Total ACV Growth and Pega Cloud ACV Growth

(NASDAQ: PEGA), the Enterprise Transformation Company™, released its financial results for the fourth quarter and full-year 2025.Pegasystems Inc.

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“2025 was an extraordinary year of progress and execution,” said Alan Trefler, founder and CEO, Pega. “We’re entering a transformative era with bold ideas and compelling innovation. Our approach positions us to lead the industry, deliver extraordinary value to clients, and enable clients to overcome legacy system limitations.”

“Our 2025 results reflect strong financial discipline, with top and bottom-line beats of our guidance and exceeding the Rule of 40,” Pega COO & CFO, Ken Stillwell, said. “Our recurring business model and our technology leadership position us to continue to accelerate ACV growth, expand margins, and increase free cash flow.”

Financial and performance metrics⁽¹⁾

Reconciliation of ACV and Constant Currency ACV

Cash Flow Growth

2026 Guidance⁽¹⁾

As of February 10, 2026, we are providing the following guidance:

Quarterly conference call

A conference call and audio-only webcast will be conducted at 8:00 a.m. EST on Wednesday, February 11, 2026.

Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1 (800) 715-9871 (domestic) or 1 (646) 307-1963 (international) and using Conference ID 6226958, or viahttps://events.q4inc.com/attendee/958808765 www.pega.com Investors section

Discussion of non-GAAP financial measures

Our non-GAAP financial measures should only be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We believe that these measures help investors understand our core operating results and prospects, which is consistent with how management measures and forecasts our performance without the effect of often one-time charges and other items outside our normal operations. Management uses these measures to assess the performance of the company's operations and establish operational goals and incentives. They are not a substitute for financial measures prepared under U.S. GAAP. Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.

Forward-looking statements

Certain statements in this press release may be "forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, including our 2026 Guidance and the anticipated growth and development of our business.

Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, positions, forecasts, guidance, likely, and usually or variations of such words and other similar expressions identify forward-looking statements. These statements represent our views only as of the date the statement was made and are based on current expectations and assumptions.

Forward-looking statements deal with future events and are subject to risks and uncertainties that are difficult to predict, including, but not limited to:

These risks and others that may cause actual results to differ materially from those expressed in such forward-looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2025, and other filings we make with the SEC.

Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the results included in such statements will be achieved. Although subsequent events may cause our view to change, except as required by applicable law, we do not undertake and expressly disclaim any obligation to publicly update or revise these forward-looking statements, whether as the result of new information, future events, or otherwise.

Any forward-looking statements in this press release represent our views as of February 10, 2026.

About Pegasystems

Pega provides the leading AI-powered platform for enterprise transformation. The world’s most influential organizations trust our technology to reimagine how work gets done by automating workflows, personalizing customer experiences, and modernizing legacy systems. Since 1983, our scalable, flexible architecture has fueled continuous innovation, helping clients accelerate their path to the autonomous enterprise. Ready to Build for Change®? Visitwww.pega.com.

All trademarks are the property of their respective owners.

Our non-GAAP financial measures reflect the following adjustments:

(1) Per share amounts have been recast for all prior periods to reflect the effect of the Company’s two-for-one forward common stock split effected in the form of a stock dividend distributed on June 20, 2025.

(2) Stock-based compensation:

(3) Effective income tax rates:

Our GAAP effective income tax rate is subject to significant fluctuations due to several factors, including our stock-based compensation plans, research and development tax credits, and the valuation allowance on our deferred tax assets in the U.S. and U.K. We determine our non-GAAP income tax rate using applicable rates in taxing jurisdictions and assessing certain factors, including historical and forecasted earnings by jurisdiction, discrete items, and ability to realize tax assets. Under GAAP we recorded a release of our valuation allowance on our net deferred tax assets in the U.S. federal and state and U.K during the fourth quarter of 2025, resulting in a $175 million non‑cash tax benefit. See "Note 18. Income Taxes" in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2025 for additional information. We believe it is beneficial for our management to review our non-GAAP results consistent with our annual plan’s effective income tax rate as established at the beginning of each year, given tax rate volatility.

(1) Our non-GAAP free cash flow is defined as cash provided by operating activities less investment in property and equipment. Investment in property and equipment fluctuates in amount and frequency and is significantly affected by the timing and size of investments in our facilities and equipment. We provide information on free cash flow to enable investors to assess our ability to generate cash without incurring additional external financings. This information is not a substitute for financial measures prepared under U.S. GAAP.

(2) The supplemental information discloses items that affect our cash flows and are considered by management not to be representative of our core business operations and ongoing operational performance.

