Pegasystems' third quarter was marked by notable outperformance, with management attributing the results to accelerated adoption of its cloud-native platform and its AI-powered Blueprint design tool. CEO Alan Trefler emphasized that Pega’s unique approach to AI—using large language models (LLMs) for application design rather than real-time workflow control—helped differentiate its offerings in regulated industries. Management highlighted the growing momentum of Blueprint, noting that it not only shortened sales cycles but also improved the reliability and value of client implementations, leading to a faster pace of projects going live.
Is now the time to buy PEGA? Find out in our full research report (it’s free for active Edge members).
Pegasystems (PEGA) Q3 CY2025 Highlights:
- Revenue: $381.4 million vs analyst estimates of $351.6 million (17.3% year-on-year growth, 8.5% beat)
- Adjusted EPS: $0.30 vs analyst estimates of $0.20 (50.1% beat)
- Adjusted Operating Income: $58.13 million vs analyst estimates of $39.47 million (15.2% margin, 47.3% beat)
- Operating Margin: 3.8%, up from -3.6% in the same quarter last year
- Billings: $369.7 million at quarter end, up 15.4% year on year
- Market Capitalization: $11.31 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Pegasystems’s Q3 Earnings Call
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Palak (Citi): asked what drove the acceleration in ACV growth despite expectations for a slowdown. CFO Kenneth Stillwell attributed this to the positive impact of Blueprint, which contributed to faster client adoption and partner engagement.
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Jacob Roberge (William Blair): inquired about feedback on the new predictable AI agents and how they differ from competitors. CEO Alan Trefler explained that Pegasystems’ agent approach is more predictable and less resource-intensive due to design-time application of AI versus runtime prompts.
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Raimo Lenschow (Barclays): questioned the impact of cloud migration on declining term license revenue. Stillwell clarified that the shift to cloud reduces term license revenue but strengthens recurring ACV and long-term business momentum.
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Patrick Walravens (Citizens): probed the evolution of pricing models in the industry, referencing outcome-based pricing. Trefler responded that Pegasystems’ work-based pricing leads to better alignment with customer value and distinguishes it from seat-based competitors.
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Blair Abernethy (Rosenblatt Securities): asked about trends in the federal vertical, particularly regarding cloud adoption and project delays. Trefler and Stillwell noted that while government shutdowns can slow progress, long-term modernization initiatives and cloud migration remain priorities.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will be closely monitoring (1) the pace of client migrations to Pega Cloud and its impact on recurring revenue, (2) the adoption and market impact of Powered by Blueprint among global partners, and (3) continued momentum in legacy IT modernization projects, especially in government and regulated industries. Execution on these fronts will be crucial for sustaining growth.
Pegasystems currently trades at $67.51, up from $57.05 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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