Innovation Accelerates Pega’s Q4 2025 Growth

WALTHAM, Mass.--( BUSINESS WIRE)-- Pegasystems Inc. (NASDAQ: PEGA), the Enterprise Transformation Company™, released its financial results for the fourth quarter and full-year 2025.

“2025 was an extraordinary year of progress and execution,” said Alan Trefler, founder and CEO, Pega. “We’re entering a transformative era with bold ideas and compelling innovation. Our approach positions us to lead the industry, deliver extraordinary value to clients, and enable clients to overcome legacy system limitations.”

“Our 2025 results reflect strong financial discipline, with top and bottom-line beats of our guidance and exceeding the Rule of 40,” Pega COO & CFO, Ken Stillwell, said. “Our recurring business model and our technology leadership position us to continue to accelerate ACV growth, expand margins, and increase free cash flow.”

Financial and performance metrics (1)

____________________

(1) Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.

Reconciliation of ACV and Constant Currency ACV

(in millions, except percentages)

December 31, 2024

December 31, 2025

1-Year Change

ACV

1,372

1,608

Impact of changes in foreign exchange rates

—

(46

)

Constant currency ACV

1,372

1,562

Note: Constant currency ACV is calculated by applying the December 31, 2024 foreign exchange rates to current period shown.

Cash Flow Growth

(Dollars in thousands,

except per share amounts) (1)

Three Months Ended

December 31,

Year Ended

December 31,

2025

2024

Change

2025

2024

Change

Total revenue

504,317

490,830

1,745,812

1,497,180

Net income - GAAP

234,574

119,090

393,437

99,189

297

Net income - non-GAAP

139,554

147,953

385,411

270,542

Diluted earnings per share - GAAP

1.27

0.63

102

2.13

0.55

287

Diluted earnings per share - non-GAAP

0.76

0.80

2.10

1.51

(1) Per share amounts have been recast for all prior periods to reflect the effect of the Company’s two-for-one forward common stock split effected in the form of a stock dividend distributed on June 20, 2025.

Three Months Ended

December 31,

Year Ended

December 31,

2025

2024

Change

2025

2024

Change

Pega Cloud

193,487

149,638

43,849

695,902

558,734

137,168

Maintenance

79,305

81,257

(1,952

)

314,593

323,304

(8,711

)

Subscription services

272,792

230,895

41,897

1,010,495

882,038

128,457

Subscription license

178,215

207,113

(28,898

)

(14

507,368

401,869

105,499

Subscription

451,007

438,008

12,999

1,517,863

1,283,907

233,956

Consulting

53,310

52,822

488

227,949

213,273

14,676

Total revenue

504,317

100

490,830

100

13,487

1,745,812

100

1,497,180

100

248,632

(2) Perpetual license revenue has been combined within Subscription license revenue for all periods presented.

2026 Guidance (1)

As of February 10, 2026, we are providing the following guidance:

2026

Annual contract value growth

15%

2026

GAAP

Non-GAAP (1)

Revenue

$2.0 Billion

Diluted earnings per share

$1.87

$2.75

2026

Cash provided by operating activities

$595 million

Free cash flow

$575 million

(1) A reconciliation of our GAAP and Non-GAAP guidance is contained in the financial schedules at the end of this release.

Quarterly conference call

A conference call and audio-only webcast will be conducted at 8:00 a.m. EST on Wednesday, February 11, 2026.

Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1 (800) 715-9871 (domestic) or 1 (646) 307-1963 (international) and using Conference ID 6226958, or via https://events.q4inc.com/attendee/958808765by logging onto www.pega.com at least five minutes prior to the event's broadcast and clicking on the webcast icon in the Investors section.

Discussion of non-GAAP financial measures

Our non-GAAP financial measures should only be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We believe that these measures help investors understand our core operating results and prospects, which is consistent with how management measures and forecasts our performance without the effect of often one-time charges and other items outside our normal operations. Management uses these measures to assess the performance of the company's operations and establish operational goals and incentives. They are not a substitute for financial measures prepared under U.S. GAAP. Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.

Forward-looking statements

Certain statements in this press release may be "forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, including our 2026 Guidance and the anticipated growth and development of our business.

Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, positions, forecasts, guidance, likely, and usually or variations of such words and other similar expressions identify forward-looking statements. These statements represent our views only as of the date the statement was made and are based on current expectations and assumptions.

Forward-looking statements deal with future events and are subject to risks and uncertainties that are difficult to predict, including, but not limited to:

These risks and others that may cause actual results to differ materially from those expressed in such forward-looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2025, and other filings we make with the SEC.

Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the results included in such statements will be achieved. Although subsequent events may cause our view to change, except as required by applicable law, we do not undertake and expressly disclaim any obligation to publicly update or revise these forward-looking statements, whether as the result of new information, future events, or otherwise.

Any forward-looking statements in this press release represent our views as of February 10, 2026.

About Pegasystems

Pega provides the leading AI-powered platform for enterprise transformation. The world’s most influential organizations trust our technology to reimagine how work gets done by automating workflows, personalizing customer experiences, and modernizing legacy systems. Since 1983, our scalable, flexible architecture has fueled continuous innovation, helping clients accelerate their path to the autonomous enterprise. Ready to Build for Change®? Visit www.pega.com.

All trademarks are the property of their respective owners.

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) (2)

(in thousands, except per share amounts)

Three Months Ended

December 31,

Year Ended

December 31,

2025

2024

2025

2024

Revenue

Subscription services

272,792

230,895

1,010,495

882,038

Subscription license

178,215

207,113

507,368

401,869

Consulting

53,310

52,822

227,949

213,273

Total revenue

504,317

490,830

1,745,812

1,497,180

Cost of revenue

Subscription services

46,631

40,988

169,247

149,918

Subscription license

316

389

1,382

1,905

Consulting

56,518

60,978

250,753

238,842

Total cost of revenue

103,465

102,355

421,382

390,665

Gross profit

400,852

388,475

1,324,430

1,106,515

Operating expenses

Selling and marketing

153,308

139,655

578,637

534,780

Research and development

80,855

76,379

312,681

298,074

General and administrative

40,998

28,207

148,722

112,848

Litigation settlement, net of recoveries

9,750

—

9,750

32,403

Restructuring

11,578

1,245

11,540

4,528

Total operating expenses

296,489

245,486

1,061,330

982,633

Income from operations

104,363

142,989

263,100

123,882

Foreign currency transaction (loss) gain

(2,711

)

6,318

(14,890

)

(912

)

Interest income

2,398

6,944

13,641

25,779

Interest expense

(113

)

(1,788

)

(1,285

)

(6,835

)

(Loss) income on capped call transactions

—

(223

)

(663

)

Other income (loss), net

1,037

(299

)

20,284

1,385

Income before (benefit from) provision for income taxes

104,974

154,168

280,627

142,636

(Benefit from) provision for income taxes

(129,600

)

35,078

(112,810

)

43,447

Net income

234,574

119,090

393,437

99,189

Earnings per share

Basic

1.38

0.69

2.30

0.58

Diluted

1.27

0.63

2.13

0.55

Weighted-average number of common shares outstanding

Basic

170,001

172,000

170,782

170,530

Diluted

184,165

191,272

184,790

179,268

(1) The number of common shares and per share amounts have been recast for all prior periods to reflect the effect of the Company’s two-for-one forward common stock split effected in the form of a stock dividend distributed on June 20, 2025.

(2) Perpetual license revenue and related cost of revenue have been combined within Subscription license revenue and cost of revenue for all periods presented.

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

December 31, 2025

December 31, 2024

Assets

Current assets:

Cash and cash equivalents

212,447

337,103

Marketable securities

213,352

402,870

Total cash, cash equivalents, and marketable securities

425,799

739,973

Accounts receivable, net

264,713

305,468

Unbilled receivables, net

166,478

173,085

Other current assets

121,305

115,178

Total current assets

978,295

1,333,704

Long-term unbilled receivables, net

102,544

61,407

Goodwill

81,506

81,113

Other long-term assets

469,499

292,049

Total assets

1,631,844

1,768,273

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

12,924

6,226

Accrued expenses

44,847

31,544

Accrued compensation and related expenses

148,797

138,042

Deferred revenue

509,275

423,910

Convertible senior notes, net

—

467,470

Other current liabilities

21,935

18,866

Total current liabilities

737,778

1,086,058

Long-term operating lease liabilities

60,825

67,647

Other long-term liabilities

45,860

29,088

Total liabilities

844,463

1,182,793

Total stockholders’ equity

787,381

585,480

Total liabilities and stockholders’ equity

1,631,844

1,768,273

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Year Ended

December 31,

2025

2024

Net income

393,437

99,189

Adjustments to reconcile net income to cash provided by operating activities

Non-cash items

72,362

227,582

Change in operating assets and liabilities, net

39,428

19,155

Cash provided by operating activities

505,227

345,926

Cash provided by (used in) investing activities

197,246

(202,576

)

Cash (used in) financing activities

(834,630

)

(30,214

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

6,988

(4,434

)

Net (decrease) increase in cash, cash equivalents, and restricted cash

(125,169

)

108,702

Cash, cash equivalents, and restricted cash, beginning of period

341,529

232,827

Cash, cash equivalents, and restricted cash, end of period

216,360

341,529

PEGASYSTEMS INC.

RECONCILIATION OF SELECTED GAAP AND NON-GAAP MEASURES (1)

(in thousands, except percentages and per share amounts)

Three Months Ended

December 31,

Year Ended

December 31,

2025

2024

Change

2025

2024

Change

Net income - GAAP

234,574

119,090

393,437

99,189

297

Stock-based compensation (2)

34,043

34,500

155,239

142,718

Restructuring

11,578

1,245

11,540

4,528

Legal fees

16,174

4,499

39,151

18,713

Litigation settlement, net of recoveries

9,750

—

9,750

32,403

Amortization of intangible assets

627

700

2,630

3,153

Interest on convertible senior notes

—

594

394

2,451

Capped call transactions

—

)

223

663

Repurchases of convertible senior notes

—

(459

)

—

(459

)

Foreign currency transaction loss (gain)

2,711

(6,318

)

14,890

912

Other

(941

)

759

(20,327

)

(869

)

Income taxes (3)

(168,962

)

(6,653

)

(221,516

)

(32,860

)

Net income - non-GAAP

139,554

147,953

385,411

270,542

Diluted earnings per share - GAAP

1.27

0.63

102

2.13

0.55

287

non-GAAP adjustments

(0.51

)

0.17

(0.03

)

0.96

Diluted earnings per share - non-GAAP

0.76

0.80

2.10

1.51

Diluted weighted-average number of common shares outstanding - GAAP

184,165

191,272

184,790

179,268

Capped call transactions

—

(7,106

)

(1,196

)

(428

)

Diluted weighted-average number of common shares outstanding - non-GAAP

184,165

184,166

—

183,594

178,840

Our non-GAAP financial measures reflect the following adjustments:

(2) Stock-based compensation:

Three Months Ended

December 31,

Year Ended

December 31,

(Dollars in thousands)

2025

2024

2025

2024

Cost of revenue

4,909

6,795

26,646

27,353

Selling and marketing

15,553

13,463

60,721

55,084

Research and development

7,895

7,059

31,684

29,838

General and administrative

5,686

7,183

36,188

30,443

34,043

34,500

155,239

142,718

Income tax benefit

(6,417

)

(422

)

(31,043

)

(1,799

)

(3) Effective income tax rates:

Year Ended

December 31,

2025

2024

GAAP

(40

non-GAAP

Our GAAP effective income tax rate is subject to significant fluctuations due to several factors, including our stock-based compensation plans, research and development tax credits, and the valuation allowance on our deferred tax assets in the U.S. and U.K. We determine our non-GAAP income tax rate using applicable rates in taxing jurisdictions and assessing certain factors, including historical and forecasted earnings by jurisdiction, discrete items, and ability to realize tax assets. Under GAAP we recorded a release of our valuation allowance on our net deferred tax assets in the U.S. federal and state and U.K during the fourth quarter of 2025, resulting in a $175 million non‑cash tax benefit. See "Note 18. Income Taxes" in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2025 for additional information. We believe it is beneficial for our management to review our non-GAAP results consistent with our annual plan’s effective income tax rate as established at the beginning of each year, given tax rate volatility.

PEGASYSTEMS INC.