- ACV represents the annualized value of our active contracts as of the measurement date. The contract's total value is divided by its duration in years to calculate ACV. ACV is a performance measure that we believe provides useful information to our management and investors.Annual contract value (“ACV”)

- Expected future revenue from existing non-cancellable contracts:Remaining performance obligations (“Backlog”)

As of December 31, 2025:

As of December 31, 2024:

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Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.^{____________________}

(in millions, except percentages)	December 31, 2024		December 31, 2025			1-Year Change
ACV	$	1,372	$	1,608		17	%
Impact of changes in foreign exchange rates		—		(46	)
Constant currency ACV	$	1,372	$	1,562		14	%

Note: Constant currency ACV is calculated by applying the December 31, 2024 foreign exchange rates to current period shown.

(Dollars in thousands, except per share amounts)⁽¹⁾	Three Months Ended December 31,						Year Ended December 31,
(Dollars in thousands, except per share amounts)⁽¹⁾	2025		2024		Change		2025		2024		Change
Total revenue	$	504,317	$	490,830	3	%	$	1,745,812	$	1,497,180	17	%
Net income - GAAP	$	234,574	$	119,090	97	%	$	393,437	$	99,189	297	%
Net income - non-GAAP	$	139,554	$	147,953	(6	)%	$	385,411	$	270,542	42	%
Diluted earnings per share - GAAP	$	1.27	$	0.63	102	%	$	2.13	$	0.55	287	%
Diluted earnings per share - non-GAAP	$	0.76	$	0.80	(5	)%	$	2.10	$	1.51	39	%

Per share amounts have been recast for all prior periods to reflect the effect of the Company’s two-for-one forward common stock split effected in the form of a stock dividend distributed on June 20, 2025.⁽¹⁾

	Three Months Ended December 31,													Year Ended December 31,
(Dollars in thousands)⁽²⁾	2025				2024				Change					2025				2024				Change
Pega Cloud	$	193,487	38	%	$	149,638	30	%	$	43,849		29	%	$	695,902	40	%	$	558,734	37	%	$	137,168		25	%
Maintenance		79,305	16	%		81,257	17	%		(1,952	)	(2	)%		314,593	18	%		323,304	22	%		(8,711	)	(3	)%
Subscription services		272,792	54	%		230,895	47	%		41,897		18	%		1,010,495	58	%		882,038	59	%		128,457		15	%
Subscription license		178,215	35	%		207,113	42	%		(28,898	)	(14	)%		507,368	29	%		401,869	27	%		105,499		26	%
Subscription		451,007	89	%		438,008	89	%		12,999		3	%		1,517,863	87	%		1,283,907	86	%		233,956		18	%
Consulting		53,310	11	%		52,822	11	%		488		1	%		227,949	13	%		213,273	14	%		14,676		7	%
Total revenue	$	504,317	100	%	$	490,830	100	%	$	13,487		3	%	$	1,745,812	100	%	$	1,497,180	100	%	$	248,632		17	%

Perpetual license revenue has been combined within Subscription license revenue for all periods presented.⁽²⁾

	2026
Annual contract value growth	15%

	2026
	GAAP	Non-GAAP⁽¹⁾
Revenue	$2.0 Billion	$2.0 Billion
Diluted earnings per share	$1.87	$2.75

	2026
Cash provided by operating activities	$595 million
Free cash flow	$575 million

A reconciliation of our GAAP and Non-GAAP guidance is contained in the financial schedules at the end of this release.⁽¹⁾


PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS^{(1) (2)} (in thousands, except per share amounts)

