PEGA

Pegasystems Inc.

Next est. report 2026-10-20 · AMC

AI '25: AI-Ready Design Agentic Utilities '26: Agentic Systems of Action

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Overview

Pegasystems Inc. offers enterprise software for customer engagement and digital process automation, including its Pega Infinity suite and Pega Platform. Leverag

Pegasystems Inc. offers enterprise software for customer engagement and digital process automation, including its Pega Infinity suite and Pega Platform. Leveraging AI with its Blueprint and new Infinity Studio, Pega helps businesses design, build, and evolve applications, emphasizing predictable outcomes and no per-token AI costs. Pega Cloud, its fastest-growing segment, now constitutes 57% of total ACV, serving global industries.

What They Do (Plain English & Analogies): Pegasystems (Pega) is like a master chef for businesses, helping them design and run their operations more efficiently using advanced software. Instead of writing every instruction from scratch each time, Pega provides a 'recipe book' (its platform) and 'smart assistants' (AI agents) to automate complex tasks. Imagine a large restaurant that needs to serve thousands of customers consistently. Pega helps them design the perfect menu (workflows) and ensures every dish (business process) is prepared and served exactly right, every time, without wasting ingredients (costly AI tokens). They help companies build software that can easily adapt to changes, like a chef who can quickly tweak a recipe for a new ingredient or customer preference. Their focus is on making business processes predictable, reliable, and cost-effective, especially in the new world of Artificial Intelligence.
Very Brief History: Founded in 1983 and headquartered in Cambridge, Massachusetts, Pegasystems Inc. has evolved from its roots in rules-based expert systems to become a global provider of enterprise software solutions. Over decades, the company has focused on optimizing workflows and decisions for businesses, transitioning to a subscription model starting in 2017. More recently, Pega has significantly invested in AI capabilities, notably with the introduction of Pega Blueprint and Infinity Studio, to help clients design, build, operate, and evolve enterprise systems more effectively in an AI-driven world.
"Street Stereotype": On the street, Pegasystems is often perceived as a company that provides robust, enterprise-grade business process management (BPM) and customer relationship management (CRM) solutions, particularly for large, complex organizations. In the current AI-driven market, there's a perception of Pega as a differentiated player that offers predictable outcomes and predictable costs for AI adoption, contrasting with the 'token maxing' mindset and cost uncertainty seen with other AI providers. While the market has experienced significant confusion and lengthened decision cycles due to AI, Pega is seen as offering a structured, governable, and cost-effective approach to leveraging AI for business transformation, aiming to avoid 'AI chaos'.
Subsidiaries On Linked In*: {"subsidiaries":[]}
Customer Sectors & Example Clients: Pegasystems serves a broad spectrum of industries, including financial services, life sciences, healthcare, communications, media, government, insurance, manufacturing, high-tech, and consumer services. While specific client names are not provided in the transcript, the CEO mentions meeting with "heads of technology of very large financial institution[s]", indicating that large banks are among their key clients. Given their industry focus and enterprise-grade solutions, other likely large enterprise clients would include major insurance companies, telecommunication providers, and government agencies.
New Customers / Segments They'Re Targeting: Pegasystems is actively targeting new logos and new workflows/use cases within both existing and new client bases. They are leveraging their Pega Blueprint and the newly released Infinity Studio in Pega 26 to shorten sales cycles and unlock opportunities, particularly for new clients and new applications. The company is focused on helping organizations move beyond AI experimentation to production deployments that deliver measurable ROI, governance, and managed total cost of ownership, which appeals to clients seeking clarity amidst market confusion.
Supply Chain And Sourcing Geographies: The provided information, including the earnings transcript and company description, primarily details Pegasystems' software development, licensing, hosting, and support services. It does not contain specific details about a physical supply chain or the sourcing geographies for products or components. Pegasystems' core offerings are software solutions and cloud services, rather than physical goods.
Sales Geographies And Expansion Plans: Pegasystems currently operates and sells its solutions across the United States, the wider Americas, the United Kingdom, other European nations, the Middle East, Africa, and the Asia-Pacific region. The transcript does not explicitly mention plans to expand sales into new specific geographies, but rather focuses on improving go-to-market execution and increasing prospecting activity within their existing operational regions.
How Key Themes May Help/Hurt: The 'Business Services '26: Agentic Systems of Action' theme is highly relevant to PEGA. Pega is a constituent member, recognized as an 'Enterprise business process powerhouse' that employs 'high-scale decisioning agents that handle real-time customer lifecycles, automated insurance underwriting paths, and compliance check escalations, replacing static scripts with dynamic, probabilistic reasoning.' **Help:** * **Accelerating Enterprise Adoption:** The theme's bullish outlook on accelerating enterprise adoption of AI-driven automation and agentic systems directly benefits Pega, as their core offering aligns with this trend. * **Monetization Strategies:** Pega's outcome-based pricing model, which charges for business value created rather than per token, aligns with the theme's observation of viable monetization strategies beyond traditional SaaS, including outcome-based models. * **Demand for Governed AI:** The increasing focus on governance, predictable outcomes, and managing token costs, as highlighted in the theme's context and by Pega's management, plays directly to Pega's strengths and differentiated approach. **Hurt:** * **Pace of AI Innovation vs. Adoption:** The theme notes that the rapid pace of AI innovation risks outstripping enterprises' ability to fully adopt and integrate agentic systems, which Pega acknowledges as 'buyer uncertainty' and 'confusion' leading to lengthened decision cycles. * **Competitive Landscape:** The intensely competitive and rapidly evolving AI landscape, with many embedded AI features offered at no extra cost and the emergence of open-source solutions, could challenge Pega's proprietary offerings, even with its differentiated cost model. * **Regulatory Scrutiny:** Increasing regulatory scrutiny, such as the EU AI Act and Colorado AI Act, could impose compliance costs and operational complexities for all companies deploying AI, including Pega and its clients.

