Pegasystems Q3 revenue, adjusted EPS miss estimates as contract growth slows

By Reuters News


Overview

  • Enterprise AI software firm's Q3 revenue rose 3% but missed analyst expectations

  • Adjusted EPS for Q3 missed analyst expectations

  • Company says slower growth reflects go-to-market execution challenges, client investment scrutiny and evolving purchasing behaviors


Outlook

  • Company says ACV growth rate may remain adversely affected for rest of 2026

  • Company expects cash flow generation may continue to be adversely affected for rest of year

  • Pegasystems targets $700 mln or more of free cash flow in 2028


Result Drivers

  • CLOUD ADOPTION - Pega Cloud ACV grew 20% in Q3 and reached 59% of total ACV, driven by expanding cloud adoption

  • CLIENT INVESTMENT SCRUTINY - Co said slower ACV growth was due to clients subjecting large technology investments to greater scrutiny as AI disrupts the industry

  • GO-TO-MARKET EXECUTION - Co attributed sluggish ACV growth through the first nine months to go-to-market execution challenges and said it is taking actions to accelerate growth


Company press release:


Key Details

Metric

Beat/Miss

Actual

Consensus Estimate

Q3 Revenue

Miss

$393.36 mln

$422.04 mln (10 Analysts)

Q3 Adjusted EPS

Miss

$0.35

$0.48 (10 Analysts)

Q3 EPS

$0.08

Q3 Adjusted Net Income

Miss

$59.75 mln

$82.46 mln (10 Analysts)

Q3 Net Income

$14.09 mln


Analyst Coverage

  • The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 5 "strong buy" or "buy", 8 "hold" and no "sell" or "strong sell"

  • The average consensus recommendation for the software peer group is "buy"

  • Wall Street's median 12-month price target for Pegasystems Inc. is $43.00, about 22.7% above its October 19 closing price of $35.04

  • The stock recently traded at 14 times the next 12-month earnings vs. a P/E of 10 three months ago


Reuters Recommended Reads

  • Oct 20 - France's Sidetrade Q3 revenue rises on AI-native products, international growth

  • Oct 20 - Germany's Mensch und Maschine 9M sales rise on software segment growth

  • Oct 20 - Software upgrades eat nearly a third of companies' IT budgets, survey finds


For questions concerning the data in this report, contact Estimates.Support@lseg.com. For any other questions or feedback, contact reuters.support@thomsonreuters.com.


(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)

Capital.com is an execution-only brokerage platform and the content provided on the Capital.com website is intended for informational purposes only and should not be regarded as an offer to sell or a solicitation of an offer to buy the products or securities to which it applies. No representation or warranty is given as to the accuracy or completeness of the information provided.

The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance.

To the extent permitted by law, in no event shall Capital.com (or any affiliate or employee) have any liability for any loss arising from the use of the information provided. Any person acting on the information does so entirely at their own risk.

Any information which could be construed as “investment research” has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.