	Three Months Ended December 31,						Year Ended December 31,
		2025			2024			2025			2024
Revenue
Subscription services	$	272,792		$	230,895		$	1,010,495		$	882,038
Subscription license		178,215			207,113			507,368			401,869
Consulting		53,310			52,822			227,949			213,273
Total revenue		504,317			490,830			1,745,812			1,497,180
Cost of revenue
Subscription services		46,631			40,988			169,247			149,918
Subscription license		316			389			1,382			1,905
Consulting		56,518			60,978			250,753			238,842
Total cost of revenue		103,465			102,355			421,382			390,665
Gross profit		400,852			388,475			1,324,430			1,106,515
Operating expenses
Selling and marketing		153,308			139,655			578,637			534,780
Research and development		80,855			76,379			312,681			298,074
General and administrative		40,998			28,207			148,722			112,848
Litigation settlement, net of recoveries		9,750			—			9,750			32,403
Restructuring		11,578			1,245			11,540			4,528
Total operating expenses		296,489			245,486			1,061,330			982,633
Income from operations		104,363			142,989			263,100			123,882
Foreign currency transaction (loss) gain		(2,711	)		6,318			(14,890	)		(912	)
Interest income		2,398			6,944			13,641			25,779
Interest expense		(113	)		(1,788	)		(1,285	)		(6,835	)
(Loss) income on capped call transactions		—			4			(223	)		(663	)
Other income (loss), net		1,037			(299	)		20,284			1,385
Income before (benefit from) provision for income taxes		104,974			154,168			280,627			142,636
(Benefit from) provision for income taxes		(129,600	)		35,078			(112,810	)		43,447
Net income	$	234,574		$	119,090		$	393,437		$	99,189
Earnings per share
Basic	$	1.38		$	0.69		$	2.30		$	0.58
Diluted	$	1.27		$	0.63		$	2.13		$	0.55
Weighted-average number of common shares outstanding
Basic		170,001			172,000			170,782			170,530
Diluted		184,165			191,272			184,790			179,268
The number of common shares and per share amounts have been recast for all prior periods to reflect the effect of the Company’s two-for-one forward common stock split effected in the form of a stock dividend distributed on June 20, 2025.⁽¹⁾
Perpetual license revenue and related cost of revenue have been combined within Subscription license revenue and cost of revenue for all periods presented.⁽²⁾

PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)

	December 31, 2025		December 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	212,447	$	337,103
Marketable securities		213,352		402,870
Total cash, cash equivalents, and marketable securities		425,799		739,973
Accounts receivable, net		264,713		305,468
Unbilled receivables, net		166,478		173,085
Other current assets		121,305		115,178
Total current assets		978,295		1,333,704
Long-term unbilled receivables, net		102,544		61,407
Goodwill		81,506		81,113
Other long-term assets		469,499		292,049
Total assets	$	1,631,844	$	1,768,273
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	12,924	$	6,226
Accrued expenses		44,847		31,544
Accrued compensation and related expenses		148,797		138,042
Deferred revenue		509,275		423,910
Convertible senior notes, net		—		467,470
Other current liabilities		21,935		18,866
Total current liabilities		737,778		1,086,058
Long-term operating lease liabilities		60,825		67,647
Other long-term liabilities		45,860		29,088
Total liabilities		844,463		1,182,793
Total stockholders’ equity		787,381		585,480
Total liabilities and stockholders’ equity	$	1,631,844	$	1,768,273


PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

	Year Ended December 31,
		2025			2024
Net income	$	393,437		$	99,189
Adjustments to reconcile net income to cash provided by operating activities
Non-cash items		72,362			227,582
Change in operating assets and liabilities, net		39,428			19,155
Cash provided by operating activities		505,227			345,926
Cash provided by (used in) investing activities		197,246			(202,576	)
Cash (used in) financing activities		(834,630	)		(30,214	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		6,988			(4,434	)
Net (decrease) increase in cash, cash equivalents, and restricted cash		(125,169	)		108,702
Cash, cash equivalents, and restricted cash, beginning of period		341,529			232,827
Cash, cash equivalents, and restricted cash, end of period	$	216,360		$	341,529


PEGASYSTEMS INC. RECONCILIATION OF SELECTED GAAP AND NON-GAAP MEASURES⁽¹⁾ (in thousands, except percentages and per share amounts)

	Three Months Ended December 31,								Year Ended December 31,
		2025			2024		Change			2025			2024		Change
Net income - GAAP	$	234,574		$	119,090		97	%	$	393,437		$	99,189		297	%
Stock-based compensation⁽²⁾		34,043			34,500					155,239			142,718
Restructuring		11,578			1,245					11,540			4,528
Legal fees		16,174			4,499					39,151			18,713
Litigation settlement, net of recoveries		9,750			—					9,750			32,403
Amortization of intangible assets		627			700					2,630			3,153
Interest on convertible senior notes		—			594					394			2,451
Capped call transactions		—			(4	)				223			663
Repurchases of convertible senior notes		—			(459	)				—			(459	)
Foreign currency transaction loss (gain)		2,711			(6,318	)				14,890			912
Other		(941	)		759					(20,327	)		(869	)
Income taxes⁽³⁾		(168,962	)		(6,653	)				(221,516	)		(32,860	)
Net income - non-GAAP	$	139,554		$	147,953		(6	)%	$	385,411		$	270,542		42	%

Diluted earnings per share - GAAP	$	1.27		$	0.63		102	%	$	2.13		$	0.55		287	%
non-GAAP adjustments		(0.51	)		0.17					(0.03	)		0.96
Diluted earnings per share - non-GAAP	$	0.76		$	0.80		(5	)%	$	2.10		$	1.51		39	%

