Low-code automation software company Pegasystems (NASDAQ:PEGA) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 17.3% year on year to $381.4 million. Its non-GAAP profit of $0.30 per share was 50.8% above analysts’ consensus estimates.
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 (50.8% 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: $371 million at quarter end, up 15.8% year on year
- Market Capitalization: $11.13 billion
StockStory’s Take
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.
Looking ahead, Pegasystems’ forward guidance is shaped by the continued shift to its cloud-based platform, the maturation of its AI-powered Blueprint tool, and the expansion of partner-branded solutions. CFO Kenneth Stillwell noted that while the cloud transition may pressure some legacy revenue streams in the near term, it is expected to drive more sustainable, subscription-based growth. Trefler described the partner strategy, including Powered by Blueprint, as opening new paths to customer acquisition and scaling through the broader ecosystem, stating, “If we can be successful on that, it’s extremely exciting.”
Key Insights from Management’s Remarks
Management credited the quarter’s outperformance to a combination of accelerating cloud adoption, the impact of Pega Blueprint, and a refined go-to-market model.
-
Cloud migration momentum: Pegasystems’ transition to cloud-native solutions drove faster annual contract value (ACV) growth, with management noting 85% of new ACV coming from Pega Cloud. Clients cited improved reliability and performance as reasons for migrating mission-critical workloads.
-
Blueprint accelerates sales cycles: The AI-powered Blueprint tool, which leverages large language models for workflow design, has shortened sales cycles and made implementations more reliable. Management highlighted that deals now close in days instead of months, particularly with net-new clients unfamiliar with Pegasystems.
-
Partner ecosystem expansion: The launch of Powered by Blueprint allows partners to embed their own best practices and branding within Blueprint, enabling them to differentiate and accelerate client onboarding. Management expects this to significantly broaden market reach beyond direct sales.
-
Usage-based pricing model: Pegasystems’ shift to charging clients based on actual work processed, rather than seat licenses, aligns incentives and creates a scalable foundation for revenue growth. Management views this as structurally ahead of competitors still reliant on seat-based pricing.
-
Legacy modernization opportunity: The company is seeing increased demand for modernizing legacy applications, with Blueprint’s new features enabling clients to map and migrate older systems efficiently. These modernization projects are becoming a significant driver of new implementations and ACV growth.
Drivers of Future Performance
Pegasystems’ outlook centers on expanding cloud platform adoption, scaling Blueprint through partners, and driving new business via usage-based pricing and legacy modernization.
-
Cloud platform expansion: Management expects continued migration of existing and new clients to Pega Cloud, which supports scalable growth and higher margins. Stillwell noted that cloud ACV growth will naturally reduce legacy term license revenue but improve long-term subscription stability and customer value.
-
Partner-driven customer acquisition: The Powered by Blueprint initiative is designed to let global partners drive sales using their own intellectual property, expanding Pegasystems’ reach to new markets and reducing reliance on direct sales teams. Management believes this could result in an order-of-magnitude increase in new client wins if executed effectively.
-
Legacy and AI-driven modernization: Pegasystems is focusing on legacy IT modernization, leveraging Blueprint’s new features to automate migration from older systems. This trend is supported by increased government and enterprise interest in IT transformation, which management expects to provide a steady stream of large, long-term projects.
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 $63.86, up from $57.05 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
Our Favorite Stocks Right Now
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.