Pegasystems (PEGA) AI Stock Analysis

• Market Cap: $9.53B
• Dividend Yield: 0.16%
• Average Volume (3M): 1.02M
• Price to Earnings (P/E): 38.0
• Beta (1Y): 1.34
• 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: 991,486
• 30 Day Avg. Volume: 1,018,925
• 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: 1.02
• Enterprise Value/Revenue: 5.62
• Enterprise Value/Gross Profit: 7.42
• Enterprise Value/Ebitda: 26.08
• 1Y Price Target: $76.00
• Price Target Upside: 43.40% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 8
• EPS Forecast (FY): 2.23
• Revenue Forecast (FY): $1.86B

• Rating: 74 Outperform
• Price Target: $67.00 ▲(26.42% Upside)

The score is driven primarily by strong financial performance (high margins, improved profitability, solid cash flow) and a positive earnings backdrop (cloud ACV acceleration and strong cash generation). Offsetting factors include a premium valuation (high P/E, low yield) and only neutral technical momentum, with corporate events adding both a legal positive and a restructuring-related near-term headwind.

Positive Factors

High gross and improving net margins

Sustained 75.7% gross margins and a rising net margin to 16% reflect durable software economics and pricing power. High margins support reinvestment in R&D and sales, bolster free cash flow generation, and provide resilience versus cost pressures over the medium term.

Strong free cash flow generation

Robust operating and free cash flow, plus efficient earnings-to-cash conversion, create long-term financial flexibility. This cash enables strategic investments in cloud and AI, funds buybacks and reduces reliance on external financing, strengthening balance sheet durability across cycles.

Accelerating Pega Cloud ACV

Rapid Pega Cloud ACV growth signals durable transition to recurring, higher‑visibility revenue with stickier customer relationships. Cloud adoption supports better upsell, longer contract life, and margin expansion potential, anchoring revenue quality over the medium term.

Negative Factors

Decline in term license revenue

The structural shift from term licenses to cloud can depress upfront recognized revenue and complicate near-term comparability. Execution risk in migrating customers and timing of revenue recognition could pressure reported growth and sales productivity during the transition period.

Consulting restructuring and $13M charge

Reorganizing Consulting to enable an AI‑first model may improve long‑term delivery but creates short‑to‑medium term disruption. Role eliminations risk delivery capacity and client timelines, could slow implementations and consulting revenue, while severance increases near‑term operating volatility.

Ongoing trade-secret litigation remand

A remand for retrial and Appian's intent to press claims keeps material legal exposure and uncertainty. Protracted litigation can incur significant legal costs, distract management, and pose reputational or damages risk that could affect long‑term customer relationships and contract outcomes.

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 income statement trends (high 75.7% gross margin and improved 16.0% net margin) and solid cash generation (FCF growth and good earnings-to-cash conversion). Balance sheet is generally healthy with low leverage (0.10 debt-to-equity), but the relatively low equity ratio keeps the score below top-tier.

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: 53.00
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• 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 53 is below the 20-day moving average (MA) of 59.41, below the 50-day MA of 58.19, and below the 200-day MA of 53.26, indicating a bearish trend. The MACD of -0.75 indicates Positive momentum. The RSI at 33.66 is Neutral, neither overbought nor oversold. The STOCH value of 15.66 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
PEGA	74 Outperform	$9.53B	38.04	51.96%	0.16%	17.00%	120.21%
BILL	74 Outperform	$5.04B	-177.06	0.30%	―	11.63%	50.72%
NICE	71 Outperform	$7.24B	13.01	15.23%	―	9.46%	34.09%
MNDY	66 Neutral	$6.62B	108.32	5.81%	―	28.62%	186.67%
CVLT	65 Neutral	$5.48B	70.53	32.87%	―	22.02%	-55.25%
ESTC	65 Neutral	$7.64B	-70.48	-12.84%	―	16.98%	-265.85%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%

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.