Diluted weighted-average number of common shares outstanding - GAAP		184,165			191,272		(4	)%		184,790			179,268		3	%
Capped call transactions		—			(7,106	)				(1,196	)		(428	)
Diluted weighted-average number of common shares outstanding - non-GAAP		184,165			184,166		—	%		183,594			178,840		3	%

	Three Months Ended December 31,						Year Ended December 31,
(Dollars in thousands)		2025			2024			2025			2024
Cost of revenue	$	4,909		$	6,795		$	26,646		$	27,353
Selling and marketing		15,553			13,463			60,721			55,084
Research and development		7,895			7,059			31,684			29,838
General and administrative		5,686			7,183			36,188			30,443
	$	34,043		$	34,500		$	155,239		$	142,718
Income tax benefit	$	(6,417	)	$	(422	)	$	(31,043	)	$	(1,799	)

	Year Ended December 31,
	2025		2024
GAAP	(40	)%	30	%
non-GAAP	22	%	22	%


PEGASYSTEMS INC. RECONCILIATION OF FREE CASH FLOW⁽¹⁾ (in thousands, except percentages)

	Year Ended December 31,						Change
		2025			2024		Change
Cash provided by operating activities	$	505,227			345,926		46	%
Investment in property and equipment		(14,504	)		(7,712	)
Free cash flow⁽¹⁾	$	490,723		$	338,214		45	%

Supplemental information⁽²⁾
Litigation settlement, net of recoveries	$	—		$	32,403
Legal fees		35,484			16,197
Restructuring		2,056			5,252
Interest paid on convertible senior notes		1,754			3,810
Income taxes, net of refunds		21,630			82,317
	$	60,924		$	139,979

PEGASYSTEMS INC.

ANNUAL CONTRACT VALUE

(in thousands, except percentages)

	December 31, 2025		December 31, 2024		Change					Constant Currency Change
Pega Cloud	$	866,612	$	652,443	$	214,169		33	%	28	%
Maintenance		288,873		291,807		(2,934	)	(1	)%	(4	)%
Subscription services		1,155,485		944,250		211,235		22	%	18	%
Subscription license		452,902		427,268		25,634		6	%	4	%
	$	1,608,387	$	1,371,518	$	236,869		17	%	14	%

PEGASYSTEMS INC.

BACKLOG

(in thousands, except percentages)

	Subscription services						Subscription license			Consulting			Total
	Pega Cloud			Maintenance			Subscription license			Consulting			Total
1 year or less	$	709,190		$	235,152		$	77,528		$	53,353		$	1,075,223		52	%
1-2 years		400,926			73,895			2,636			854			478,311		23	%
2-3 years		213,259			51,327			2,101			28			266,715		13	%
Greater than 3 years		214,189			32,325			7,331			88			253,933		12	%
	$	1,537,564		$	392,699		$	89,596		$	54,323		$	2,074,182		100	%
% of Total		74	%		19	%		4	%		3	%		100	%
Change since December 31, 2024
	$	410,405		$	51,839		$	(11,886	)	$	332		$	450,690
		36	%		15	%		(12	)%		1	%		28	%

	Subscription services						Subscription license			Consulting			Total
	Pega Cloud			Maintenance			Subscription license			Consulting			Total
1 year or less	$	525,133		$	230,866		$	89,197		$	50,519		$	895,715		56	%
1-2 years		328,234			65,461			10,874			3,297			407,866		25	%
2-3 years		159,536			24,598			733			125			184,992		11	%
Greater than 3 years		114,256			19,935			678			50			134,919		8	%
	$	1,127,159		$	340,860		$	101,482		$	53,991		$	1,623,492		100	%
% of Total		70	%		21	%		6	%		3	%		100	%


PEGASYSTEMS INC. RECONCILIATION OF GAAP BACKLOG AND CONSTANT CURRENCY BACKLOG (in millions, except percentages)

	December 31, 2024		December 31, 2025			1 Year Growth Rate
Backlog - GAAP	$	1,623	$	2,074		28	%
Impact of changes in foreign exchange rates		—		(80	)
Constant currency backlog	$	1,623	$	1,994		23	%

Note: Constant currency backlog is calculated by applying the December 31, 2024 foreign exchange rates to current period shown.


