Summary
Pegasystems posted second-quarter revenue of $384.51 million, up 9.5% from the prior-year quarter. Year-to-date revenue reached $860.14 million, up 26.3%. Profit growth ran well ahead of the top line. GAAP net income was $30.08 million in the quarter, up 354.8%, and diluted EPS was $0.17, up 325.0%. For the six months, net income of $115.50 million and diluted EPS of $0.63 both swung to a profit from a loss a year earlier. Operating income was $17.28 million in the quarter, up 33.3%, while the year-to-date figure of $144.27 million also swung to a profit.
Gross profit was $274.94 million for the quarter, up 8.2%, and $648.12 million for the six months, up 32.4%. Gross margin slipped to 71.5% in the quarter, down 0.9 percentage points, but came in at 75.4% for the six months, up 3.5 points. Operating margin followed the same pattern: 4.5% for the quarter, up 0.8 points, and 16.8% year to date, up 17.9 points. The prior-year six-month period included a litigation settlement charge that does not repeat this year, which is the main reason the year-to-date margin lines look so different from the quarterly ones.
Forward-looking indicators strengthened. Annual contract value was $1,514 million at June 30, 2025, up 16% as reported and 14% in constant currency. Pega Cloud ACV rose 28% as reported and 25% in constant currency. Remaining performance obligations, which the company reports as backlog, stood at $1.84 billion, up 30.5%, or 27% on a constant currency basis. Deferred revenue was $422.19 million, up 18.9%. Management credits expanded cloud adoption, a client shift away from maintenance toward cloud offerings, and higher consultant billable hours for the revenue mix.
Cash generation was strong. Operating cash flow was $86.27 million in the quarter, up 115.1%, and $290.50 million for the six months, up 31.9%. Free cash flow, a non-GAAP measure, was $286,481 thousand for the six months, up 31%. Capital expenditures were $4.02 million year to date, up 116.2%. Repaying the convertible notes at maturity in March thinned the balance sheet considerably. Total cash, cash equivalents, and marketable securities were $411,567 thousand at June 30, 2025, versus $739,973 thousand at December 31, 2024. The company bought back $250,189 thousand of stock in the first half and still had $489,254 thousand of repurchase authority remaining.
Non-GAAP results grew more slowly than GAAP because the prior-year comparison carried that litigation charge. Non-GAAP net income was $50.15 million for the quarter, up 9%, and non-GAAP diluted EPS was $0.28, up 8%. For the six months, non-GAAP net income was $190.69 million, up 117%, and non-GAAP diluted EPS was $1.04, up 108%.
Costs tied to litigation remain a live issue. Legal fees from proceedings outside the ordinary course were $10,020 thousand in the first half, up from $2,701 thousand a year earlier, and management expects to keep incurring them. The company also cites its ongoing litigation with Appian Corp., foreign currency exchange rates, the timing of revenue recognition, reliance on third-party hosting providers, and variation in demand from public sector clients among the risks that could move results. Management framed the first half around Rule of 40 discipline, which it says is fueling both accelerated growth and margin expansion. These materials did not include numeric guidance for the third quarter or the full fiscal year, so the forward view rests on those operating metrics rather than a stated outlook.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2025 | Q1 FY2025 | QoQ | Q2 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $384.5M | $475.6M | -19.2% | $351.2M | +9.5% |
| Gross profit | $274.9M | $373.2M | -26.3% | $254.2M | +8.2% |
| Gross margin | 71.5% | 78.5% | -7.0 pp | 72.4% | -0.9 pp |
| Research & development | $78.8M | $74.3M | +6.1% | $75.4M | +4.5% |
| Sales & marketing | $147.1M | $138.1M | +6.6% | $139.8M | +5.3% |
| General & administrative | $31.8M | $33.8M | -6.0% | $25.4M | +25.1% |
| Total operating expenses | $257.7M | $246.2M | +4.7% | $241.2M | +6.8% |
| Operating income (loss) | $17.3M | $127.0M | -86.4% | $13.0M | +33.3% |
| Operating margin | 4.5% | 26.7% | -22.2 pp | 3.7% | +0.8 pp |
| Net income (loss) | $30.1M | $85.4M | -64.8% | $6.6M | +354.8% |
| Net margin | 7.8% | 18.0% | -10.1 pp | 1.9% | +5.9 pp |
| Diluted EPS | $0.17 | $0.91 | -$0.74 | $0.07 | +$0.10 |
Risks
The company faces ongoing litigation with Appian Corp. and related legal proceedings, and legal fees and related expenses rose in the three and six months ended June 30, 2025. Management expects to continue incurring additional costs for these proceedings, which could pressure results and distract leadership.
Future performance depends on successful execution of investments in artificial intelligence, including Pega GenAI Blueprint. If these AI initiatives do not gain client adoption or keep pace with enterprise AI decisioning competition, revenue growth and differentiation could suffer.
Demand from public sector clients can vary, and government agencies are a target market. Budget cycles, procurement timing, or policy shifts could delay or reduce contracts and affect revenue recognition.
The company relies on third-party service providers, including hosting providers, to deliver Pega Cloud offerings. A service disruption, security issue, or failure by these providers could interrupt client operations and harm retention.
The subscription model depends on maintaining client retention rates. A decline in retention or failure to renew and expand contracts could reduce recurring revenue and backlog growth.
The business relies on key personnel, including those driving AI development and cloud delivery. Difficulty attracting or retaining critical employees could slow product innovation and client success efforts.
The company intends to pay a quarterly cash dividend after the stock split, but the Board may terminate or modify the program without prior notice. Any reduction could negatively affect investor sentiment.
SaaS KPIs
All quarters →Annual Contract Value (ACV)
Pega Cloud ACV
Constant Currency Backlog
Subscription Services ACV
Subscription License ACV
Remaining Performance Obligations (Backlog)
Remaining Performance Obligations (Backlog) 1 year or less
Summary, forecast, risks and KPIs are extracted from PEGASYSTEMS INC's SEC filings for Q2 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.