Executive Summary

Q3 2025 delivered a clean beat on revenue and EPS versus Wall Street consensus as cloud momentum and Blueprint-driven sales acceleration translated to strong top-line and profitability; total revenue was $381.35M and non-GAAP diluted EPS was $0.30, ahead of consensus revenue ~$351.9M and EPS ~$0.20, with GAAP diluted EPS $0.24 . Values marked with * in estimates tables are from S&P Global.
Annual Contract Value (ACV) rose 14% year over year to $1.557B, with Pega Cloud ACV up 27% YoY; backlog increased 19% (18% CC), underscoring durable demand and pipeline visibility .
Management highlighted accelerating adoption of Pega GenAI Blueprint, expanding partner-led “Powered by Blueprint,” and cloud margins “approaching 80%” as structural drivers of growth and margin expansion .
Capital returns remain a tangible catalyst: year-to-date buybacks totaled $393M (8.7M shares), and the company maintained its quarterly dividend regimen ($0.03/share for Q4 2025) .
Guidance practice unchanged (no intra-year updates); modeling commentary pointed to ongoing mix shift to cloud (term license revenue to decline over time) and revenue recognition lags as ACV converts to revenue over subsequent quarters .

What Went Well and What Went Wrong

What Went Well

Strong beat vs consensus: revenue $381.35M vs ~$351.95M*; non-GAAP EPS $0.30 vs ~$0.20*; driven by cloud momentum and Blueprint’s impact on sales cycles . Values marked with * are from S&P Global.
ACV and backlog acceleration: ACV up 14% YoY to $1.557B; Pega Cloud ACV up 27% YoY; backlog up 19% YoY (18% CC), reinforcing visibility and durability .
Management execution and margin trajectory: CFO noted Pega Cloud margins “approaching 80%,” with record operating cash flow ($346.8M YTD) and free cash flow ($338.3M YTD), supporting sizable buybacks .

Selected quotes:

“Pega Cloud ACV growth accelerated again, and we’ve generated $347M in operating cash flow allowing us to have a significant year of buybacks.” — Ken Stillwell, COO & CFO .
“Our differentiated AI strategy continues to resonate…clients and partners embrace Pega Blueprint.” — Alan Trefler, CEO .
“We provide annual guidance at the start of each fiscal year and do not typically update it.” — Ken Stillwell .

What Went Wrong

Ongoing term license headwinds: Management reiterated the structural decline of term license revenue as mix shifts to cloud; investors should expect further declines and variability due to accounting duration effects .
Foreign exchange volatility: FX continued to create noise for reported results intra-year; management excludes FX in non-GAAP metrics and notes lag dynamics between ACV and revenue recognition .
Federal sector disruption: Temporary slowdown in services/projects due to government shutdown dynamics; while long-term strategic projects persist, near-term rollouts may be delayed .

Financial Results

Headline metrics vs prior periods and estimates

Metric	Q3 2024 (oldest)	Q2 2025	Q3 2025 (newest)
Revenue ($USD Millions)	$325.05	$384.51	$381.35
GAAP Diluted EPS ($)	$(0.08)	$0.17	$0.24
Non-GAAP Diluted EPS ($)	$0.19	$0.28	$0.30
EBIT Margin %	-2.823%*	4.482%*	3.793%*

Values marked with * are from S&P Global.

Actual vs Wall Street consensus (Q3 2025)

Metric	Consensus	Actual
Revenue ($USD)	$351,946,780*	$381,350,000
Primary/Normalized EPS ($)	$0.1999*	$0.30
EBITDA ($USD)	$42,152,630*	$17,559,000*
Gross Margin %	72.5%*	72.232%*

Values marked with * are from S&P Global.

Segment revenue breakdown (Q3 2025 vs Q3 2024)

Segment ($USD Thousands)	Q3 2024	Q3 2025	YoY Change
Pega Cloud	$144,108	$184,549	+$40,441; +28%
Maintenance	$80,702	$79,649	-$1,053; -1%
Subscription services (Cloud+Maint)	$224,810	$264,198	+$39,388; +18%
Subscription license	$45,420	$60,600	+$15,180; +33%
Subscription total	$270,230	$324,798	+$54,568; +20%
Consulting	$54,364	$56,394	+$2,030; +4%
Perpetual license	$456	$158	-$298; -65%
Total revenue	$325,050	$381,350	+$56,300; +17%

KPIs and cash metrics

KPI	Q3 2024 / Prior	Q3 2025 / Current	Change
ACV ($USD Millions)	$1,360	$1,557	+14%
Pega Cloud ACV ($USD Thousands)	$640,574	$815,370	+27%
Backlog GAAP ($USD Millions)	$1,475 (Sep-2024)	$1,755 (Sep-2025)	+19%
Backlog Constant Currency ($USD Millions)	$1,475	$1,745	+18%
Operating Cash Flow (YTD, $USD Thousands)	$250,697 (9M’24)	$346,796 (9M’25)	+38%
Free Cash Flow (YTD, $USD Thousands)	$245,776 (9M’24)	$338,311 (9M’25)	+38%
Share Repurchases (YTD)	N/A	8.7M shares; $393M	—

