Pegasystems' third-quarter profit falls to 8 cents a share as ACV growth slows to 6%

Pegasystems said growth in its key contract metric slowed sharply this year as customers take a harder look at big technology purchases, though its cloud business kept expanding.

Total annual contract value, or ACV, rose 6% to $1.653 billion from $1.557 billion, or 7% in constant currency, according to the earnings release it filed with an 8-K on Tuesday. Pega Cloud ACV grew 20% and now makes up 59% of the total.

The enterprise software company said purchasing behaviors "continue to evolve as clients subject large technology investments to greater scrutiny as AI disrupts the industry," and that its ACV growth rate significantly slowed in the first nine months compared with a year ago. It said those factors may keep weighing on ACV growth and cash flow for the rest of the year.

The quarter

Revenue rose 3% to $393.4 million from $381.4 million. GAAP net income fell 68% to $14.1 million, or 8 cents a diluted share, from $43.4 million, or 24 cents. The quarter included a $16.0 million litigation settlement charge and $13.3 million of legal fees, according to the income statement and reconciliation.

On a non-GAAP basis, earnings rose to 35 cents a share from 30 cents.

Pega Cloud revenue climbed 19% to $218.9 million, while subscription license revenue fell 9% to $55.6 million and consulting revenue fell 18% to $46.2 million. Free cash flow for the first nine months was $289.8 million, down 14%.

Fixing execution

COO and CFO Ken Stillwell blamed the slower ACV growth largely on "go-to-market execution challenges" but said the third-quarter ACV add was the strongest of the year. He said the company is "taking decisive actions to improve execution, accelerate growth," and remains on track to deliver $700 million or more of free cash flow in 2028.

By the numbers

• Revenue: $393.4 million, up 3%
• GAAP diluted EPS: $0.08, vs. $0.24
• Non-GAAP diluted EPS: $0.35, vs. $0.30
• Total ACV: $1.653 billion, up 6%
• Pega Cloud ACV growth: 20%
• Nine-month free cash flow: $289.8 million, down 14%

Sources

1. Pegasystems Inc., Form 8-K (Item 2.02) with Exhibit 99.1 earnings release, filed Oct. 20, 2026, accession 0001013857-26-000057

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