Pega Cloud ACV Grows 20% in Q3 2026
PEGASYSTEMS INC (PEGA) filed an SEC Form 8-K — Results of Operations and Financial Condition. EXHIBIT 99.1 Pega Cloud ACV Grows 20% in Q3 2026 • Cloud adoption continues to expand as Pega Cloud reaches 59% of total ACV in Q3 • Total ACV grows 6% as reported and 7% in constant currency year over year • Company takes actions to accelerate growth and capitalize on AI market
How this was made
The 30-second read
Why it matters
The disclosed cloud ACV growth could drive short‑term buying interest, while broader ACV slowdown may limit upside.
Market read
First‑hand earnings data provides fresh guidance for traders evaluating AI/cloud exposure.
What to watch
Potential impact of foreign‑exchange effects on constant‑currency ACV and upcoming cash‑flow guidance for 2028.
Pega Cloud ACV Grows 20% in Q3 2026
Pega Cloud ACV grew 20% and non-GAAP net income grew 8%, but total ACV grew 6%, total revenue grew 3%, GAAP net income declined 68%, and management said ACV growth significantly slowed during the nine months ended September 30, 2026.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenue - Three Months Ended September 30GAAP | $393.4M | – | 3 % |
| Total revenue - Nine Months Ended September 30GAAP | $1.24B | – | — % |
| Total cost of revenue - Three Months Ended September 30GAAP | $103.8M | – | – |
| Total cost of revenue - Nine Months Ended September 30GAAP | $318.6M | – | – |
| Gross profit - Three Months Ended September 30GAAP | $289.5M | – | – |
| Gross profit - Nine Months Ended September 30GAAP | $925.4M | – | – |
| Total operating expenses - Three Months Ended September 30GAAP | $274.7M | – | – |
| Total operating expenses - Nine Months Ended September 30GAAP | $856.8M | – | – |
| Income from operations - Three Months Ended September 30GAAP | $14.86M | – | – |
| Income from operations - Nine Months Ended September 30GAAP | $68.65M | – | – |
| Net income - Three Months Ended September 30GAAP | $14.09M | – | (68) % |
| Net income - Nine Months Ended September 30GAAP | $60.19M | – | (62) % |
| Net income - Three Months Ended September 30non-GAAP | $59.75M | – | 8 % |
| Net income - Nine Months Ended September 30non-GAAP | $202.4M | – | (18) % |
| Diluted earnings per share - Three Months Ended September 30GAAP | $ 0.08 | – | (67) % |
| Diluted earnings per share - Nine Months Ended September 30GAAP | $ 0.35 | – | (59) % |
| Diluted earnings per share - Three Months Ended September 30non-GAAP | $ 0.35 | – | 17 % |
| Diluted earnings per share - Nine Months Ended September 30non-GAAP | $ 1.17 | – | (13) % |
| Cash provided by operating activities - Nine Months Ended September 30GAAP | $304.3M | – | (12) % |
| Investment in property and equipment - Nine Months Ended September 30other | (14,474) | – | – |
| Free cash flow - Nine Months Ended September 30non-GAAP | $289.8M | – | (14) % |
| Annual contract value as of September 30other | $1.65M | – | 6 % |
| Constant currency annual contract value as of September 30other | $1.66M | – | 7 % |
| Pega Cloud ACV as of September 30other | $976.0M | – | 20 % |
| Maintenance ACV as of September 30other | $261.3M | – | (12) % |
| Subscription services ACV as of September 30other | $1.24B | – | 11 % |
| Subscription license ACV as of September 30other | $416.0M | – | (6) % |
| Backlog as of September 30other | $2.01M | – | 15 % |
| Constant currency backlog as of September 30other | $2.02M | – | 15 % |
| GAAP effective income tax rate - Nine Months Ended September 30GAAP | 21 % | – | – |
| Non-GAAP effective income tax rate - Nine Months Ended September 30non-GAAP | 22 % | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Pega Cloud revenue - Three Months Ended September 30Cloud adoption continues to expand. | $218.9M | – | 19 % |
| Maintenance revenue - Three Months Ended September 30Not separately discussed. | $72.65M | – | (9) % |
| Subscription services revenue - Three Months Ended September 30Includes Pega Cloud and Maintenance. | $291.6M | – | 10 % |
| Subscription license revenue - Three Months Ended September 30Not separately discussed. | $55.58M | – | (9) % |