PEGASYSTEMS INC. RECONCILIATION OF FORWARD-LOOKING GUIDANCE (in millions, except percentages and per share amounts)

		2026
Annual contract value growth		15	%

Revenue (GAAP and Non-GAAP)	$	2,000

Net Income - GAAP	$	344
Stock-based compensation		158
Legal fees		30
Incomes taxes		(26	)
Net Income - Non-GAAP	$	506

Diluted earnings per share - GAAP	$	1.87
Non-GAAP adjustments		0.88
Diluted earnings per share - non-GAAP	$	2.75

Diluted weighted-average number of common shares outstanding - GAAP		184

		2026
Cash provided by operating activities	$	595
Investment in property and equipment		(20	)
Free cash flow	$	575

Supplemental information
Legal fees	$	30
Restructuring		12
Litigation settlement, net of recoveries		10
Income taxes⁽¹⁾		63
	$	115

Evolving U.S. tax legislation may impact the amount of tax payments.⁽¹⁾

our future financial performance and business plans;
the adequacy of our liquidity and capital resources;
the successful execution of investments in artificial intelligence;
the timing of revenue recognition;
variation in demand for our products and services;
reliance on key personnel;
potential legal and financial liabilities, as well as damage to our reputation, due to cyber-attacks;
security breaches and security flaws;
our ability to protect our intellectual property rights, costs associated with defending such rights, intellectual property rights claims, and other related claims by third parties against us, including related costs, damages, and other relief that may be granted against us;
our ongoing litigation with Appian Corp. and associated legal proceedings;
our client retention rate; and
management of our growth.

: We have excluded stock-based compensation from our non-GAAP operating expenses and profitability measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to our revenues recognized during the periods presented and is expected to contribute to our future revenues, we continue to evaluate our business performance, excluding stock-based compensation.Stock-based compensation
: We have excluded restructuring from our non-GAAP financial measures. Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as these amounts are not representative of our core business operations and ongoing operational performance.Restructuring
Legal and related fees arising from proceedings outside the ordinary course of business. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.Legal fees:
: Cost to settle litigation, net of insurance recoveries, arising from proceedings outside the ordinary course of business. See "Note 20. Commitments And Contingencies" in Item 8 of our Annual Report filed on Form 10-K for the year ended December 31, 2025 and prior filings for further information. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.Litigation settlement, net of recoveries
: We have excluded the amortization of intangible assets from our non-GAAP operating expenses and profitability measures. Amortization of intangible assets fluctuates in amount and frequency and is significantly affected by the timing and size of acquisitions. Investors should note that intangible assets contributed to our revenues recognized during the periods presented and are expected to contribute to future revenues. Amortization of intangible assets is likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods.Amortization of intangible assets
: In February 2020, we issued convertible senior notes (the “Notes”), due March 1, 2025, in a private placement. The Notes accrued interest at an annual rate of 0.75%, paid semi-annually in arrears on March 1 and September 1. The outstanding Notes were repaid in their entirety at maturity. We believe that excluding the amortization of issuance costs provides a useful comparison of our operational performance in different periods.Interest on convertible senior notes
: We have excluded gains and losses related to our capped call transactions held at fair value under U.S. GAAP. The capped call transactions were expected to reduce common stock dilution and/or offset any potential cash payments we must make, other than for principal and interest, upon conversion of the Notes. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.Capped call transactions
: We have excluded gains from the repurchases of the Notes. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.Repurchases of convertible senior notes
: We have excluded foreign currency transaction gains and losses from our non-GAAP profitability measures. Foreign currency transaction gains and losses fluctuate in amount and frequency and are significantly affected by foreign exchange market rates. Foreign currency transaction gains and losses are likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods.Foreign currency transaction loss (gain)
: We have excluded gains and losses from our venture investments. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.Other
:Diluted weighted-average number of common shares outstanding
- Capped call transactions: In periods of GAAP net income, the shares calculated by applying the if-converted method related to the Company’s Notes are included in the diluted weighted-average shares outstanding if they are dilutive. The capped call transactions were expected to reduce common stock dilution and/or offset any potential cash payments the Company must make, other than for principal and interest, upon conversion of the Notes. We believe that including the expected impact of the capped call transactions in our non-GAAP financial measures provides a useful comparison of our operational performance in different periods.

: Cost to settle litigation, net of insurance recoveries, arising from proceedings outside the ordinary course of business. See "Note 20. Commitments And Contingencies" in Item 8 of our Annual Report filed on Form 10-K for the year ended December 31, 2025 and prior filings for further information.Litigation settlement, net of recoveries
Legal and related fees arising from proceedings outside the ordinary course of business.Legal fees:
: Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities.Restructuring
: In February 2020, we issued the Notes, due March 1, 2025, in a private placement. The Notes accrued interest at an annual rate of 0.75%, paid semi-annually in arrears on March 1 and September 1. The outstanding Notes were repaid in their entirety at maturity.Interest paid on convertible senior notes
: Direct income taxes paid net of refunds received.Income taxes, net of refunds