# PEGASYSTEMS INC (PEGA) Informational only - not investment advice. CIK: 0001013857 SIC: 7374 Services-Computer Processing & Data Preparation SIC breadcrumb: [Services](/division/I/) > [Business Services](/major-group/73/) > [SIC 7374 Services-Computer Processing & Data Preparation](/industry/7374/) Latest 10-K filed: 2026-02-10 SEC page: https://www.sec.gov/edgar/browse/?CIK=1013857 Filing source: https://www.sec.gov/Archives/edgar/data/1013857/000101385726000017/pega-20251231.htm ## At a glance FY2025 · period end 2025-12-31 · filed 2026-02-10 · accession 0001013857-26-000017 · source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001013857.json | Metric | Value | FY | Provenance | | --- | ---: | ---: | --- | | Revenue | 1,745,812,000 USD | 2025 | verified | | Net income | 393,437,000 USD | 2025 | verified | | Assets | 1,631,844,000 USD | 2025 | verified | | Free cash flow | 490,723,000 USD | 2025 | computed | | Net margin | 22.54% | 2025 | computed | | Operating margin | 15.07% | 2025 | computed | | Revenue YoY | +16.61% | 2025 | computed | | ROE | 49.97% | 2025 | computed | Computed values are grepcent-computed from the verified facts above and may differ from ratios the company itself reports. Free cash flow = operating cash flow − capital expenditures. Net margin = net income ÷ revenue. Operating margin = operating income ÷ revenue. Revenue YoY = FY2025 revenue ÷ FY2024 revenue − 1 (consecutive fiscal years only). ROE = net income ÷ period-end stockholders' equity. No market price, no rating, no forecast on this site. Not investment advice. ### Peer percentile fingerprint | Ratio | PEGA | Peer median | Percentile | N | | --- | ---: | ---: | ---: | ---: | | Net margin | 22.5% | 5.8% | 86 | 29 | | Operating margin | 15.1% | 7.7% | 74 | 28 | | Revenue growth | 16.6% | 10.0% | 72 | 30 | | FCF margin | 28.1% | 17.5% | 79 | 29 | | ROE | 50.0% | 14.1% | 92 | 27 | | ROA | 24.1% | 5.0% | 100 | 30 | | Liabilities / equity | 1.07 | 1.28 | 42 | 27 | | Current ratio | 1.33 | 1.64 | 41 | 30 | Percentile = share of the N covered peers reporting that ratio whose value is lower (ties counted half); computed among grepcent-covered companies in SIC industry 7374 Services-Computer Processing & Data Preparation, not the whole market. A higher percentile means a higher value of the ratio, not a better company. Ratios with fewer than 8 reporting peers are omitted. Latest reported values per company; fiscal periods may differ. Descriptive arithmetic - not a score, rating, or ranking. ## Selected Fundamentals | Metric | Value | Unit | FY | Filed | | --- | ---: | --- | ---: | --- | | Revenue | 1745812000 | USD | 2025 | 2026-02-10 | | Net income | 393437000 | USD | 2025 | 2026-02-10 | | Assets | 1631844000 | USD | 2025 | 2026-02-10 | ## Financials Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-10. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001013857.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts. | Metric | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Revenue | | | 888,467,000 | 891,581,000 | 911,383,000 | 1,017,517,000 | 1,211,653,000 | 1,317,845,000 | 1,432,616,000 | 1,497,180,000 | 1,745,812,000 | | Net income | | 45,015,000 | 98,548,000 | 10,617,000 | -90,433,000 | -61,373,000 | -63,040,000 | -345,582,000 | 67,808,000 | 99,189,000 | 393,437,000 | | Operating income | | 50,644,000 | 93,177,000 | -17,032,000 | -134,878,000 | -143,527,000 | -94,732,000 | -109,405,000 | 80,954,000 | 123,882,000 | 263,100,000 | | Gross profit | | 522,973,000 | 608,794,000 | 589,816,000 | 601,361,000 | 706,604,000 | 875,290,000 | 949,210,000 | 1,054,133,000 | 1,106,515,000 | 1,324,430,000 | | Diluted EPS | | 0.56 | 1.19 | 0.13 | -1.14 | -0.76 | -0.77 | -4.22 | 0.37 | 0.55 | 2.13 | | Operating cash flow | | 39,874,000 | 158,235,000 | 104,356,000 | -42,165,000 | -563,000 | 39,118,000 | 22,336,000 | 217,785,000 | 345,926,000 | 505,227,000 | | Capital expenditures | | 19,088,000 | 13,741,000 | 11,893,000 | 10,608,000 | 25,369,000 | 10,456,000 | 35,379,000 | 16,781,000 | 7,712,000 | 14,504,000 | | Dividends paid | | 9,174,000 | 9,277,000 | 9,432,000 | 9,486,000 | 9,628,000 | 9,761,000 | 9,834,000 | 9,964,000 | 10,199,000 | 15,422,000 | | Share buybacks | | 27,248,000 | 4,335,000 | 54,434,000 | 22,135,000 | 27,974,000 | 52,711,000 | 25,707,000 | 0.00 | 68,057,000 | 499,689,000 | | Assets | | 654,656,000 | 1,012,753,000 | 982,553,000 | 984,812,000 | 1,604,262,000 | 1,593,531,000 | 1,357,672,000 | 1,510,736,000 | 1,768,273,000 | 1,631,844,000 | | Liabilities | | 318,767,000 | 356,883,000 | 361,022,000 | 445,802,000 | 1,062,090,000 | 1,177,443,000 | 1,226,829,000 | 1,156,898,000 | 1,182,793,000 | 844,463,000 | | Stockholders' equity | | 548,940,000 | 655,870,000 | 621,531,000 | 539,010,000 | 542,172,000 | 416,088,000 | 130,843,000 | 353,838,000 | 585,480,000 | 787,381,000 | | Cash and cash equivalents | 93,026,000 | 70,594,000 | 162,279,000 | 114,422,000 | | 171,899,000 | 159,965,000 | 145,054,000 | 229,902,000 | 337,103,000 | 212,447,000 | | Free cash flow | | 20,786,000 | 144,494,000 | 92,463,000 | -52,773,000 | -25,932,000 | 28,662,000 | -13,043,000 | 201,004,000 | 338,214,000 | 490,723,000 | ### Ratios ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported. | Metric | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Net margin | | | 11.09% | 1.19% | -9.92% | -6.03% | -5.20% | -26.22% | 4.73% | 6.63% | 22.54% | | Operating margin | | | 10.49% | -1.91% | -14.80% | -14.11% | -7.82% | -8.30% | 5.65% | 8.27% | 15.07% | | Return on equity | | 8.20% | 15.03% | 1.71% | -16.78% | -11.32% | -15.15% | -264.12% | 19.16% | 16.94% | 49.97% | | Return on assets | | 6.88% | 9.73% | 1.08% | -9.18% | -3.83% | -3.96% | -25.45% | 4.49% | 5.61% | 24.11% | | Liabilities / equity | | 0.58 | 0.54 | 0.58 | 0.83 | 1.96 | 2.83 | 9.38 | 3.27 | 2.02 | 1.07 | | Current ratio | | 1.48 | 2.20 | 1.84 | 1.34 | 2.12 | 1.73 | 1.57 | 1.78 | 1.23 | 1.33 | ## As-reported value updates 10 tracked differences above grepcent's stated thresholds were found between the earliest XBRL-filed value and the value currently on file for the same fiscal period. Ledger: /company/PEGA/revisions/ ## Quarterly Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-07-21. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001013857.json. Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived. | Quarter | End date | Revenue | Net income | Diluted EPS | Method | | --- | --- | ---: | ---: | ---: | --- | | 2022-Q3 | 2022-09-30 | | | -1.14 | reported discrete quarter | | 2023-Q1 | 2023-03-31 | | | -0.25 | reported discrete quarter | | 2023-Q2 | 2023-06-30 | | | -0.56 | reported discrete quarter | | 2023-Q3 | 2023-06-30 | | -46,804,000 | | reported discrete quarter | | 2023-Q3 | 2023-09-30 | 334,643,000 | | -0.09 | reported discrete quarter | | 2023-Q4 | 2023-12-31 | 474,233,000 | 142,665,000 | | derived Q4 = FY annual - nine-month YTD | | 2024-Q1 | 2024-03-31 | 330,147,000 | -12,124,000 | -0.14 | reported discrete quarter | | 2024-Q2 | 2024-03-31 | | -12,124,000 | | reported discrete quarter | | 2024-Q2 | 2024-06-30 | 351,153,000 | | 0.07 | reported discrete quarter | | 2024-Q3 | 2024-06-30 | | 6,613,000 | | reported discrete quarter | | 2024-Q3 | 2024-09-30 | 325,050,000 | | -0.17 | reported discrete quarter | | 2024-Q4 | 2024-12-31 | 490,830,000 | 119,090,000 | | derived Q4 = FY annual - nine-month YTD | | 2025-Q1 | 2025-03-31 | 475,633,000 | 85,422,000 | 0.91 | reported discrete quarter | | 2025-Q2 | 2025-03-31 | | 85,422,000 | | reported discrete quarter | | 2025-Q2 | 2025-06-30 | 384,512,000 | | 0.17 | reported discrete quarter | | 2025-Q3 | 2025-06-30 | | 30,077,000 | | reported discrete quarter | | 2025-Q3 | 2025-09-30 | 381,350,000 | | 0.24 | reported discrete quarter | | 2025-Q4 | 2025-12-31 | 504,317,000 | 234,574,000 | | derived Q4 = FY annual - nine-month YTD | | 2026-Q1 | 2026-03-31 | 429,973,000 | 32,764,000 | 0.18 | reported discrete quarter | | 2026-Q2 | 2026-03-31 | | 32,764,000 | | reported discrete quarter | | 2026-Q2 | 2026-06-30 | 420,716,000 | | 0.08 | reported discrete quarter | ## Filed narrative (10-K & 10-Q) ## Business Verbatim Item 1 Business section from PEGA's latest 10-K: [/company/PEGA/business/](/company/PEGA/business/). ## Risk Factors Verbatim Item 1A Risk Factors from PEGA's latest 10-K: [/company/PEGA/risk-factors/](/company/PEGA/risk-factors/). ## Latest quarter (10-Q) Latest 10-Q source: https://www.sec.gov/Archives/edgar/data/1013857/000101385726000050/pega-20260630.htm Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high Filing date: 2026-07-21 Report date: 2026-06-30 ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q (“Quarterly Report”) contains or incorporates forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the sufficiency of our capital, our position and estimates relating to tax, and legal proceedings. 