Pegasystems (PEGA) Q2 2026 earnings summary

Executive summary

• Pega Cloud ACV rose 22% year-over-year, driving total ACV up 7% (8% in constant currency) as of June 30, 2026, despite market confusion and elongated decision cycles due to AI-driven shifts and token-based pricing models.

• Free cash flow reached $288.3M in the first half of 2026, a record for the company, with operating cash flow at $298.2M.

• Pega launched Infinity 2026 and Blueprint AI, emphasizing predictable outcomes, outcome-based pricing, and innovation in AI deployment.

• Clients are increasingly seeking structure, governance, and economic discipline in AI deployments, favoring workflow-centric models.

• Net income for the first half was $46.1M, down from $115.5M in the prior year.

Financial highlights

• Total ACV increased from $1,514M to $1,620M year-over-year, a 7% increase (8% in constant currency), with Pega Cloud ACV up 22% to $926M.

• Free cash flow for the first half of 2026 was $288.3M, up from $286M in 2025.

• Pega Cloud revenue for the first half was $418.97M, up 32% year-over-year.

• Gross margin for the first half was 75%, with Pega Cloud gross margin at 79%.

• The company repurchased 8.9M shares for $367.2M in H1 2026.

Outlook and guidance

• Annual guidance provided at the start of the year; no quarterly updates.

• ACV growth rate slowed due to client delays amid AI market changes, with potential continued impact for the rest of the year.

• Targeting $700M+ free cash flow in 2028, with continued focus on cloud scale, mix shift, and disciplined investment.

• Two-thirds of net new ACV expected in the second half of 2026, requiring a challenging recovery after a slow first half.

• Outcome-based pricing and AI cost containment expected to drive client adoption as AI ROI becomes a priority.