Pegasystems (PEGA) Q4 2025 earnings summary

Executive summary

• Achieved 17% year-over-year growth in total annual contract value (ACV) to $1.61B, with Pega Cloud ACV up 33% and net new ACV up 37% year-over-year in constant currency.

• Free cash flow reached $491M for FY25, up 45% year-over-year, reflecting strong operational performance.

• Total revenue for 2025 increased 17% year-over-year to $1.75B.

• Transitioned to a recurring subscription model, driving more predictable revenue and improved margins.

• Achieved ISO 42001 certification for Pega Cloud services and AI analytics.

Financial highlights

• Total ACV grew 17% year-over-year as reported, 14% in constant currency, exceeding guidance.

• Pega Cloud ACV increased 33% year-over-year as reported, 28% in constant currency, to $867M.

• Free cash flow rose 45% year-over-year to $491M, surpassing guidance by $51M.

• Contractually committed backlog grew 28% year-over-year as reported, exceeding $2B for the first time.

• Pega Cloud gross margin improved to 74% in 2025, up from 51% in 2019.

Outlook and guidance

• 2026 guidance: Total ACV growth of 15%, total revenue of $2B, GAAP EPS of $1.87, non-GAAP EPS of $2.75, and free cash flow of $575M.

• Board authorized an additional $1B in share buyback capacity.

• Pega Cloud ACV expected to grow above 30% in 2026, with revenue and ACV growth now closely aligned post-subscription transition.

• Professional services revenue to represent ~10% of 2026 revenue.

• Net new ACV expected to be back-end loaded in 2026 due to contract renewal seasonality.