RECONCILIATION OF FREE CASH FLOW (1) AND OTHER METRICS

(in thousands, except percentages)

Year Ended

December 31,

Change

2025

2024

Cash provided by operating activities

505,227

345,926

Investment in property and equipment

(14,504

)

(7,712

)

Free cash flow (1)

490,723

338,214

Supplemental information (2)

Litigation settlement, net of recoveries

—

32,403

Legal fees

35,484

16,197

Restructuring

2,056

5,252

Interest paid on convertible senior notes

1,754

3,810

Income taxes, net of refunds

21,630

82,317

60,924

139,979

(1) Our non-GAAP free cash flow is defined as cash provided by operating activities less investment in property and equipment. Investment in property and equipment fluctuates in amount and frequency and is significantly affected by the timing and size of investments in our facilities and equipment. We provide information on free cash flow to enable investors to assess our ability to generate cash without incurring additional external financings. This information is not a substitute for financial measures prepared under U.S. GAAP.

(2) The supplemental information discloses items that affect our cash flows and are considered by management not to be representative of our core business operations and ongoing operational performance.

PEGASYSTEMS INC.

ANNUAL CONTRACT VALUE

(in thousands, except percentages)

Annual contract value (“ACV”) - ACV represents the annualized value of our active contracts as of the measurement date. The contract's total value is divided by its duration in years to calculate ACV. ACV is a performance measure that we believe provides useful information to our management and investors.

December 31, 2025

December 31, 2024

Change

Constant Currency Change

Pega Cloud

866,612

652,443

214,169

Maintenance

288,873

291,807

(2,934

)

Subscription services

1,155,485

944,250

211,235

Subscription license

452,902

427,268

25,634

1,608,387

1,371,518

236,869

PEGASYSTEMS INC.

BACKLOG

(in thousands, except percentages)

Remaining performance obligations (“Backlog”) - Expected future revenue from existing non-cancellable contracts:

As of December 31, 2025:

Subscription services

Subscription license

Consulting

Total

Pega Cloud

Maintenance

1 year or less

709,190

235,152

77,528

53,353

1,075,223

1-2 years

400,926

73,895

2,636

854

478,311

2-3 years

213,259

51,327

2,101

266,715

Greater than 3 years

214,189

32,325

7,331

253,933

1,537,564

392,699

89,596

54,323

2,074,182

100

% of Total

100

Change since December 31, 2024

410,405

51,839

(11,886

)

332

450,690

(12

As of December 31, 2024:

Subscription services

Subscription license

Consulting

Total

Pega Cloud

Maintenance

1 year or less

525,133

230,866

89,197

50,519

895,715

1-2 years

328,234

65,461

10,874

3,297

407,866

2-3 years

159,536

24,598

733

125

184,992

Greater than 3 years

114,256

19,935

678

134,919

1,127,159

340,860

101,482

53,991

1,623,492

100

% of Total

100

PEGASYSTEMS INC.

RECONCILIATION OF GAAP BACKLOG AND CONSTANT CURRENCY BACKLOG

(in millions, except percentages)

December 31, 2024

December 31, 2025

1 Year Growth Rate

Backlog - GAAP

1,623

2,074

Impact of changes in foreign exchange rates

—

(80

)

Constant currency backlog

1,623

1,994

Note: Constant currency backlog is calculated by applying the December 31, 2024 foreign exchange rates to current period shown.

PEGASYSTEMS INC.

RECONCILIATION OF FORWARD-LOOKING GUIDANCE

(in millions, except percentages and per share amounts)

2026

Annual contract value growth

Revenue (GAAP and Non-GAAP)

2,000

Net Income - GAAP

344

Stock-based compensation

158

Legal fees

Incomes taxes

(26

)

Net Income - Non-GAAP

506

Diluted earnings per share - GAAP

1.87

Non-GAAP adjustments

0.88

Diluted earnings per share - non-GAAP

2.75

Diluted weighted-average number of common shares outstanding - GAAP

184

2026

Cash provided by operating activities

595

Investment in property and equipment

(20

)

Free cash flow

575

Supplemental information

Legal fees

Restructuring

Litigation settlement, net of recoveries

Income taxes (1)

115

(1) Evolving U.S. tax legislation may impact the amount of tax payments.