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: •our future financial performance and business plans; •the adequacy of our liquidity and capital resources; •the successful execution of investments in artificial intelligence; •our ability to protect our intellectual property rights, costs associated with defending such rights, intellectual property rights claims, and other related claims by third parties against us, including related costs, damages, and other relief that may be granted against us; •our ongoing litigation with Appian Corp. and associated legal proceedings; and •management of our growth. 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, Part II of this Quarterly Report on Form 10-Q, 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. The forward-looking statements in this Quarterly Report represent our views as of July 21, 2026. NON-GAAP 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. A reconciliation of GAAP and non-GAAP measures is located with each non-GAAP measure. BUSINESS OVERVIEW We develop, market, license, host, and support enterprise software that helps organizations optimize decisions and processes in real-time so they can deliver outcomes that transform their business. Our powerful platform for enterprise AI decisioning and workflow automation enables the world’s leading brands and government agencies to hyper-personalize customer experiences, automate customer service, and streamline operations, mission-critical business processes, and workflows, and transform legacy systems. Clients can leverage our AI technology and scalable architecture to accelerate their digital transformation. In addition, our sales and client success teams, world-class partners, and clients are able to leverage Pega BlueprintTM (“Blueprint”) to rapidly prototype and accelerate the development and deployment of applications quickly and collaboratively. We focus on enterprise-scale businesses and government agencies that require advanced solutions to distinguish themselves in the competitive markets they serve. Our solutions achieve and facilitate differentiation by increasing business agility, driving growth and modernization, improving productivity, attracting and retaining customers, and reducing risk. Along with our partners, we deliver solutions tailored by industry. Performance metrics We use performance metrics to analyze and assess our overall performance, make operating decisions, and forecast and plan for future periods, including: 20 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. [[GREPCENT_TABLE]] [["(Dollars in thousands)","June 30, 2025","","June 30, 2026","Change","","Constant Currency Change"],["Pega Cloud","$","761,051","","","$","926,290","","$","165,239","","22","%","","22","%"],["Maintenance","301,375","","","271,328","","(30,047)","","(10)","%","","(9)","%"],["Subscription services","1,062,426","","","1,197,618","","135,192","","13","%","","13","%"],["Subscription license","451,591","","","422,316","","(29,275)","","(6)","%","","(6)","%"],["","$","1,514,017","","","$","1,619,934","","$","105,917","","7","%","","8","%"]] [[/GREPCENT_TABLE]] Unprecedented changes in the AI market caused clients to delay their purchasing decisions. As a result, our ACV growth rate significantly slowed during the six months ended June 30, 2026, as compared to the same period last year. These factors may continue to adversely affect the ACV growth rate for the rest of the year. Reconciliation of ACV and constant currency ACV [[GREPCENT_TABLE]] [["(in millions, except percentages)","June 30, 2025","","June 30, 2026","","1-Year Change"],["ACV","$","1,514","","$","1,620","","7","%"],["Impact of changes in foreign exchange rates","\u2014","","","10"],["Constant currency ACV","$","1,514","","$","1,630","","8","%"]] [[/GREPCENT_TABLE]] Note: Constant currency ACV is calculated by applying the June 30, 2025 foreign exchange rates to current period shown. 