Pegasystems Inc (PEGA)

Price$32.97Cached quoteAs of 2026-09-30 01:37 UTC

AI: Undervalued

Price checkThe shares look undervalued if cash generation holds despite slower contract growth.

Pegasystems is valued at roughly $6.0 billion, or about 12 times trailing free cash flow, meaning cash left after operating and capital spending. First-half 2026 free cash flow alone was $288 million, nearly matching the prior-year period despite weaker contract momentum. That cash yield is attractive for a software business whose cloud contract value still grew 22%. The discount appears to price in a substantial deterioration, so the shares look undervalued if current cash generation proves broadly durable.

Big pictureCash generation has improved sharply, but customer commitments slowed as artificial intelligence spending shifted.

Revenue increased from $1.43 billion in 2023 to $1.75 billion in 2025, while operating cash flow rose from $218 million to $505 million. Free cash flow reached about $491 million in 2025. However, annual contract value, which measures the yearly value of active customer contracts, grew only 7% by June 2026 after growing 17% during 2025. Management said rapid changes in artificial intelligence caused customers to delay purchases and warned that cash generation could weaken later in 2026.

Business strengthA net cash balance and aggressive buybacks provide unusual protection for a software company.

At June's end, Pegasystems held about $362 million of cash and marketable securities and only $72 million of debt, with no cash borrowings under its credit facility. Management also repurchased 8.9 million shares for $367 million during the first half, helping reduce shares outstanding from 170.3 million at year-end to 164.4 million. Stock compensation was still substantial at $82 million, but buybacks more than offset issuance. Another $875 million remained authorized for repurchases, giving management considerable capital-allocation flexibility.

What could change the storyThe thesis turns on whether delayed purchases resume before cash growth weakens.

The strongest bull case is that customers are postponing, rather than abandoning, projects while they reassess artificial intelligence costs. Cloud contract value still grew 22%, supporting that interpretation. The bear case is that artificial intelligence tools permanently reduce demand for Pega's workflow software or lengthen sales cycles enough to erode future cash flow. A recovery in total contract growth toward double digits would strengthen the undervaluation case; continued growth near 7% alongside falling free cash flow would make today's apparently cheap multiple much less compelling.

AI: News

Second-quarter slowdownSlower customer commitments overshadowed strong cash flow and triggered a sharp earnings-day selloff.

On July 21, Pegasystems reported second-quarter revenue of $420.7 million, up about 9%, while cloud contract value grew 22%. Total contract value grew only 7%, however, as customers delayed decisions amid rapid artificial intelligence changes. Adjusted earnings and revenue missed analyst expectations. The shares fell roughly 13% to 19% in early trading the next day depending on the measurement point, making this the clearest recent company-specific repricing event.

First-quarter missAn earlier earnings miss began weakening confidence before the second-quarter slowdown became more obvious.

Pegasystems reported first-quarter results on April 21 with cloud contract value up 29% and total contract value up 12%, but revenue and adjusted earnings missed Wall Street expectations. The stock ended the following week about 14% lower, although broader trading conditions may also have contributed. The result mattered because it showed that strong cloud adoption was not immediately translating into the revenue and earnings investors had expected, setting up greater sensitivity to the subsequent second-quarter disappointment.

Buyback expansionStrong 2025 cash flow led management to authorize another billion dollars of share repurchases.

On February 10, Pegasystems reported 17% annual contract-value growth, 33% cloud contract-value growth, and a 45% increase in free cash flow, while announcing an additional $1 billion repurchase authorization. Contemporary market data showed the shares rising about 6.6% around the announcement. The decision matters because management subsequently spent $367 million buying shares during the first half of 2026, reducing the share count and increasing each remaining shareholder's claim on future cash generation.