| Subscription revenue - Three Months Ended September 30Includes subscription services and subscription license. | $347.2M | – | 7 % |
| Consulting revenue - Three Months Ended September 30Not separately discussed. | $46.20M | – | (18) % |
| Pega Cloud revenue - Nine Months Ended September 30Cloud adoption continues to expand. | $637.9M | – | 27 % |
| Maintenance revenue - Nine Months Ended September 30Not separately discussed. | $222.5M | – | (5) % |
| Subscription services revenue - Nine Months Ended September 30Includes Pega Cloud and Maintenance. | $860.4M | – | 17 % |
| Subscription license revenue - Nine Months Ended September 30Not separately discussed. | $232.5M | – | (29) % |
| Subscription revenue - Nine Months Ended September 30Includes subscription services and subscription license. | $1.09B | – | 2 % |
| Consulting revenue - Nine Months Ended September 30Not separately discussed. | $151.2M | – | (13) % |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
2028 outlook
- Note$700M or more of free cash flow
What drove it
- Pega Cloud ACV was $ 975,991 as of September 30, 2026, compared with $ 815,370 as of September 30, 2025, a 20 % increase.
- Pega Cloud revenue was $ 218,925 for the three months ended September 30, 2026, compared with $ 184,549, a 19 % increase.
- Subscription services revenue was $ 291,578 for the three months ended September 30, 2026, compared with $ 264,198, a 10 % increase.
- Backlog was $ 2,009 as of September 30, 2026, compared with $ 1,755 as of September 30, 2025, a 15 % increase.
- Management said the Q3 ACV add was the strongest of the year.
Concerns
- Management said ACV growth significantly slowed during the nine months ended September 30, 2026, as compared with the same period last year.
- Management attributed the slowdown to evolving purchasing behaviors, greater scrutiny of large technology investments as AI disrupts the industry, and go-to-market execution challenges.
- Management said these factors may continue to adversely affect the ACV growth rate and cash flow generation for the rest of the year.
- Subscription license revenue was $ 55,578 for the three months ended September 30, 2026, compared with $ 60,758, a (9) % change.
- Consulting revenue was $ 46,203 for the three months ended September 30, 2026, compared with $ 56,394, an (18) % change.
- Litigation settlement expense was 16,000 for the three months and nine months ended September 30, 2026.
What to watch
- ACV growth rate for the rest of the year.
- Progress on actions to improve go-to-market execution and accelerate growth.
- Pega Cloud adoption and the mix between Pega Cloud, maintenance, and subscription license.
- Cash flow generation relative to management's statement that it remains on track to deliver $700M or more of free cash flow in 2028.
- Backlog conversion, including the $ 985,469 of backlog expected within 1 year or less as of September 30, 2026.
Balance sheet and cash flow
- Cash and cash equivalents as of September 30, 2026: $ 202,190; December 31, 2025: $ 212,447
- Marketable securities as of September 30, 2026: 107,521; December 31, 2025: 213,352
- Total cash, cash equivalents, and marketable securities as of September 30, 2026: 309,711; December 31, 2025: 425,799
- Cash provided by operating activities for the nine months ended September 30, 2026: $ 304,299; 2025: $ 346,796
- Cash provided by investing activities for the nine months ended September 30, 2026: 89,038; 2025: 214,897
- Cash (used in) financing activities for the nine months ended September 30, 2026: (402,070); 2025: (756,391)
- Cash, cash equivalents, and restricted cash, end of period for the nine months ended September 30, 2026: $ 205,037; 2025: $ 153,802
Analysis
Pega reported third-quarter total revenue of $ 393,359, compared with $ 381,350, a 3 % increase. Subscription services revenue increased 10 % to $ 291,578, led by Pega Cloud revenue of $ 218,925, up 19 %. These gains were partly offset by subscription license revenue of $ 55,578, down (9) %, and consulting revenue of $ 46,203, down (18) %.