21 Cash Flow [[GREPCENT_TABLE]] [["(Dollars in thousands)","Six Months Ended June 30,","","Change"],["2025","","2026"],["Cash provided by operating activities","$","290,496","","","$","298,225","","","3","%"],["Investment in property and equipment","(4,015)","","","(9,967)"],["Free cash flow (1)","$","286,481","","","$","288,258","","","1","%"],["Supplemental information (2)"],["Legal fees","$","10,020","","","$","9,188"],["Restructuring","1,354","","","11,449"],["Interest paid on convertible senior notes","1,754","","","\u2014"],["Other","\u2014","","","(689)"],["Income taxes, net of refunds","(702)","","","10,842"],["","$","12,426","","","$","30,790"]] [[/GREPCENT_TABLE]] As a result of the factors discussed under ACV above, our cash flow generation may continue to be adversely affected for the rest of the year. (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 below identifies certain items included in operating cash flow that may affect comparability between periods. •Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business. •Restructuring: Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities. •Interest on convertible senior notes: In February 2020, we issued convertible senior notes (the “Notes”), due March 1, 2025, in a private placement. The Notes accrued interest at an annual rate of 0.75%, paid semi-annually in arrears on March 1 and September 1. The outstanding Notes were repaid in their entirety at maturity. •Other: One-time cash flow items not part of our ongoing operations. •Income taxes, net of refunds: Direct income taxes paid net of refunds received. 22 Remaining performance obligations (“Backlog”) Reconciliation of Backlog and Constant Currency Backlog (Non-GAAP) [[GREPCENT_TABLE]] [["(in millions, except percentages)","June 30, 2025","","June 30, 2026","","1-Year Growth Rate"],["Backlog - GAAP","$","1,835","","","$","2,019","","","10","%"],["Impact of changes in foreign exchange rates","\u2014","","","20"],["Constant currency backlog","$","1,835","","","$","2,039","","","11","%"]] [[/GREPCENT_TABLE]] Note: Constant currency Backlog is calculated by applying the June 30, 2025 foreign exchange rates to current period shown. CRITICAL ACCOUNTING POLICIES Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our unaudited condensed consolidated financial statements, which have been prepared following accounting principles generally accepted in the U.S. and the rules and regulations of the SEC for interim financial reporting. Preparing these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions, and expectations of what could occur in the future based on the available information. For more information about our critical accounting policies, we encourage you to read the discussion in the following locations in our Annual Report on Form 10-K for the year ended December 31, 2025: •“Critical Accounting Estimates and Significant Judgments” in Item 7; and •“Note 2. Significant Accounting Policies” in Item 8. No significant changes have been made to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025. 23 RESULTS OF OPERATIONS Revenue [[GREPCENT_TABLE]] [["(Dollars in thousands)","Three Months Ended June 30,","","Change","","Six Months Ended June 30,","","Change"],["2026","","2025","","","2026","","2025"],["Pega Cloud","$","213,934","","51","%","","$","166,743","","43","%","","$","47,191","","28","%","","$","418,965","","49","%","","$","317,866","","37","%","","$","101,099","","32","%"],["Maintenance","74,528","","18","%","","79,271","","21","%","","(4,743)","","(6)","%","","149,845","","18","%","","155,639","","18","%","","(5,794)","","(4)","%"],["Subscription services","288,462","","69","%","","246,014","","64","%","","42,448","","17","%","","568,810","","67","%","","473,505","","55","%","","95,305","","20","%"],["Subscription license","82,028","","19","%","","80,674","","21","%","","1,354","","2","%","","176,880","","21","%","","268,395","","31","%","","(91,515)","","(34)","%"],["Subscription","370,490","","88","%","","326,688","","85","%","","43,802","","13","%","","745,690","","88","%","","741,900","","86","%","","3,790","","1","%"],["Consulting","50,226","","12","%","","57,824","","15","%","","(7,598)","","(13)","%","","104,999","","12","%","","118,245","","14","%","","(13,246)","","(11)","%"],["","$","420,716","","100","%","","$","384,512","","100","%","","$","36,204","","9","%","","$","850,689","","100","%","","$","860,145","","100","%","","$","(9,456)","","(1)","%"]] [[/GREPCENT_TABLE]] •The