Pegasystems (PEGA) AI Stock Analysis

• Market Cap: $7.54B
• Dividend Yield: 0.16%
• Average Volume (3M): 2.65M
• Price to Earnings (P/E): 20.5
• Beta (1Y): 1.41
• Revenue Growth: 17.00%
• EPS Growth: 120.21%
• Country: US
• Employees: 5,443
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 0.76
• Shares Outstanding: 169,043,720
• 10 Day Avg. Volume: 2,404,107
• 30 Day Avg. Volume: 2,647,056
• PEG Ratio: 0.09
• Price to Book (P/B): 12.95
• Price to Sales (P/S): 5.84
• P/FCF Ratio: 20.78
• Enterprise Value/Market Cap: 1.00
• Enterprise Value/Revenue: 4.31
• Enterprise Value/Gross Profit: 5.68
• Enterprise Value/Ebitda: 24.43
• 1Y Price Target: $61.25
• Price Target Upside: 37.27% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 10
• EPS Forecast (FY): 2.22
• Revenue Forecast (FY): $1.86B

• Rating: 71 Outperform
• Price Target: $46.00 ▲(3.09% Upside)
• Action: Reiterated Date: 02/13/26
• Date: Action: Reiterated 02/13/26

Score is driven primarily by strong financial performance (profitability and free-cash-flow inflection plus reduced leverage) and a supportive earnings-call outlook (solid 2026 growth/FCF guidance and expanding backlog). This is tempered by clearly bearish technicals (price below major moving averages with negative MACD) and only middling valuation support (P/E ~28 with a minimal dividend).

Positive Factors

Cash generation

Sustained, material free cash flow (~$505M in 2025) strengthens funding for R&D, cloud migration, buybacks and debt reduction. Durable cash conversion supports reinvestment and optionality, lowering refinancing risk and enabling multi-year strategic execution independent of short-term market moves.

Deleveraging & liquidity

Sharp reduction in debt and higher equity materially improve financial flexibility and reduce interest and covenant risk. A stronger balance sheet supports continued investment in cloud and AI initiatives, enables buybacks and cushions cyclical pressure, improving resilience over multiple quarters.

Cloud momentum & backlog

Large, growing backlog with a rising share from Pega Cloud signals durable recurring revenue and clearer visibility into future ACV. The cloud-led mix and expanding backlog support higher retention, predictable subscription cashflows, and scalable delivery economics that can sustain multi-year revenue and margin expansion.

Negative Factors

Earnings & historical volatility

Historic swings from losses to profitability indicate earnings sensitivity to execution, product transitions and one-offs. This persistence of volatility complicates forecasting, could amplify investor scrutiny during softer quarters, and means sustained execution is required to lock in recent improvements.

Delivery model shift risk

Outsourcing delivery and shrinking in-house services can reduce margins but risks execution quality and client satisfaction during migrations. Partner-dependent delivery raises coordination and IP control challenges, potentially slowing deployments and creating multi-quarter friction in revenue realization when scaled.

Back‑end loaded ACV / seasonality

Concentration of sales in H2 increases sensitivity to deal timing and conversion execution. Back‑loaded ACV creates quarter-to-quarter cash and revenue variability, complicates capacity planning and may stress delivery ramp or partner ecosystems if conversions slip, posing a multi-quarter execution risk.

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 turnaround with accelerating revenue, a return to profitability, and very strong recent operating/free cash flow. Balance sheet risk has improved materially with sharply lower debt, but multi-year results show meaningful volatility and past leverage pressure.

Income Statement

Revenue has grown steadily from 2020–2024 and accelerated sharply in 2025 (annual revenue up to ~$1.75B, with a very large reported growth rate). Profitability has also improved materially versus 2021–2022 losses, with 2023–2024 returning to positive net income and solid gross margins in the low-to-mid 70% range. The key watch-out is consistency: the business swung from meaningful losses in 2022 to strong profitability in 2025, suggesting earnings can be volatile and potentially influenced by non-recurring items.

Balance Sheet

Leverage improved dramatically: total debt fell from roughly ~$550–690M in 2021–2024 to about ~$61M in 2025, while equity increased meaningfully (to ~$787M). This reduces financial risk and strengthens flexibility. However, history shows the capital structure was pressured in 2022 with very high leverage (debt well above equity), and total assets also dipped from 2024 to 2025—so while the current snapshot looks healthier, the balance sheet has not been uniformly stable over the full period.

