Pegasystems (PEGA) Q1 2026 earnings summary

Executive summary

• Pega Cloud ACV rose 29% year-over-year (27% in constant currency), driving overall ACV growth of 12% (11% in constant currency), with Pega Cloud revenue up 36% and strong free cash flow of $207M in Q1 2026.

• Total revenue for Q1 2026 was $429.97M, down 10% year-over-year, with net income of $32.76M, a 62% decrease from Q1 2025.

• Macro headwinds, including a U.S. government shutdown and geopolitical tensions, caused deal delays, especially in government and EMEA sectors.

• The company continues to focus on AI innovation, with Blueprint AI and new vibe coding tools accelerating pipeline creation and client value.

• Transition to a recurring subscription model and expansion of share repurchase program, with $167M in buybacks and $5M in dividends in Q1.

Financial highlights

• Pega Cloud revenue grew 36% year-over-year to $205.03M in Q1 2026, with trailing 12-month revenue at $750M and gross margin at 78%.

• Total ACV reached $1,622M as of March 31, 2026, up 12% year-over-year.

• Free cash flow was $207M in Q1 2026, with operating cash flow at $212M.

• Gross profit was $323.2M (75% margin), down from $373.2M (78%) year-over-year.

• Backlog (remaining performance obligations) grew 16% to $2.01B.

Outlook and guidance

• Full-year guidance is provided at the start of the year, with no quarterly updates; management expects continued Pega Cloud growth and investments in AI-first delivery models.

• Business activity and term license revenue are expected to be back-end loaded in 2026, with higher activity in Q3 and Q4.

• Targeting continued ACV growth, margin expansion, and increased cash flow, pursuing a $150B+ market opportunity by FY29.