Pegasystems falls as third quarter misses estimates

Investing.com -- Pegasystems Inc (NASDAQ: PEGA) reported third-quarter results that fell short of analyst expectations, with both earnings and revenue missing consensus estimates. The company posted adjusted earnings per share of $0.35, compared to the analyst estimate of $0.49, while revenue of $393.4 million came in below the $421.8 million consensus.

Shares fell 3.4% in after-hours trading Tuesday.

Revenue increased 3% YoY from $381.4 million in the third quarter of 2025. The company cited go-to-market execution challenges that impacted growth through the first nine months of 2026, though it noted that third-quarter ACV additions were the strongest of the year. Total ACV grew 6% as reported and 7% in constant currency YoY, reaching $1.65 billion.

"While our ACV growth through the first three quarters of 2026 did not reflect the opportunity we see in the market, largely due to go-to-market execution challenges, our Q3 ACV add was the strongest of the year and reinforces our confidence in the demand for our solutions," said Ken Stillwell, COO and CFO.

Pega Cloud revenue grew 19% YoY to $218.9 million, representing 59% of total ACV in the third quarter. Subscription services revenue increased 10% to $291.6 million, while subscription license revenue declined 9% to $55.6 million. Consulting revenue fell 18% to $46.2 million.

The company acknowledged that purchasing behaviors continue to evolve as clients subject large technology investments to greater scrutiny amid AI industry disruption. These factors significantly slowed ACV growth during the nine months ended September 30, 2026, and may continue to adversely affect growth rates for the remainder of the year.

Pegasystems reported GAAP net income of $14.1 million, or $0.08 per diluted share, compared to $43.4 million, or $0.24 per diluted share, in the year-ago quarter. The company generated $304.3 million in operating cash flow for the nine months ended September 30, 2026.

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