Cash Flow

Cash generation is a clear strength: operating cash flow and free cash flow improved significantly from modest/negative levels in 2020–2022 to strong positive levels in 2023–2025 (2025 operating cash flow and free cash flow both ~$505M). Free cash flow has generally tracked net income well in profitable years (around ~0.9–1.0x in 2023–2024), supporting earnings quality. The main weakness is earlier volatility (including negative free cash flow in 2022), though the recent trend is decisively positive.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	1.75B	1.50B	1.43B	1.32B	1.21B
Gross Profit	1.32B	1.11B	1.05B	949.21M	875.29M
EBITDA	307.82M	184.90M	136.97M	-119.28M	-95.44M
Net Income	393.44M	99.19M	67.81M	-345.58M	-63.04M
Balance Sheet
Total Assets	1.63B	1.77B	1.51B	1.36B	1.59B
Cash, Cash Equivalents and Short-Term Investments	425.80M	739.97M	423.34M	297.22M	362.78M
Total Debt	75.97M	549.67M	581.27M	687.74M	685.53M
Total Liabilities	844.46M	1.18B	1.16B	1.23B	1.18B
Stockholders Equity	787.38M	585.48M	353.84M	130.84M	416.09M
Cash Flow
Free Cash Flow	490.72M	338.21M	201.00M	-13.04M	28.66M
Operating Cash Flow	505.23M	345.93M	217.78M	22.34M	39.12M
Investing Cash Flow	197.25M	-202.58M	-50.75M	13.07M	72.50M
Financing Cash Flow	-834.63M	-30.21M	-81.96M	-46.99M	-121.84M

Pegasystems Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 44.62
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PEGA, the sentiment is Neutral. The current price of 44.62 is above the 20-day moving average (MA) of 42.48, below the 50-day MA of 50.55, and below the 200-day MA of 53.95, indicating a neutral trend. The MACD of -1.41 indicates Negative momentum. The RSI at 48.02 is Neutral, neither overbought nor oversold. The STOCH value of 69.92 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for PEGA.

Pegasystems Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NICE	76 Outperform	$7.28B	11.93	16.53%	―	9.46%	34.09%
PEGA	71 Outperform	$7.54B	20.50	57.32%	0.16%	17.00%	120.21%
BILL	68 Neutral	$4.37B	-186.69	-0.64%	―	11.63%	50.72%
MNDY	67 Neutral	$3.60B	31.68	10.43%	―	28.62%	186.67%
CVLT	64 Neutral	$3.75B	44.21	34.48%	―	22.02%	-55.25%
ESTC	63 Neutral	$5.48B	-66.47	-10.24%	―	16.98%	-265.85%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%

Pegasystems Corporate Events

Pegasystems Adopts 2026 Executive Incentive Compensation Plan

On February 9, 2026, Pegasystems Inc.’s Compensation Committee approved the 2026 Section 16 Officer/ALT Member Corporate Incentive Compensation Plan for its executive officers, covering the period from January 1 to December 31, 2026. The plan creates a bonus pool tied 75% to financial goals and 25% to strategic goals, with funding dependent on achieving at least 70% of the Corporate Goals and allowing potential enhanced incentives if performance exceeds 100%.

Once the overall Funding Percentage is set, individual executive payouts depend on continued employment and personal performance, giving the board and management a tool to align leadership rewards with company results. Executives may also elect to receive half of their target bonus in restricted stock units, granted in March 2026 at a discount to the stock’s closing price and vesting in 2027 subject to plan funding and performance, further linking compensation to long-term shareholder value and retention of key leaders.

The most recent analyst rating on (PEGA) stock is a Buy with a $62.00 price target. To see the full list of analyst forecasts on Pegasystems stock, see the PEGA Stock Forecast page.

Pegasystems Raises 2026 Outlook and Boosts Buyback Plan

Pegasystems Inc. reported that 2025 was a year of strong execution, with annual contract value rising 17% year on year to $1.61 billion and Pega Cloud ACV jumping 33%, alongside a 17% increase in total revenue and a 45% surge in cash flow from operations and free cash flow. On February 10, 2026, the company reinforced its confidence with 2026 guidance of 15% ACV growth and sharply higher cash flows while extending its share repurchase program by a year to June 30, 2027 and lifting the authorization by $1 billion, signaling an ongoing commitment to shareholder returns and its cloud-led growth strategy.

The robust 2025 results included substantial GAAP profitability improvements, with full-year GAAP net income nearly quadrupling and diluted GAAP EPS up almost threefold, reflecting both operating leverage and financial discipline. Subscription revenues, particularly from Pega Cloud, continued to outpace the wider business, underscoring the company’s transition toward higher-margin recurring revenue and strengthening its competitive position in enterprise transformation software markets.

The most recent analyst rating on (PEGA) stock is a Buy with a $62.00 price target. To see the full list of analyst forecasts on Pegasystems stock, see the PEGA Stock Forecast page.

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.