3 Main Long-Term Bull Details

Differentiated AI Architecture for Predictable Outcomes and Costs: Pega's unique approach of using AI extensively at design time (Blueprint AI) to create structured workflows and then executing those workflows predictably at scale, with selective AI use at runtime and no per-token costs, provides a significant competitive advantage. This resonates with enterprises seeking to avoid 'AI chaos' and manage unpredictable expenses, driving long-term adoption for mission-critical systems.
Strong Cash Flow Generation and Capital Allocation: Despite recent ACV growth challenges, Pega demonstrates strong free cash flow generation, with a record $288 million in the first half of 2026. The company is committed to being a 'Rule of 40' company and uses its cash flow for strategic capital allocation, including opportunistic share repurchases, which can create long-term shareholder value.
Accelerating Enterprise Demand for Governed AI and Transformation: As organizations move beyond AI experimentation to focus on measurable business outcomes, governance, and total cost of ownership, Pega's value proposition becomes increasingly compelling. The market is rewarding companies that combine AI, workflow automation, and enterprise transformation within a governed, production-ready platform, positioning Pega for long-term growth as this trend solidifies.

3 Main Long-Term Bear Details

Lingering Buyer Uncertainty and Elongated Sales Cycles: The unprecedented change and confusion in the software market due to AI are causing significant buyer uncertainty, leading to longer buying cycles and delayed investment decisions. This market disruption could persist, impacting Pega's ability to convert its pipeline and achieve its ACV growth targets in the near to medium term.
Go-to-Market Execution Challenges: Pega acknowledges that it 'didn't execute well enough on our go-to-market change' in the first half of 2026, particularly in driving deeper engagement and new logo acquisition. While they are making adjustments, a prolonged period of suboptimal execution could hinder their ability to capitalize on market opportunities.
Pressure on Legacy Revenue Streams Amidst Cloud Transition: While Pega Cloud ACV is growing and expected to reach 75% of total ACV, the ongoing migration of clients to Pega Cloud continues to put pressure on maintenance and subscription license ACV growth rates. This mix shift, while beneficial long-term, creates near-term headwinds for overall ACV growth.