The contract base continued to shift toward cloud. Pega Cloud ACV was $ 975,991, up 20 %, while total ACV was $ 1,653,309, up 6 %, or 7 % on a constant-currency basis. Maintenance ACV declined (12) % to $ 261,321 and subscription license ACV declined (6) % to $ 415,997. Backlog reached $ 2,009,364, with $ 985,469 expected within 1 year or less.
GAAP profitability weakened despite modest revenue growth. Third-quarter GAAP net income was $ 14,092, down (68) %, and diluted GAAP earnings per share was $ 0.08, down (67) %. Income from operations was $ 14,861 versus $ 14,469. The quarter included 16,000 of litigation settlement expense. Non-GAAP net income rose 8 % to $ 59,750 and non-GAAP diluted earnings per share rose 17 % to $ 0.35.
For the nine months ended September 30, 2026, cash provided by operating activities was $ 304,299, down (12) %, and non-GAAP free cash flow was $ 289,825, down (14) %. Total cash, cash equivalents, and marketable securities were 309,711 as of September 30, 2026, compared with 425,799 at December 31, 2025. Management said purchasing scrutiny, AI-related industry disruption, and go-to-market execution challenges significantly slowed ACV growth during the nine-month period and may continue to affect ACV growth and cash generation for the rest of the year.
The release did not provide formal near-term financial guidance. Management stated that it is taking actions to improve execution and accelerate growth, while remaining on track to deliver $700M or more of free cash flow in 2028. The key operating test is whether stronger Q3 ACV additions, cloud adoption, and backlog convert into improved total ACV growth, revenue growth, and cash generation.
Management, verbatim
The AI market is still sorting itself out, but we’re confident in our long-term winning strategy to harness models like Claude, OpenAI GPT, and Gemini to help enterprises achieve predictable business outcomes at predictable costs while maintaining the governance, security, and control required for mission-critical operations.
Alan Trefler, founder and CEO, Pega
While our ACV growth through the first three quarters of 2026 did not reflect the opportunity we see in the market, largely due to go-to-market execution challenges, our Q3 ACV add was the strongest of the year and reinforces our confidence in the demand for our solutions.
Ken Stillwell, COO and CFO, Pega
Not in the filing
stated, not guessed- Formal near-term revenue guidance
- Formal near-term gross margin guidance
- Formal near-term operating expense guidance
- Formal near-term tax-rate guidance
- Previous-release outlook for comparison
- Quarterly operating cash flow
- Quarterly free cash flow
- Reported gross margin
- Debt balance
- Share repurchases
- Dividends
- Capital-return activity
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Pegasystems filed its Q3 2026 earnings via an SEC Form 8‑K, detailing segment performance and forward‑looking statements.
Ticker impact
Q3 2026 results disclosed via SEC 8‑K showing 20% cloud ACV growth and 6% total ACV increase, with guidance on free cash flow.
modest upside potential as cloud growth exceeds expectations, tempered by slower overall ACV and cash‑flow concerns
Investors may price in strong cloud performance while remaining cautious on broader growth slowdown.
Market effects
Highlights continued demand for enterprise AI/cloud solutions, may benefit peers in workflow automation.
U.S. tech sector sees mixed reaction; cloud growth could support broader AI investment sentiment.
Signals AI adoption trends that could influence global enterprise software valuations.
Counterpoint
Despite cloud acceleration, slowing overall ACV may indicate market saturation, suggesting a short‑term pullback.
Key entities
- companyPegasystems Inc.
Enterprise AI software provider reporting Q3 results.
- executiveAlan Trefler
Founder and CEO providing forward‑looking commentary.
