 million and earnings estimated at 24 cents per share, reflecting a decline of 7.69% from the previous year [1][10] Financial Performance - PEGA has consistently beaten the Zacks Consensus Estimate in the last four quarters, with an average surprise of 94.01% [2] - The company generated $202 million in free cash flow in the first quarter of 2025, surpassing the total for the entire year of 2023, indicating strong cash flow performance [6] Cloud Business Growth - Pegasystems is experiencing significant growth in its cloud business, with Cloud Annual Contract Value (ACV) increasing by 23% year-over-year to $701 million in the first quarter of 2025 [3] - The company aims for 20% or more annual Cloud ACV growth, with strategic efforts to transition legacy workloads to Pega Cloud gaining traction [4] Challenges and Risks - The second-quarter performance may be negatively impacted by unfavorable foreign exchange rates and cautious spending behavior in Europe, which has led to deferred client spending and reduced IT budgets [7][8] - Intense competition from Salesforce and Microsoft in the AI-driven space is expected to challenge Pegasystems' market share and margin stability [8] Long-term Prospects - The adoption of Pegasystems' GenAI strategy, particularly through its AI-powered low-code tool, Pega Blueprint, is expected to drive long-term growth [11] - A collaboration with Amazon Web Services is anticipated to enhance Pegasystems' growth by modernizing cloud-based legacy systems and improving AI capabilities [12] Stock Performance - PEGA shares have returned 9.3% year-to-date, slightly trailing the Zacks Computer and Technology sector's gain of 9.6% [13] - The stock is currently trading at a Price/Book ratio of 14.26X, indicating a premium valuation compared to the sector's 10.45X [16]

Core Viewpoint - Pegasystems (PEGA) is anticipated to report a year-over-year decline in earnings despite an increase in revenues for the quarter ended June 2025, with actual results being a significant factor influencing its near-term stock price [1][2]. Earnings Expectations - The upcoming earnings report is expected to be released on July 22, and if the key numbers exceed expectations, the stock may rise; conversely, a miss could lead to a decline [2]. - The consensus estimate for quarterly earnings is $0.24 per share, reflecting a year-over-year decrease of 7.7%, while revenues are projected to be $368.77 million, representing a 5% increase from the previous year [3]. Estimate Revisions - Over the last 30 days, the consensus EPS estimate has been revised down by 5%, indicating a collective reassessment by analysts [4]. - The Most Accurate Estimate for Pegasystems is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -12.03%, suggesting a bearish outlook from analysts [12]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that a positive or negative reading can predict the deviation of actual earnings from consensus estimates, with positive readings being more reliable [9][10]. - Pegasystems currently holds a Zacks Rank of 1, but the negative Earnings ESP complicates the prediction of an earnings beat [12]. Historical Performance - In the last reported quarter, Pegasystems was expected to post earnings of $0.23 per share but delivered $0.76, resulting in a surprise of +230.43% [13]. - The company has successfully beaten consensus EPS estimates in the last four quarters [14]. Conclusion - While Pegasystems does not appear to be a strong candidate for an earnings beat, investors should consider other factors when making decisions regarding the stock ahead of the earnings release [17].

Core Insights - Pegasystems (PEGA) is leveraging its generative AI strategy, particularly through its low-code tool "Pega Blueprint," which is driving enterprise modernization and efficiency in deal closures [1][9] - A strategic five-year collaboration with Amazon Web Services (AWS) focuses on legacy system modernization, integrating Amazon Bedrock into Pega tools to enhance application lifecycle management while ensuring security and compliance [2][3] - The introduction of Pega-as-a-Service on AWS Marketplace is designed to streamline procurement and implementation, enhancing financial flexibility and accelerating time to value for clients [4] Competitive Landscape - Microsoft poses a significant challenge to Pegasystems with its Power Platform and Azure, offering low-code solutions and strong integration capabilities, making it a more accessible option for modern digital workflows [5] - ServiceNow competes directly with Pegasystems in workflow automation, particularly in IT service management, with its AI-powered Core Business Suite and a robust partner ecosystem that enhances scalability [6] Financial Performance - Pegasystems' shares have increased by 8.2% year to date, outperforming the broader Zacks Computer and Technology sector, which has returned 7.4%, and the Computer-Software industry, which has risen by 16.8% [7] - The Zacks Consensus Estimate for PEGA's earnings is projected at $1.88 per share for 2025, reflecting a year-over-year growth of 24.5%, with a recent upward revision of 13.9% over the past 60 days [13]

