It has been about a month since the last earnings report for Pegasystems (PEGA Quick QuotePEGA - Free Report) . Shares have added about 14.9% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Pegasystems due for a pullback? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for Pegasystems Inc. before we dive into how investors and analysts have reacted as of late.

Pegasystems Q4 Earnings Surpass Estimates, Revenues Increase Y/Y

Pegasystems reported fourth-quarter 2025 non-GAAP earnings of 76 cents per share, which beat the Zacks Consensus Estimate by 5.56% but decreased 5% year over year.
Revenues of $504.32 million beat the Zacks Consensus Estimate by 4.04% and increased 3% year over year.

Pegasystems’ strong fourth-quarter 2025 performance is driven by its unique innovation, along with bold ideas led by the Pega Blueprint platform. Growth was fueled by AI-integrated workflows, rising cloud subscriptions and disciplined execution, resulting in higher ACV, backlog and margin gains.

PEGA’s Quarterly Performance

Subscription services revenues, comprising Pega Cloud and Maintenance, generated $272.8 million (contributing 54.1% to total revenues), up 18.1% on a year-over-year basis.
Subscription license revenues (35.3% of total revenues) were $178.2 million, representing a 14% year-over-year decline.

Total Subscription revenues, consisting of both subscription services and subscription licenses, rose 3% year over year to $451 million (contributing 89.4% to total revenues).
Consulting revenues (10.6% of the total revenues) were $53.3 million. The reported figure is up 0.9% year over year.

Pega Cloud’s Annual Contract Value (ACV) increased 33% year over year to $867 million.
Maintenance and Subscription licenses, collectively referred to as Client Cloud ACV, rose approximately 2.9% year over year to $741 million.

The company reported that Total ACV increased 17% year over year on a reported and 14% on a constant-currency basis, reaching $1.608 billion.

The company's backlog grew 28% year over year on a reported basis and 23% on a constant currency basis, underscoring the sustained demand for its services and products and future revenue visibility.

Pegasystems’ Q4 Operating Results

In the fourth quarter of 2025, gross margin expanded 30 basis points (bps) year over year to 79.5%.

Total operating expenses increased 20.8% year over year to $296.5 million. As a percentage of revenues, operating expenses increased 880 bps.

The company reported an operating income of $104.4 million, down 27% year over year. The operating margin contracted 840 bps from the year-ago quarter to 20.7%.

PEGA’s Balance Sheet & Cash Flow

As of Dec. 31, 2025, cash and cash equivalents and marketable securities were $425.8 million compared with $351.3 million as of Sept. 30, 2025.

Operating cash flow rose more than 45% year over year to $505 million, while free cash flow grew 45% to approximately $491 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in fresh estimates.

The consensus estimate has shifted 61.78% due to these changes.

VGM Scores

Currently, Pegasystems has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock has a grade of D on the value side, putting it in the bottom 40% for value investors.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Pegasystems has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Pegasystems is part of the Zacks Computer - Software industry. Over the past month, PTC Inc. (PTC Quick QuotePTC - Free Report) , a stock from the same industry, has gained 2.3%. The company reported its results for the quarter ended December 2025 more than a month ago.

PTC Inc. reported revenues of $685.83 million in the last reported quarter, representing a year-over-year change of +21.4%. EPS of $1.92 for the same period compares with $1.10 a year ago.

For the current quarter, PTC Inc. is expected to post earnings of $2.13 per share, indicating a change of +19% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for PTC Inc.. Also, the stock has a VGM Score of C.