Pegasystems Reports Q2 Revenue, EPS Beat
Key Points
Revenue reached $384.5 million, up 9%, and beat estimates by $22.6 million, or 6.3%.
Adjusted EPS was $0.28, surpassing analyst expectations by 14.7%.
Cloud annual contract value climbed 28% year over year, accelerating the company’s shift to recurring cloud-based revenue.
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Pegasystems (NASDAQ:PEGA), a company known for its AI-powered workflow automation and customer engagement solutions, released its second-quarter results on July 22, 2025. The earnings release revealed that Pegasystems exceeded both revenue (GAAP) and earnings (non-GAAP) projections. Revenue (GAAP) came in at $384.5 million, outpacing the $361.9 million estimate. Non-GAAP earnings per share were $0.28 versus an estimate of $0.24. The quarter marked clear progress in cloud adoption, margin expansion, and cash flow. Overall, the company reported broad-based growth and operational improvement.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| Adjusted EPS | $0.28 | $0.24 | $0.26 | 8% |
| Revenue | $384.5 million | $361.9 million | $351.2 million | 9% |
| Adj. Net Income | $50.2 million | $45.8 million | 10% | |
| Free Cash Flow (Non-GAAP, 6 months) | $286.5 million | $218.4 million | 31% | |
| Annual Contract Value | $1.51 billion | $1.30 billion | 16% |
Source: Pegasystems. Note: Analyst estimates for the quarter provided by FactSet.
Business Overview and Success Factors
Pegasystems delivers software for workflow automation, customer relationship management (CRM), and artificial intelligence decisioning for large enterprises. Its core product, Pega Infinity, combines low-code development tools, AI-driven decision engines, and automation technologies. The goal is to help organizations simplify operations, improve customer experiences, and adapt quickly to business changes.
Recently, Pegasystems has focused on expanding its cloud-based offerings and integrating advanced AI capabilities into its platform. The company’s key growth drivers include rapid cloud adoption, innovation in AI-powered workflow tools such as Blueprint, and capturing new business from large organizations and government agencies. Operational efficiency, expanding client relationships, and product differentiation are all critical to its performance.
Highlights and Details of the Quarter
The quarter saw strong outperformance on both revenue (GAAP) and earnings (non-GAAP). This top-line result was up 9% year over year. Non-GAAP net income rose 9% to $50.2 million. The company's free cash flow (non-GAAP) for the first six months of 2025 grew 31%, reaching $286.5 million.
Annual contract value (ACV)—a measure that tracks recurring revenue under active contracts—stood out, gaining 16% to $1.51 billion. The cloud segment was the growth engine, posting a 28% rise in Pega Cloud ACV year over year and a 24% climb in Pega Cloud revenue to $166.7 million. Subscription services grew 15% year over year, while maintenance revenue dipped 1 %. Consulting revenue increased 11% year over year
A major development was the broad adoption of the AI design tool Blueprint. Blueprint allows clients to quickly build and optimize business workflows using a mix of generative AI for design and rules-based automation for execution. Company executives highlighted that Blueprint now influences every new business deal and over 1,000 Blueprints are created weekly—double the volume just months ago. These innovations further differentiate the Pega Infinity platform and illustrate the practical, client-driven use of AI within the software.
Pega Cloud backlog, reflecting work yet to be delivered, jumped 30% year over year, reaching $1.32 billion. Total backlog (GAAP) expanded 31% to $1.84 billion. Purpose-built versions of Blueprint for the public sector also contributed to market expansion.
The company fully repaid its convertible debt, achieving a debt-free balance sheet, and continued share repurchase activity, but litigation risk remains present. The quarter did see a notable drop in cash and marketable securities, in part due to repurchases and debt payoff, but the company remains in a net cash position.
Outlook and What to Watch
Pegasystems management did not offer updated financial guidance for the next quarter or the full year. Leadership emphasized that while results for the first quarter were solid, it is too early in the year to set new expectations or establish a trend. No forward revenue or margin targets were supplied.
Looking ahead, investors should monitor the company’s continued transition to cloud, the rate of ACV and backlog growth, and ongoing efforts in AI product expansion. Other watch items include the pace of legacy revenue declines, effects of foreign exchange, and the outcome of ongoing litigation.
Note: Revenue and net income are presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
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