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Annual guidance practice	FY 2025	Annual guidance set at fiscal year start	No intra-year update; practice reaffirmed	Maintained
Term license revenue trend	Ongoing	Expect structural decline over time	Reiterated decline and variability due to mix/duration	Maintained (clarified)
Pega Cloud margins	Q3 2025	Expanding	“Approaching 80%” in Q3 commentary	Raised qualitatively
Revenue recognition lag for Cloud	Ongoing	ACV converts to revenue over subsequent quarters	Reaffirmed lag of “a few quarters” before ACV becomes revenue	Maintained
Dividend	Q4 2025	$0.03/share quarterly	$0.03/share declared and paid Oct 15, 2025	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025, Q2 2025)	Current Period (Q3 2025)	Trend
GenAI Blueprint adoption	Became ubiquitous in every sales campaign; >1,000 orgs building Blueprints; partner-branded Blueprints launched (Accenture, Capgemini, etc.)	Blueprint accelerating sales cycles/new logos; “Powered by Blueprint” gaining momentum with 5 partners; examples of <100-day go-live deployments	Accelerating
AI approach (design-time vs runtime)	“Predictable AI”: design-time LLM + runtime workflows; differentiation vs prompt-driven competitors	Reinforced unique architecture; orchestration reliability vs LLM control at runtime	Consistent, gaining recognition
Cloud migration & margins	Cloud ACV up 23–28% YoY; backlog strong; commentary on lag between ACV and revenue	Cloud ACV +27% YoY; margins “approaching 80%”; mix shift pressuring term license	Strengthening
Pricing evolution	Work-based (usage) pricing highlighted to align vendor/client incentives	Reiterated usage-based model; seat-based pricing viewed as structurally misaligned	Structural shift continuing
Federal/public sector	Momentum and FedRAMP High positioning; some reshuffling/on-hold projects noted	Short-term service/project slowdown amid shutdown; long-term IT modernization bipartisan priority	Mixed near term; constructive long term
Partner ecosystem	Hiring leadership; AWS SCA; marketplace availability; partner influence rising	“Powered by Blueprint” unlocking partner IP and reach; expected to meaningfully expand aperture	Expanding
Legacy modernization	New features to ingest legacy assets (videos/screenshots) for rapid design	Multiple <100-day legacy-to-modern app conversions; strong client interest	Accelerating

Management Commentary

Strategy and differentiation: “Our approach with Pega GenAI Blueprint is to leverage the power of LLMs at design time with the power of a robust workflow engine at runtime, delivering the best of AI plus the best of reliability.” — Alan Trefler .
Sales acceleration and partner reach: “Blueprint…has been a game changer…partners are adopting it at an accelerated pace.” — Alan Trefler .
Profitability and capital returns: “We’ve generated $347M of operating cash flow…we have purchased $393M of Pega stock…demonstrating our confidence….” — Ken Stillwell .
Margins and mix: “Pega Cloud margins continue to expand, approaching 80% in Q3…term license revenue will decline over time as mix shifts to Pega Cloud.” — Ken Stillwell .
Guidance policy: “We provide annual guidance at the start of each fiscal year and do not typically update it.” — Ken Stillwell .

Q&A Highlights

ACV acceleration drivers: Blueprint impacting business “in a positive way” and now the “exclusive way” to go to market; partner adoption accelerating .
Federal dynamics: Projects slowed during shutdown but remain long-term and strategic; strong positioning via Pega Cloud for Government and FedRAMP High .
Pricing: Shift to work-based pricing to align incentives; management views seat-based pricing as structurally flawed .
Term license outlook: Expect structural decline; mix-related variability and accounting duration effects highlighted .
Orchestration layer: Pega positioned as a reliable agent orchestration fabric via workflows vs LLM control at runtime; neutral interoperability with other agents .
New logos & partner scale: “Powered by Blueprint” enables partners to sell their IP and expand reach beyond Pega practices; potential order-of-magnitude growth leverage .

Estimates Context

Versus S&P Global consensus, Q3 2025 revenue beat by ~$29.4M and non-GAAP diluted EPS beat by ~$0.10; gross margin was in line with expectations while EBITDA came in below consensus (likely reflecting FX volatility and mix) . Values marked with * are from S&P Global.
Mix and recognition dynamics suggest street models should continue to reflect: (a) lag between ACV growth and revenue recognition, (b) persistent shift from term license to cloud revenues, and (c) expanding Pega Cloud margins and disciplined OpEx .

Key Takeaways for Investors

Pega’s architectural AI differentiation and Blueprint-led go-to-market are translating into tangible growth (ACV/backlog) and beats versus consensus; the narrative supports estimate upward revisions on revenue and EPS near term .
Cloud mix and margin trajectory are core to the medium-term thesis; with margins “approaching 80%,” operating leverage is likely to expand even as term license revenues decline .
Partner-led scale (“Powered by Blueprint”) is the next leg of growth, potentially accelerating new logos and workloads without proportional salesforce expansion; watch for additional hyperscaler collaborations and partner IP rollouts .
Capital returns are material and ongoing: $393M YTD repurchases and continued dividends offer support to per-share value and investor return profiles .
Near-term modeling: factor FX and ACV→revenue lags; sequential revenue was slightly down vs Q2 given seasonality and mix, but YoY growth and profitability remain healthy .
Federal sector risk is transitory; long-term IT modernization tailwinds remain intact; Pega’s FedRAMP High and government-specific offerings support backlog durability .
Monitor term license decline pace and cloud conversion timing; beats/misses will hinge on mix and timing of go-lives converting backlog to revenue .

Values marked with * are retrieved from S&P Global. All other figures and statements are cited from company documents and the earnings call.

PEGASYSTEMS INC (PEGA)·Q3 2025 Earnings Summary