MSFT vs. PEGA: Which Agentic AI Vendor is a Better Buy in 2H25?

The artificial intelligence (AI) revolution has entered a new phase with the emergence of agentic AI — systems capable of autonomous decision-making and task execution rather than merely assisting human users. Two prominent players in this space, Microsoft MSFT and Pegasystems PEGA, are taking distinctly different approaches to capitalize on this transformative technology. Microsoft leverages its massive cloud infrastructure and enterprise software ecosystem to integrate agentic capabilities across its portfolio, while Pegasystems focuses on specialized workflow automation and legacy system modernization powered by AI agents.Both companies recently announced significant expansions of their agentic AI offerings, with Microsoft evolving Copilot into autonomous digital workers and Pega enhancing its Blueprint platform to automatically transform legacy systems into modern applications. The timing of these announcements, coupled with strong financial performance from both companies, makes for a compelling comparison as investors seek exposure to the next wave of AI innovation.Let's delve deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now.The Case for MSFT StockMicrosoft's approach to agentic AI represents a comprehensive platform strategy that spans its entire technology stack. The company's third-quarter fiscal 2025 results demonstrated continued momentum, with total revenues reaching $70.1 billion, up 13% year over year. Microsoft Cloud revenues of $42.4 billion grew 22% in constant currency, with Azure showing particularly strong performance at 33% growth, including 16 percentage points from AI services alone.The company's agentic AI strategy centers on transforming Copilot from a simple assistant into autonomous digital workers capable of reasoning, planning, and acting independently. Microsoft processed more than 100 trillion tokens during the quarter, representing a five-fold increase year over year, indicating massive adoption of its AI services. The company has introduced specialized agents like Sales Agent and Customer Service Agent while enabling customers to build custom agents through Copilot Studio, with more than 230,000 organizations already using the platform.Microsoft's scale advantages are evident in its infrastructure investments, with capital expenditures of $21.4 billion in the quarter supporting long-term monetization. The company's diverse revenue streams provide stability, though this same diversification may limit the upside potential from any single technology trend. Azure's strong performance demonstrates Microsoft's ability to capture enterprise AI workloads, but the company's massive size means incremental growth from agentic AI represents a smaller percentage impact on overall results.The Zacks Consensus Estimate for Microsoft’s fiscal 2025 earnings is pegged at $13.36 per share, indicating a 13.22% year-over-year increase.Microsoft Corporation Price and Consensus Microsoft Corporation price-consensus-chart | Microsoft Corporation QuoteFind the latest EPS estimates and surprises on Zacks Earnings Calendar.The Case for PEGA StockPegasystems presents a compelling pure-play opportunity in enterprise agentic AI with its specialized focus on workflow automation and legacy system modernization. The company's first-quarter 2025 results showcased accelerating momentum, with Annual Contract Value (ACV) growing more than 13% year over year and Pega Cloud ACV surging 23%. The company generated exceptional free cash flow of $202 million, demonstrating the profitability of its subscription model transformation.Pega's revolutionary Blueprint platform represents a breakthrough in agentic AI applications, enabling organizations to automatically analyze and convert legacy system assets into modern cloud applications. This addresses a massive market opportunity, as Pega research indicates 88% of IT decision makers cite technical debt as impacting competitive agility. The enhanced Blueprint capabilities now leverage agentic AI to ingest diverse inputs, including videos, documentation, code, and UI screens, dramatically accelerating digital transformation timelines from months to weeks.The company's focused approach to enterprise workflow automation positions it perfectly for the agentic AI revolution. Unlike broader platform providers, Pega has built its entire value proposition around intelligent automation and decision-making, making agentic AI a natural evolution rather than an add-on feature. With over 1,000 new Blueprints created weekly — more than double the rate from months earlier — customer adoption is accelerating rapidly. The company's smaller scale means successful agentic AI implementations can drive significant percentage growth in key metrics.The Zacks Consensus Estimate for PEGA’s 2025 earnings is pegged at $1.88 per share, indicating a 24.5% year-over-year increase.Pegasystems Inc. Price and Consensus Pegasystems Inc. price-consensus-chart | Pegasystems Inc. QuoteValuation and Price PerformanceRecent market performance reveals a telling divergence between the two stocks, with Pegasystems significantly outpacing Microsoft over the past three months. PEGA shares have surged 39.5% compared to Microsoft's 26% rise, with Pegasystems also outperforming the broader Zacks Computer and Technology sector. This superior price performance reflects growing investor recognition of Pega's specialized positioning in the agentic AI market and the accelerating adoption of its Blueprint platformPEGA Outperforms MSFT, Sector in 3-Month PeriodImage Source: Zacks Investment ResearchThe valuation metrics present an intriguing contrast that further supports Pegasystems' investment appeal. Microsoft trades at a price-to-earnings ratio of 32.93x, commanding a significant premium that reflects its market dominance and diversified revenue streams but also suggests limited valuation expansion potential. In stark contrast, Pegasystems trades at a more modest 13.2x P/E multiple despite its stronger recent performance and focused exposure to high-growth agentic AI applications.MSFT vs. PEGA: P/E F12M RatioImage Source: Zacks Investment ResearchConclusionWhile Microsoft offers stability and comprehensive AI capabilities, Pegasystems presents superior upside potential for the second half of 2025. Pega's specialized focus on enterprise workflow automation aligns perfectly with agentic AI capabilities, creating a more concentrated exposure to this transformative technology. The company's accelerating ACV growth, innovative Blueprint platform, and smaller scale mean that successful agentic AI adoption can drive outsized returns. Investors should consider buying Pegasystems stock to capitalize on its focused agentic AI strategy while holding or waiting for better entry points in Microsoft, where AI represents incremental rather than transformational growth potential. PEGA currently sports a Zacks Rank #1 (Strong Buy), whereas MSFT has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT): Free Stock Analysis Report Pegasystems Inc. (PEGA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks