Summary
Pega closed FY2025 Q1 with a pronounced profitability swing. Total revenue rose 44.1% to $475.6 million. Gross profit rose 58.5% to $373.2 million, and gross margin expanded to 78.5%. Operating income swung to $127.0 million from a prior-year loss, and operating margin expanded to 26.7%. Net income swung to $85.4 million from a prior-year loss, and diluted earnings per share swung to $0.91 from a prior-year loss. Those GAAP results compare with a prior-year quarter loss, and the improvement reflects a mix shift toward subscription revenue and a larger revenue base. Non-GAAP net income was $140.5 million, up 233%, and non-GAAP diluted earnings per share were $1.53, up 219%.
Cash generation remained a central part of the story. Operating cash flow rose 13.4% to $204.2 million. Capital expenditures rose 211.3% to $1.9 million, while free cash flow rose 13% to $202.3 million. Deferred revenue rose 23.1% to $473.4 million. Remaining performance obligations, or backlog, rose 21.3% to $1.73 billion. Annual contract value reached $1,445 million, up 13%, and Pega Cloud ACV reached $701 million, up 23%. Those metrics suggest the subscription model is scaling, though maintenance ACV declined 5%.
The quarter also highlighted Pega GenAI and Blueprint as drivers of client engagement. Management said ACV growth exceeded 13% year over year and pointed to record free cash flow. Pega Cloud ACV growth of 23% outpaced total ACV growth. Backlog growth of 21% provides visibility into future revenue. The company describes itself as operating as a Rule of 40 company, balancing growth and profitability while returning capital to shareholders. The board increased the share repurchase authorization by $500 million and extended the program to June 30, 2026. The company also stated an intention to pay a quarterly cash dividend of $0.03 per share.
Risks remain material. Pega faces ongoing litigation with Appian Corp., foreign currency exchange rate swings, and variation in demand for its products and services, especially among public sector clients. The company depends on key personnel and third-party service providers, including hosting providers. Cyber-attacks, security breaches, and security flaws could create legal and financial liabilities and damage reputation. The company must also manage its growth, protect intellectual property, and comply with debt obligations and covenants. In the quarter, foreign currency transaction loss increased, and legal fees and related expenses rose.
The company repaid its convertible senior notes at maturity and extended its revolving credit facility expiration to February 4, 2027. Liquidity and capital return plans remain in focus. Management's forward-looking commentary points to continued investment in AI, the timing of revenue recognition, and the adequacy of liquidity and capital resources. The quarter showed strong top-line growth, wide margin expansion, and robust cash generation. Execution risks around large multi-year contracts and the pace of cloud adoption will determine whether the current momentum persists.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2025 | Q4 FY2024 | QoQ | Q1 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $475.6M | $490.8M | -3.1% | $330.1M | +44.1% |
| Gross profit | $373.2M | $388.5M | -3.9% | $235.5M | +58.5% |
| Gross margin | 78.5% | 79.2% | -0.7 pp | 71.3% | +7.1 pp |
| Research & development | $74.3M | $76.4M | -2.7% | $72.1M | +3.0% |
| Sales & marketing | $138.1M | $139.7M | -1.1% | $127.7M | +8.1% |
| General & administrative | $33.8M | $28.2M | +19.9% | $23.5M | +43.8% |
| Total operating expenses | $246.2M | $245.5M | +0.3% | $255.9M | -3.8% |
| Operating income (loss) | $127.0M | $143.0M | -11.2% | -$20.4M | +722.1% |
| Operating margin | 26.7% | 29.1% | -2.4 pp | -6.2% | +32.9 pp |
| Net income (loss) | $85.4M | $119.1M | -28.3% | -$12.1M | +804.6% |
| Net margin | 18.0% | 24.3% | -6.3 pp | -3.7% | +21.6 pp |
| Diluted EPS | $0.91 | $1.11 | -$0.20 | -$0.14 | +$1.05 |
Risks
The MD&A discusses legal fees and related expenses arising from legal proceedings outside the ordinary course of business and states that the company expects to continue incurring additional costs for these proceedings. Forward-looking statements also cite ongoing litigation with Appian Corp.
The MD&A notes that several large multi-year contracts were recognized in subscription license revenue. Dependence on large, potentially lumpy deals and the timing of revenue recognition could cause results to vary significantly between periods.
The company's strategy centers on enterprise AI decisioning and workflow automation, including Pega GenAI Blueprint, and forward-looking statements identify successful execution of investments in artificial intelligence as a risk. Failure to effectively develop or commercialize these AI offerings could harm growth.
SaaS KPIs
All quarters →Annual Contract Value (ACV)
Pega Cloud ACV
Constant Currency Backlog
Constant Currency ACV
Subscription Services ACV
Subscription License ACV
Remaining Performance Obligations (Backlog)
Free Cash Flow
Summary, forecast, risks and KPIs are extracted from PEGASYSTEMS INC's SEC filings for Q1 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.