Pegasystems (PEGA) AI Stock Analysis

• Market Cap: $6.66B
• Dividend Yield: 0.16%
• Average Volume (3M): 1.37M
• Price to Earnings (P/E): 27.0
• Beta (1Y): 1.37
• Revenue Growth: 17.00%
• EPS Growth: 120.21%
• Country: US
• Employees: 5,443
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 0.30
• Shares Outstanding: 169,722,780
• 10 Day Avg. Volume: 2,262,121
• 30 Day Avg. Volume: 1,370,968
• PEG Ratio: 1.93
• Price to Book (P/B): 13.57
• Price to Sales (P/S): 5.31
• P/FCF Ratio: 23.50
• Enterprise Value/Market Cap: 0.97
• Enterprise Value/Revenue: 3.73
• Enterprise Value/Gross Profit: 4.93
• Enterprise Value/Ebitda: 17.31
• 1Y Price Target: $74.00
• Price Target Upside: 88.49% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 6
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 67 Neutral
• Price Target: $43.00 ▲(9.53% Upside)

The score is anchored by strong underlying financial performance and a constructive earnings outlook (cloud ACV acceleration and record cash flow), but is held back by very weak technical momentum (deeply oversold and below major moving averages) and only middling valuation support (premium P/E with low yield).

Positive Factors

High margins and improving profitability

Sustained high gross margins (75.7% TTM) and a materially improved net margin (16.0%) indicate durable product differentiation and operating leverage. These margins support reinvestment in R&D, sales and AI capabilities while providing resilience across cycles and industries served.

Accelerating cloud ACV and AI-driven adoption

Rapid cloud ACV growth (27% YoY) and an executed AI blueprint create structural recurring revenue expansion and higher contract visibility. Cloud+AI adoption supports stickier, subscription-based economics and positions the company to capture long-term enterprise digital transformation spend.

Strong cash generation and low leverage

Robust operating and free cash flow, with FCF growth and conversion above net income, plus a low debt-to-equity ratio, underpin financial flexibility. This supports strategic investments, buybacks, and cushioning for execution risk while enabling sustained product and go-to-market spend.

Negative Factors

Decline in term license revenue

The shift from term licenses to cloud subscriptions changes revenue timing and can depress near-term license bookings and growth cadence. Transitioning business models can compress reported revenue and margins in the midterm while recurring cloud bookings scale, creating execution risk during conversion.

Consulting restructuring and execution risk

A significant reorganization of Consulting to an AI-first model creates short-to-medium term delivery disruption, potential loss of billable capacity and client execution risk. While intended to improve scalability, it could reduce services revenue and slow cloud rollouts if not smoothly executed.

Relatively low equity ratio

A relatively low equity ratio indicates a thinner equity cushion, which can limit financial flexibility in stress scenarios or large strategic moves. Even with low reported leverage, constrained equity proportions may reduce headroom for sizable M&A or require more conservative capital allocation.

Pegasystems Business Overview & Revenue Model

Company Description

Pegasystems Inc. develops, markets, licenses, hosts, and supports enterprise software applications in the United States, rest of the Americas, the United Kingdom, rest of Europe, the Middle East, Africa, and the Asia-Pacific. It provides Pega Platform, an application development product for clients; and Pega Infinity, a software platform that unifies customer engagement and digital process automation. The company also offers customer engagement applications, including Pega Customer Decision Hub that enable enterprises to enhance customer acquisition and experiences across inbound, outbound, and paid media channels; Pega Sales Automation to automate and manage the sales process; and Pega Customer Service to anticipate customer needs, connect customers to people and systems, and automate customer interactions to evolve the customer service experience, as well as to allow enterprises to deliver interactions across channels and enhance employee productivity. In addition, it provides intelligent automation software; Pega Cloud that allows clients to develop, test, and deploy applications and the Pega Platform using an Internet-based infrastructure; Pega Academy, which offers instructor-led and online training to its employees, clients, and partners; and guidance, implementation, and technical support services. The company primarily markets its software and services to financial services, life sciences, healthcare, communications and media, government, insurance, manufacturing and high tech, and consumer services markets through a direct sales force, as well as partnerships with technology providers and application developers. Pegasystems Inc. was incorporated in 1983 and is headquartered in Cambridge, Massachusetts.

How the Company Makes Money

Pegasystems generates revenue primarily through the sale of software licenses, subscription services, and professional services. The company offers its products on a subscription basis, providing customers with access to its cloud-based platforms. Significant revenue streams include license sales for on-premise deployments, annual subscriptions for cloud services, and consulting services that assist organizations in implementing and optimizing PEGA solutions. Additionally, PEGA has formed strategic partnerships with major technology companies, enhancing its market reach and providing integrated solutions that drive further revenue opportunities. Revenue is also bolstered by maintenance and support services, which ensure ongoing customer engagement and satisfaction.

Pegasystems Financial Statement Overview

Summary

Strong profitability and efficiency trends (TTM gross margin 75.7%, net margin improved to 16.0%) supported by solid cash generation (free cash flow growth 8% TTM; FCF conversion slightly above net income). Balance sheet leverage is low (debt-to-equity 0.10), though the relatively low equity ratio tempers the score.

Income Statement

Pegasystems has demonstrated strong revenue growth and improving profitability. The TTM gross profit margin is robust at 75.7%, and the net profit margin has improved significantly to 16.0% from previous years. The EBIT and EBITDA margins have also shown positive trends, indicating efficient cost management and operational improvements.

Balance Sheet

The company's balance sheet shows a healthy debt-to-equity ratio of 0.10 in the TTM, a significant improvement from previous years, indicating reduced leverage. The return on equity is strong at 45.98%, reflecting effective utilization of shareholder equity. However, the equity ratio is relatively low, suggesting a moderate reliance on debt financing.

Cash Flow

Pegasystems has shown strong cash flow performance with a free cash flow growth rate of 8.0% in the TTM. The free cash flow to net income ratio is slightly above 1, indicating efficient conversion of earnings into cash. The operating cash flow to net income ratio is healthy, reflecting good cash generation relative to net income.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	1.73B	1.50B	1.43B	1.32B	1.21B	1.02B
Gross Profit	1.31B	1.11B	1.05B	949.21M	875.29M	706.60M
EBITDA	373.32M	184.90M	136.97M	-119.28M	-95.44M	-84.19M
Net Income	277.95M	99.19M	67.81M	-345.58M	-63.04M	-61.37M
Balance Sheet
Total Assets	1.29B	1.77B	1.51B	1.36B	1.59B	1.60B
Cash, Cash Equivalents and Short-Term Investments	351.36M	739.97M	423.34M	297.22M	362.78M	465.17M
Total Debt	76.83M	549.67M	581.27M	687.74M	685.53M	595.80M
Total Liabilities	695.96M	1.18B	1.16B	1.23B	1.18B	1.06B
Stockholders Equity	596.83M	585.48M	353.84M	130.84M	416.09M	542.17M
Cash Flow
Free Cash Flow	439.23M	338.21M	201.00M	-13.04M	28.66M	-25.93M
Operating Cash Flow	442.02M	345.93M	217.78M	22.34M	39.12M	-563.00K
Investing Cash Flow	228.32M	-202.58M	-50.75M	13.07M	72.50M	-321.68M
Financing Cash Flow	-813.55M	-30.21M	-81.96M	-46.99M	-121.84M	423.45M

Pegasystems Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 39.26
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Positive
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PEGA, the sentiment is Negative. The current price of 39.26 is below the 20-day moving average (MA) of 50.78, below the 50-day MA of 55.51, and below the 200-day MA of 54.12, indicating a bearish trend. The MACD of -4.40 indicates Positive momentum. The RSI at 19.08 is Positive, neither overbought nor oversold. The STOCH value of 8.57 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PEGA.

Pegasystems Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NICE	71 Outperform	$6.69B	12.67	15.24%	―	9.46%	34.09%
PEGA	67 Neutral	$6.66B	27.02	51.96%	0.16%	17.00%	120.21%
ESTC	65 Neutral	$6.36B	-58.45	-12.84%	―	16.98%	-265.85%
CVLT	64 Neutral	$3.60B	42.48	34.48%	―	22.02%	-55.25%
MNDY	63 Neutral	$5.32B	85.47	5.81%	―	28.62%	186.67%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
BILL	61 Neutral	$3.73B	-136.62	0.30%	―	11.63%	50.72%

Pegasystems Corporate Events

Pegasystems Restructures Consulting to Enable AI-First Strategy

On January 7, 2026, Pegasystems Inc. announced organizational changes aimed at shifting to an AI-first delivery model and supporting its 2026 strategic priorities, with the restructuring primarily affecting its Consulting organization through role eliminations and reorganization. The company has begun notifying affected employees, expects communications to be substantially completed in the first quarter of 2026, and anticipates incurring an estimated $13 million charge in the fourth quarter of 2025, largely tied to severance and related benefits, underscoring a significant operational realignment as Pegasystems adapts to evolving AI-driven client expectations for speed, precision, and scalable results.

The most recent analyst rating on (PEGA) stock is a Buy with a $66.00 price target. To see the full list of analyst forecasts on Pegasystems stock, see the PEGA Stock Forecast page.

Pegasystems Wins Key Virginia Supreme Court Trade Secrets Ruling

On January 8, 2026, the Supreme Court of Virginia unanimously affirmed a July 30, 2024 decision by the Court of Appeals of Virginia that had reversed a prior judgment in favor of Appian Corp. on trade secret claims under the Virginia Uniform Trade Secrets Act in litigation against Pegasystems Inc. and former employee Youyong Zou, and ordered the case remanded for a new trial. The ruling fully rejected Appian’s appeal of the appellate decision and highlighted trial errors that Pegasystems has long challenged, including improper jury instructions on damages and limitations on Pegasystems’ ability to present evidence, marking a significant legal and reputational win for Pegasystems as it seeks to clear its name and mitigate exposure from the previously issued $2 billion verdict.

The most recent analyst rating on (PEGA) stock is a Buy with a $80.00 price target. To see the full list of analyst forecasts on Pegasystems stock, see the PEGA Stock Forecast page.