increases in Pega Cloud revenue in the three and six months ended June 30, 2026 were primarily due to expanded [Excerpt truncated for page length; source filing is linked above.] ## Latest 10-K MD&A (excerpt) Latest 10-K Item 7 source: https://www.sec.gov/Archives/edgar/data/1013857/000101385726000017/pega-20251231.htm Complete FY 2025 MD&A: /company/PEGA/mda/fy2025/ Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high Filing date: 2026-02-10 Report date: 2025-12-31 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NON-GAAP 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. A reconciliation of GAAP and non-GAAP measures is located with each non-GAAP measure. 24 BUSINESS OVERVIEW We develop, market, license, host, and support enterprise software that helps organizations optimize decisions and processes in real-time so they can deliver outcomes that transform their business. Our powerful platform for enterprise AI decisioning and workflow automation enables the world’s leading brands and government agencies to hyper-personalize customer experiences, automate customer service, and streamline operations, mission-critical business processes, and workflows, and transform legacy systems. Clients can leverage our AI technology and scalable architecture to accelerate their digital transformation. In addition, our sales and client success teams, world-class partners, and clients can leverage Blueprint to rapidly prototype and accelerate the development and deployment of applications quickly and collaboratively. We focus on enterprise-scale businesses and government agencies that require advanced solutions to distinguish themselves in the competitive markets they serve. Our solutions achieve and facilitate differentiation by increasing business agility, driving growth and modernization, improving productivity, attracting and retaining customers, and reducing risk. Along with our partners, we deliver solutions tailored by industry. Performance metrics We use performance metrics to analyze and assess our overall performance, make operating decisions, and forecast and plan for future periods, including: 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. [[GREPCENT_TABLE]] [["(Dollars in thousands)","December 31, 2024","","December 31, 2025","","Change","","Constant Currency Change"],["Pega Cloud","$","652,443","","","$","866,612","","","$","214,169","","33","%","","28","%"],["Maintenance","291,807","","","288,873","","","(2,934)","","(1)","%","","(4)","%"],["Subscription services","944,250","","","1,155,485","","","211,235","","22","%","","18","%"],["Subscription license","427,268","","","452,902","","","25,634","","6","%","","4","%"],["","$","1,371,518","","","$","1,608,387","","","$","236,869","","17","%","","14","%"]] [[/GREPCENT_TABLE]] Reconciliation of ACV and constant currency ACV [[GREPCENT_TABLE]] [["(in millions, except percentages)","December 31, 2024","","December 31, 2025","","1-Year Change"],["ACV","$","1,372","","","$","1,608","","","17","%"],["Impact of changes in foreign exchange rates","\u2014","","","(46)"],["Constant currency ACV","$","1,372","","","$","1,562","","","14","%"]] [[/GREPCENT_TABLE]] Note: Constant currency ACV is calculated by applying the December 31, 2024 foreign exchange rates to current period shown. 25 [[GREPCENT_TABLE]] [["(Dollars in thousands)","2024","","2025","","Change"],["Cash provided by operating activities","$","345,926","","","$","505,227","","","46","%"],["Investment in property and equipment","(7,712)","","","(14,504)"],["Free cash flow (1)","$","338,214","","","$","490,723","","","45","%"],["Supplemental information (2)"],["Litigation settlement, net of recoveries","$","32,403","","","$","\u2014"],["Legal fees","16,197","","","35,484"],["Restructuring","5,252","","","2,056"],["Interest paid on convertible senior notes","3,810","","","1,754"],["Income taxes, net of refunds","82,317","","","21,630"],["","$","139,979","","","$","60,924"]] [[/GREPCENT_TABLE]] (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. ◦Litigation settlement, net of recoveries: Cost to settle litigation, net of insurance recoveries, arising from proceedings outside the ordinary course of business. See "Note 20. Commitments And Contingencies" in Item 8 of this Annual Report for further information. ◦Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business. ◦Restructuring: Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities. ◦Interest paid on convertible senior notes: In February 2020, we issued the Notes, due March 1, 2025, in a private placement. The Notes accrued interest at an annual rate of 0.75%, paid semi-annually in arrears on March 1 and September 1.The outstanding Notes were repaid in their entirety at maturity. ◦Income taxes, net of refunds: Direct income taxes paid net of refunds received. 26 Reconciliation of Backlog and Constant Currency Backlog (Non-GAAP) [[GREPCENT_TABLE]] [["(in millions, except percentages)","December 31, 2024","","December 31, 2025","","1-Year Growth Rate"],["Backlog - GAAP","$","1,623","","","$","2,074","","","28","%"],["Impact of changes in foreign exchange rates","\u2014","","","(80)"],["Constant currency backlog","$","1,623","","","$","1,994","","","23","%"]] [[/GREPCENT_TABLE]] Note: Constant currency Backlog is calculated by applying the December 31, 2024 foreign exchange rates to current period shown. RESULTS OF OPERATIONS Revenue [[GREPCENT_TABLE]] [["(Dollars in thousands)","2025","","2024","","Change"],["Pega Cloud","$","695,902","","40","%","","$","558,734","","37","%","","$","137,168","","25","%"],["Maintenance","314,593","","18","%","","323,304","","22","%","","(8,711)","","(3)","%"],["Subscription services","1,010,495","","58","%","","882,038","","59","%","","128,457","","15","%"],["Subscription license","507,368","","29","%","","401,869","","27","%","","105,499","","26","%"],["Subscription","1,517,863","","87","%","","1,283,907","","86","%","","233,956","","18","%"],["Consulting","227,949","","13","%","","213,273","","14","%","","14,676","","7","%"],["","$","1,745,812","","100","%","","$","1,497,180","","100","%","","$","248,632","","17","%"]] [[/GREPCENT_TABLE]] •The increase in Pega Cloud revenue in 2025 was primarily due to expanded adoption of Pega Cloud by our existing clients. •The decrease in maintenance revenue in 2025 was primarily due to our clients’ shift to Pega Cloud-based offerings, which do not generally result in maintenance revenue. •The increase in subscription license revenue in 2025 was primarily due to our clients’ shift to Pega Cloud-based offerings, and several large multi-year subscription license contracts recognized in revenue in 2025. •The increase in consulting revenue in 2025 was primarily due to an increase in consultant billable hours in our International regions. 27 Gross profit [[GREPCENT_TABLE]] [["","2025","","2024"],["(Dollars in thousands)","","Gross Profit %","","","Gross Profit %","","Change"],["Pega Cloud","$","548,523","","79","%","","$","434,261","","78","%","","$","114,262","","26","%"],["Maintenance","292,725","","93","%","","297,859","","92","%","","(5,134)","","(2)","%"],["Subscription services","841,248","","83","%","","732,120","","83","%","","109,128","","15","%"],["Subscription license","505,986","","100","%","","399,964","","100","%","","106,022","","27","%"],["Subscription","1,347,234","","89","%","","1,132,084","","88","%","","215,150","","19","%"],["Consulting","(22,804)","","(10)","%","","(25,569)","","(12)","%","","2,765","","11","%"],["","$","1,324,430","","76","%","","$","1,106,515","","74","%","","$","217,915","","20","%"]] [[/GREPCENT_TABLE]] The gross profit change in 2025 was primarily due to a shift in the revenue mix. Also contributing to the change was: •The increase in Pega Cloud gross profit percent in 2025 was primarily due to increased hosting cost efficiencies as Pega Cloud continues to grow and scale and a reallocation of certain headcount from Pega Cloud to Maintenance to align with the change in the nature of their responsibilities. •The increase in consulting gross profit percent in 2025 was primarily due to an increase in consultant utilization rates offset by an increase in contracted services of $6.1 million. Operating expenses [[GREPCENT_TABLE]] [["","2025","","2024","","Change"],["(Dollars in thousands)","","% of Revenue","","","% of Revenue"],["Selling and marketing","$","578,637","","33","%","","$","534,780","","36","%","","$","43,857","","8","%"],["Research and development","$","312,681","","18","%","","$","298,074","","20","%","","$","14,607","","5","%"],["General and administrative","$","148,722","","9","%","","$","112,848","","8","%","","$","35,874","","32","%"],["Litigation settlement, net of recoveries","$","9,750","","1","%","","$","32,403","","2","%","","$","(22,653)","","*"],["Restructuring","$","11,540","","1","%","","$","4,528","","\u2014","%","","$","7,012","","155","%"]] [[/GREPCENT_TABLE]] * Not meaningful •The increase in selling and marketing in 2025 was primarily due to an increase in compensation and benefits of $31.3 million attributable to increases in headcount and incentive compensation. •The increase in research and development in 2025 was primarily due to an increase in compensation and benefits of $11.6 million attributable to increases in headcount and incentive compensation. •The increase in general and administrative in 2025 was primarily due to an increase of $20.4 million in legal fees and related expenses arising from legal proceedings outside the ordinary course of business. We expect to continue to incur additional costs for these proceedings. For additional information, see "Note 20. Commitments And Contingencies" in Item 8 of this Annual Report. In 2025 we experienced an increase of $11.8 million in compensation and benefits attributable to equity compensation and a reallocation of certain headcount from research and development to general and administrative to align with the change in the nature of their responsibilities. •The decrease in litigation settlement, net of recoveries in 2025 was primarily due to the estimated cost to settle ongoing litigation arising from proceedings outside the ordinary course of business. For additional information, see "Note 20. Commitments And Contingencies" in Item 8 of this Annual Report. •During the fourth quarter of 2025, management committed to a restructuring plan, primarily within our consulting organization, intended to better align roles and capacity to an AI-first delivery model. The plan resulted in a restructuring expense of approximately $13 million in 2025, associated with severance and benefits for impacted employees. For additional information, see "Note 12. Restructuring" in Item 8 of this Annual Report. Other income and expenses [[GREP [Excerpt truncated for page length; the complete text is on the linked full-MD&A page.] Read the full FY 2025 MD&A: /company/PEGA/mda/fy2025/ All MD&A years: /company/PEGA/mda/ ## MD&A history Prior-year 10-K MD&A spans are extracted from SEC filings with the same bounded parser used for the latest filing. Each year's full verbatim text is on its own sub-page. - [FY 2024 MD&A](/company/PEGA/mda/fy2024/): filed 2025-02-12; accession 0001013857-25-000024 (https://www.sec.gov/Archives/edgar/data/1013857/000101385725000024/pega-20241231.htm) - [FY 2023 MD&A](/company/PEGA/mda/fy2023/): filed 2024-02-14; accession 0001013857-24-000012 (https://www.sec.gov/Archives/edgar/data/1013857/000101385724000012/pega-20231231.htm) - [FY 2022 MD&A](/company/PEGA/mda/fy2022/): filed 2023-02-15; accession 0001013857-23-000020 (https://www.sec.gov/Archives/edgar/data/1013857/000101385723000020/pega-20221231.htm) - [FY 2021 MD&A](/company/PEGA/mda/fy2021/): filed 2022-02-16; accession 0001013857-22-000042 (https://www.sec.gov/Archives/edgar/data/1013857/000101385722000042/pega-20211231.htm) ## Macro cross-references Indicators mapped to this company's SIC classification (industry 7374 Services-Computer Processing & Data Preparation) by grepcent's deterministic macro-sector crosswalk. A navigational mapping, not a statistical or causal claim. - [PAYEMS](/indicator/PAYEMS/): All Employees, Total Nonfarm - [CES0500000003](/indicator/CES0500000003/): Average Hourly Earnings of All Employees, Total Private - [DGS10](/indicator/DGS10/): Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity Macro-to-micro threads including this sector: [US labor market](/thread/us-labor-market/), [Growth & output](/thread/growth-output/), [Government finances](/thread/government-finances/), [Sector employment](/thread/sector-employment/). All macro indicators: /indicators/ ## For LLMs & downloads Markdown twin: /company/PEGA.md · JSON record: /company/PEGA.json · verified financials: /company/PEGA/financials.json / /company/PEGA/financials.csv · machine TOC for the whole site: /llms.txt