Pegasystems (PEGA) Emerging Technology Summit summary

Financial performance and outlook

• Achieved a strong finish in 2025 with net annual contract value (ACV) up 40% in constant currency, driven mainly by SaaS (Pega Cloud) growth, now at 30% year-over-year.

• Free cash flow reached nearly $500 million in 2025, up from $22 million in 2022, with margins in the 30% range and guidance for 17% free cash flow growth in 2026.

• Professional services revenue is expected to be about 10% in 2026, down from 2025, with minimal impact from government shutdowns.

• Migration to Pega Cloud continues steadily, with 55% of ACV now cloud-based and a target of 75% in the next few years.

• Confident in surpassing the $700 million free cash flow target for 2028, with ongoing share buybacks and capital allocation flexibility.

Product innovation and AI strategy

• Blueprint, an AI-powered design agent, accelerates workflow transformation by automating process mapping and system migration, leveraging models like Bedrock and Claude.

• Blueprint adoption has improved pipeline build, transition speed, and win rates, with more detailed metrics to be shared at the upcoming Investor Day.

• AI and machine learning have been core to the platform for decades, with a focus on deterministic workflows for regulated industries.

• Generative AI is used for design-time assistance, while deterministic workflows ensure compliance in sectors like financial services, healthcare, and government.

• The company sees AI as augmenting, not replacing, its core value proposition, especially in regulated, process-driven environments.

Go-to-market and growth drivers

• Recent hiring of additional salespeople and the rollout of Blueprint are expected to drive ACV growth, especially by targeting new logos.

• Net revenue retention (NRR) improved from 110-111% in recent years to over 112% in 2025, with new logo deals typically smaller but offering long-term growth potential.

• Autonomous partner selling motion launched for 2026, involving 10 system integrators and AWS, is seen as an upside opportunity not yet factored into guidance.

• Expansion into horizontal use cases like customer service and utilities is planned, leveraging similarities with existing verticals.

• Operating leverage is expected from R&D, G&A, and sales and marketing, with gross margins stable at 80%.