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Financial statements

	2025	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015	2014	2013	2012	2011	2010	2009
Revenue	$1.75B	$1.50B	$1.43B	$1.32B	$1.21B	$1.02B	$911.4M	$891.6M	$888.5M	$762.2M	$682.7M	$590.0M	$509.0M	$461.7M	$416.7M	$336.6M	$264.0M
Gross profit	$1.32B	$1.11B	$1.05B	$949.2M	$875.3M	$706.6M	$601.4M	$589.8M	$608.8M	$523.0M	$469.2M	$404.9M	$351.5M	$304.3M	$251.9M	$207.9M	$173.1M
Gross margin	75.86%	73.91%	73.58%	72.03%	72.24%	69.44%	65.98%	66.15%	68.52%	68.61%	68.73%	68.63%	69.07%	65.91%	60.45%	61.75%	65.56%
Research & development	$312.7M	$298.1M	$295.5M	$294.3M	$260.6M	$237.0M	$205.2M	$181.7M	$162.9M	$145.5M	$126.4M	$108.6M	$79.7M	$76.7M	$65.3M	$55.2M	$38.9M
Operating expenses	$1.06B	$982.6M	$973.2M	$1.06B	$970.0M	$850.1M	$736.2M	$606.8M	$515.6M	$472.3M	$404.6M	$353.4M	$293.5M	$272.9M	$241.4M	$210.4M	$131.3M
Operating income	$263.1M	$123.9M	$81.0M	−$109.4M	−$94.7M	−$143.5M	−$134.9M	−$17.0M	$93.2M	$50.6M	$64.7M	$51.5M	$58.1M	$31.4M	$10.5M	−$2.6M	$41.8M
Operating margin	15.07%	8.27%	5.65%	−8.30%	−7.82%	−14.11%	−14.80%	−1.91%	10.49%	6.64%	9.47%	8.74%	11.41%	6.81%	2.52%	−0.77%	15.84%
EBITDA	$276.8M	$141.5M	$99.7M	−$90.6M	−$66.1M	−$122.2M	−$113.5M	$8.3M	$117.9M	$74.8M	$87.8M	$74.9M	$78.1M	$50.0M	$28.0M	$9.4M	$44.6M
EBITDA margin	15.86%	9.45%	6.96%	−6.88%	−5.46%	−12.01%	−12.45%	0.93%	13.27%	9.81%	12.85%	12.69%	15.35%	10.83%	6.71%	2.80%	16.90%
Net income	$393.4M	$99.2M	$67.8M	−$345.6M	−$63.0M	−$61.4M	−$90.4M	$10.6M	$98.5M	$45.0M	$36.3M	$33.3M	$38.0M	$21.9M	$10.1M	−$5.9M	$32.2M
Net profit margin	22.54%	6.63%	4.73%	−26.22%	−5.20%	−6.03%	−9.92%	1.19%	11.09%	5.91%	5.32%	5.64%	7.47%	4.74%	2.43%	−1.75%	12.20%
Basic EPSper basic share	$2.30	$0.58	$0.41	-$4.22	-$0.39	-$0.38	-$0.57	$0.07	$0.64	$0.30	$0.24	$0.22	$0.25	$0.15	$0.03	-$0.02	$0.11
Diluted EPSper diluted share	$2.13	$0.55	$0.37	-$4.22	-$0.39	-$0.38	-$0.57	$0.07	$0.60	$0.28	$0.23	$0.21	$0.25	$0.14	$0.03	-$0.02	$0.11

Review official source filings ↗

Owners

Reported shareholders

Reference date Jun 30, 2026

≈46.81%of listed shares

TREFLER ALAN76.94M shares · Mar 2, 2026

View holders

Top 20 reported holders of PEGA
Holder	% owned
TREFLER ALAN	≈46.81%76.94M shares
BlackRock, Inc.	5.82%9.57M shares
VANGUARD PORTFOLIO MANAGEMENT LLC	3.93%6.46M shares
AQR CAPITAL MANAGEMENT LLC	2.99%4.92M shares
VANGUARD CAPITAL MANAGEMENT LLC	2.51%4.13M shares
MASSACHUSETTS FINANCIAL SERVICES CO /MA/	1.84%3.03M shares
FIRST TRUST ADVISORS LP	1.80%2.96M shares
STATE STREET CORP	1.78%2.93M shares
DIMENSIONAL FUND ADVISORS LP	1.63%2.68M shares
GEODE CAPITAL MANAGEMENT, LLC	1.57%2.59M shares
ARROWSTREET CAPITAL, LIMITED PARTNERSHIP	1.23%2.02M shares
Lynrock Lake LP	1.08%1.78M shares
Invesco Ltd.	0.97%1.59M shares
Thrivent Financial for Lutherans	0.92%1.51M shares
PRICE T ROWE ASSOCIATES INC /MD/	0.88%1.44M shares
Copeland Capital Management, LLC	0.86%1.41M shares
Boston Partners	0.82%1.35M shares
MORGAN STANLEY	0.71%1.17M shares
Capital Impact Advisors, LLC	0.69%1.13M shares
FEDERATED HERMES, INC.	0.69%1.13M shares

Percentages use 164.36M shares of this listed class outstanding on Jun 30, 2026. ≈ compares the latest reported holding with a share total from a different date; it is not a confirmed current stake.

Gray completes the 100% scale. Reported positions may overlap; holders have different reporting dates.

Source: SEC Form 4 ↗Updated Sep 29, 2026 · Quarterly data

Insider buys & sells

Jul 1, 2024–Jun 30, 2026

Buys0$0.00 disclosed value

Sells (SEC code S)180$94.86M disclosed value

Transaction	Insider	Type	Shares	Price	Value	Owned after
Jun 16, 2026Form 4	KOUNINIS EFSTATHIOS ASVP, Chief Accounting Officer	SellCommon stock	100	$32.32	$3.2K	2.4K
Jun 16, 2026Form 4	KOUNINIS EFSTATHIOS ASVP, Chief Accounting Officer	SellCommon stock	650	$32.31	$21.0K	2.5K
Jun 1, 2026Form 4	KOUNINIS EFSTATHIOS ASVP, Chief Accounting Officer	SellCommon stock	750	$36.99	$27.7K	2.1K
May 29, 2026Form 4	KOUNINIS EFSTATHIOS ASVP, Chief Accounting Officer	SellCommon stock	750	$34.75	$26.1K	2.9K
May 19, 2026Form 4	Akgonul Rifat KerimChief Product Officer	SellCommon stock	4.5K	$33.35	$151.6K	107.1K

Review ownership filings at SEC.gov ↗

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Pegasystems Inc (PEGA)

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