Pegasystems Q2 Earnings Surpass Estimates, Revenues Increase Y/Y

Pegasystems PEGA reported second-quarter 2025 non-GAAP earnings of 28 cents per share, which beat the Zacks Consensus Estimate by 16.67% and increased 7.7% year over year. Revenues of $384.5 million beat the Zacks Consensus Estimate by 4.27% and increased 9.5% year over year.Pegasystems’ strong second-quarter 2025 performance is driven by its unique AI strategy, led by the Pega Blueprint platform. Growth was fueled by AI-integrated workflows, rising cloud subscriptions and disciplined execution, resulting in higher ACV, backlog and margin gains. By following the Rule of 40 and targeting a growing market, the company is well-positioned for long-term growth in AI and cloud solutions.Despite these strengths, PEGA shares are slightly trailing the Zacks Computer and Technology sector’s 9.8% year-to-date return, with the stock gaining 9.3%.PEGA’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the surprise being 94.01%, on average.Pegasystems Inc. Price, Consensus and EPS Surprise Pegasystems Inc. price-consensus-eps-surprise-chart | Pegasystems Inc. QuotePEGA’s Quarterly PerformanceSubscription services revenues, comprising Pega Cloud and Maintenance, generated $246 million (contributing 64% to total revenues), up 14.7% on a year-over-year basis.Subscription license revenues (20.8% of the total revenues) were $80 million, a decline of 5.5% year over year.Total Subscription revenues, consisting of both subscription services and subscription licenses, rose 9% year over year to $326 million (contributing 84.8% to total revenues).Consulting revenues (15% of the total revenues) were $57.8 million. The reported figure is up 11.1% year over year.Perpetual license revenues (0.2% of the total revenues) were $0.7 million, surging 1,875% year over year. This segment remains a negligible contributor compared to others.Pega Cloud's Annual Contract Value (ACV) increased 28% year over year to 761 million.Maintenance and Subscription license, collectively referred to as Client Cloud ACV, rose 6% year over year to 753 million.The company reported that Total ACV increased 16% year over year on a reported and constant-currency basis, reaching $1.514 billion.The company's backlog grew by 31% year over year on a reported basis and 27% on a constant currency basis, underscoring the sustained demand for its services and products and future revenue visibility.Pegasystems’ Q2 Operating ResultsIn the second quarter of 2025, the gross margin contracted 90 basis points (bps) year over year to 71.5%.Total operating expenses increased 6.8% year over year to $257.7 million. As a percentage of revenues, operating expenses decreased to 1.7%.The company reported an operating income of $17.3 million, up 33.3% year over year. The operating margin expanded 80 bps from the year-ago quarter to 4.5%.PEGA’s Balance Sheet & Cash FlowAs of June 30, 2025, cash and cash equivalents and marketable securities were $411.6 million compared with $371.7 million as of March 31, 2025.Year to date, operating cash flow rose over 32% year over year to $290 million, while free cash flow grew 31% to approximately $286 million.PEGA’s Zacks Rank & Other Stocks to ConsiderCurrently, Pegasystems flaunts a Zacks Rank #1 (Strong Buy).ACI Worldwide ACIW, Arista Networks ANET and Western Digital WDC are some similarly ranked stocks that investors may consider in the broader Zacks Computer and Technology sector. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.ACI Worldwide is scheduled to release its second-quarter 2025 results on Aug. 7, while Arista Networks is slated to report for the same period on Aug. 5. Western Digital is set to announce its fourth-quarter fiscal 2025 results earlier, on July 30.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want 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 Western Digital Corporation (WDC): Free Stock Analysis Report ACI Worldwide, Inc. (ACIW): Free Stock Analysis Report Pegasystems Inc. (PEGA): Free Stock Analysis Report Arista Networks, Inc. (ANET): 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