Pegasystems (PEGA) Q1 2025 earnings summary

Executive summary

• Q1 2025 delivered accelerated growth with strong Pega GenAI adoption, robust client engagement, and significant progress in digital and legacy transformation initiatives.

• Annual contract value (ACV) grew 13% year-over-year to $1.45B, with Pega Cloud ACV up 23% to $701M.

• Free cash flow reached $202M in Q1, surpassing the full-year 2023 total and up 13% year-over-year.

• Total revenue for Q1 2025 was $475.6M, up 44% year-over-year, with net income of $85.4M compared to a loss last year.

• Focus remains on expanding recurring revenue, margin improvement, and balancing growth with shareholder returns.

Financial highlights

• Total revenue: $475.6M (+44% year-over-year); Pega Cloud revenue: $151.1M (+16% to +24%).

• Gross profit: $373.2M (78% margin), up from $235.5M (71%) in Q1 2024.

• Operating income: $127M, compared to a loss of $20.4M last year; diluted EPS: $0.91 (GAAP), $1.53 (non-GAAP).

• Backlog increased 21% year-over-year to $1.73B, with long-term backlog up 27%.

• Approximately 1.5M shares repurchased for $118.7M–$120M, reducing outstanding shares by 550,000.

Outlook and guidance

• Management expects continued growth in Pega Cloud and subscription services, supported by strong ACV and backlog.

• No change to full-year guidance; focus on accelerating growth, margin expansion, and capital returns.

• Currency fluctuations and seasonality may impact revenue in upcoming quarters.