Core Insights - Pegasystems (PEGA) shares have increased by 6.9% year to date (YTD), underperforming the broader Zacks Computer & Technology sector, which has appreciated by 7.4%, and key competitors like Microsoft (MSFT), Oracle (ORCL), and IBM, which have seen increases of 19.4%, 38.4%, and 29% respectively [1][2][8] Performance Analysis - The underperformance of PEGA shares is attributed to a challenging macroeconomic environment and intense competition from Microsoft and Oracle in the business process management sector [2] - Despite the challenges, Pegasystems is experiencing strong demand for its AI-powered and cloud-based solutions, with the market expected to exceed $130 billion by 2027 [6][11] - PEGA's Annual Contract Value (ACV) rose by 23% year over year to $701 million, driven by the adoption of Pega GenAI Blueprint and a shift towards term-based licensing [8][11] Revenue and Growth Projections - Pegasystems forecasts revenues of $1.7 billion for 2025, an increase from previous guidance of $1.6 billion, supported by growing ACV and market momentum [15] - The company anticipates free cash flow to grow at a compound annual growth rate (CAGR) of 15-20%, reaching over $700 million by 2028 [15] Market Position and Valuation - Pegasystems is currently trading above its 50-day and 200-day moving averages, indicating a bullish trend [6] - However, PEGA shares are considered overvalued, with a trailing 12-month Price/EBITDA (P/EBITDA) ratio of 23.79X, compared to the Zacks Computer Software market's 20.32X and IBM's 15.35X [18] Investment Outlook - Pegasystems is recognized for its strong portfolio, expanding ACV, and robust free cash flow generation capabilities, currently holding a Zacks Rank 1 (Strong Buy) and a Growth Score of A, indicating a favorable investment opportunity [21]

Core Insights - Pegasystems (PEGA) is experiencing accelerated growth in its cloud segment, with Pega Cloud's Annual Contract Value (ACV) increasing by 23% year-over-year to $701 million in Q1 2025, driven by demand for AI-powered, cloud-native solutions [1][3] - The company's cloud revenues rose 15% year-over-year to $151.1 million, highlighting the strength of its recurring revenue model [1][9] - Pegasystems aims to grow Cloud ACV by 20% or more, supported by successful cross-selling, upselling, and new client acquisitions [3][9] Cloud Momentum - There is a clear shift among enterprises towards scalable and intelligent automation, with PEGA's AI-infused platforms simplifying digital transformation and enhancing client retention [2] - The increase in ACV indicates deeper customer engagement and more durable multi-year contracts as workloads transition from legacy systems to the cloud [2] Competitive Landscape - Salesforce (CRM) is a strong competitor in cloud-native CRM and low-code workflows, leveraging its extensive integrations and partnerships to enhance its market position [5] - Oracle (ORCL) competes with PEGA in process automation, excelling in infrastructure and large-scale deployments, while PEGA stands out in BPM usability and AI-driven decision-making [6] Stock Performance and Valuation - Pegasystems shares have gained 16% year-to-date, outperforming the broader Zacks Computer and Technology sector, which returned 8.2%, and the Computer-Software industry, which rose 17% [7][9] - The Zacks Consensus Estimate for PEGA's earnings is $1.88 per share for 2025, reflecting a year-over-year growth of 24.5% [11]