Core Viewpoint - Pegasystems Inc. (NASDAQ:PEGA) is identified as an overlooked AI stock with a potential upside, supported by a positive outlook from analysts and expected strong revenue growth from its cloud offerings [1][2]. Financial Performance - The company is set to report its third-quarter earnings on October 21, with expectations of strong adoption of its Blueprint offering, which is projected to drive approximately 18% growth in cloud revenue for the year, contributing up to 45% of total revenue [2]. - Pegasystems' cloud annual contract value (ACV) increased by 28% year-over-year on a constant currency basis in the second quarter, with total ACV reaching $1,514 million, indicating a 16% year-over-year growth [3]. Analyst Ratings - Rosenblatt has reiterated a 'Buy' rating on Pegasystems and raised the price target from $61 to $65, suggesting a potential upside of about 16% [1].

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 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 - ServiceNow's enterprise workflow automation suite is gaining traction as companies adopt digital tools to streamline operations across various departments [1][4] - The Now platform serves as a crucial driver for workflow automation and cross-functional service delivery [2] Product Development - ServiceNow's latest Core Business Suite extends the Now platform into finance and supply chain operations, automating back-office functions without replacing existing ERP systems [3][11] - The Core Business Suite workflows are powered by Now Assist, which utilizes AI for automating tasks such as document handling and issue resolution [3] Financial Performance - In Q1 2025, ServiceNow reached 508 customers generating over $5 million in Annual Contract Value (ACV), reflecting a 20% year-over-year growth [4][11] - Subscription revenues hit $3.01 billion in Q1 2025, marking a 20% year-over-year growth in constant currency, surpassing the Zacks Consensus Estimate by 0.28% [5][11] Competitive Landscape - ServiceNow faces intense competition in workflow automation from Oracle and Pegasystems, both enhancing their automation capabilities across finance and operations [6] - Oracle is leveraging its Fusion Cloud Applications to offer AI-powered tools for finance and supply chain, while Pegasystems is enhancing its Pega Platform with low-code automation and generative AI capabilities [7][8] Stock Performance and Valuation - ServiceNow's shares have declined 5.2% year to date, underperforming the broader Zacks Computer & Technology sector's return of 2.4% [9] - The forward 12-month Price/Sales ratio for ServiceNow is 14.77X, compared to the industry's 19.35X, indicating a premium valuation [13]