Competitors And Differentiation: Pegasystems competes against various approaches and companies. Historically, they've competed against 'code it yourself' solutions, open-source alternatives, and inexpensive offshore coding. In the current AI landscape, competitors include frontier model providers like Anthropic and OpenAI (with tools like Claude or Codex), as well as larger enterprise software companies like Microsoft and Salesforce, and other AI-focused vendors such as Sierra and Decagon. Pega differentiates itself by: 1. **Predictable Costs:** Offering AI agents with no per-token costs, contrasting with the variable and often expensive token consumption models of many AI providers. 2. **AI at Design Time vs. Run Time:** Pega uses AI extensively at design time (via Blueprint AI) to create structured, understandable workflows, and then runs these workflows repeatedly at scale, using AI selectively only for specific tasks at runtime. This is likened to a chef designing a recipe once and then executing it consistently, rather than reinventing it every time. 3. **Structured and Visual Foundation:** Their system is built on transparent, understandable, governable, and adaptable workflows, business logic, personas, and integrations, which they argue is superior to AI-generated code that can be opaque and hard to change. 4. **'Build for Change' Philosophy:** Pega's architecture is designed for continuous evolution and adaptation, making it easier for businesses to modify their systems as requirements change.
Recent Performance & What The Market'S Focused On: Pegasystems experienced a challenging first half of 2026, with total Annual Contract Value (ACV) growing 7% (8% in constant currency) year-over-year, which was below expectations. Pega Cloud ACV, however, increased by 22% (constant currency) and now represents 57% of total ACV, remaining the fastest-growing component. The company generated a record $288 million in free cash flow in the first half of 2026 and repurchased 9 million shares for over $360 million. The market is focused on several key areas: * **AI Economics and Predictable Costs:** The primary focus is on how Pega's differentiated AI approach, offering predictable outcomes and no per-token costs, will help clients manage AI expenses and drive ROI, especially as the market moves beyond AI experimentation. * **Unlocking Delayed Deals:** Investors are watching for signs that deals that were elongated due to market confusion are beginning to close in the second half of the year. * **Go-to-Market Execution:** The market is scrutinizing Pega's ability to improve its go-to-market execution, drive new logo acquisition, and expand within existing clients to accelerate ACV growth. * **Free Cash Flow and Rule of 40:** Pega's commitment to strong free cash flow generation (targeting $700 million+ by 2028) and maintaining 'Rule of 40' performance is a key metric for investors, with management indicating they will temper spend to achieve these targets.

Revenue Segments And Estimated Mix: Pega Cloud ACV — Mix: 57%; Source: Q2 2026 earnings transcript; Trend: Increased by 22% year-over-year (constant currency), fastest-growing component, expected to reach ~75% of total ACV over time
Maintenance ACV — Mix: n/m; Source: Q2 2026 earnings transcript; Trend: Decreased, facing pressure due to migration to Pega Cloud
Subscription License ACV — Mix: n/m; Source: Q2 2026 earnings transcript; Trend: Decreased, facing pressure due to migration to Pega Cloud
Product Brands: Pega Platform
Pega Infinity
Pega Customer Decision Hub
Pega Sales Automation
Pega Customer Service
Pega Cloud
Pega Blueprint
Infinity Studio
Agentic Process Fabric

Bull / Bear Details

Pegasystems is uniquely positioned to capitalize on the AI-driven transformation of business services by offering predictable outcomes and costs through its dif

Thesis

Pegasystems is uniquely positioned to capitalize on the AI-driven transformation of business services by offering predictable outcomes and costs through its differentiated design-time AI (Blueprint) and selective runtime AI with no per-token charges. Despite near-term market confusion and execution challenges impacting ACV growth, the company's strong cash flow generation and commitment to a workflow-centric, governed AI approach underpin a long-term bullish outlook as enterprises seek ROI and control. (Updated: 2026-08-04)

Bull case

Pega's differentiated AI strategy, leveraging design-time AI (Blueprint) for workflow creation and selective runtime AI with no per-token costs, directly addresses client demand for predictable outcomes and cost containment amidst market confusion. This unique approach, reinforced by Infinity Studio, is transforming client engagement and expanding the addressable market for governed AI solutions.
The continued expansion and increasing proportion of Pega Cloud ACV (57% of total ACV, growing 22% Y/Y) is creating a more predictable, higher-quality revenue stream and improving cash flow visibility. This ongoing subscription transition, aiming for 75% Pega Cloud ACV, strengthens the company's long-term compounding shareholder value.
Pega's strong commitment to financial discipline, evidenced by record H1 2026 free cash flow of $288 million and the reaffirmed $700 million+ FCF target for 2028, provides strategic flexibility. The company plans to leverage AI for internal efficiency and temper spending to maintain Rule of 40 performance, driving long-term shareholder value.

Bear case

Significant market confusion and buyer uncertainty surrounding AI economics and deployment strategies are causing deal elongation and a "freezing" of technology investments. This led to slower-than-anticipated ACV growth in H1 2026, making the achievement of the back-end loaded annual targets very challenging.
The intensely competitive and "noisy" AI landscape, with numerous providers (Microsoft, Salesforce, OpenAI, Anthropic, Sierra, Decagon) offering diverse solutions, contributes to customer confusion. This makes it difficult for Pega to cut through the noise and fully capitalize on its differentiated approach, potentially slowing adoption despite its unique value proposition.
Acknowledged underperformance in go-to-market execution during the first half of 2026 impacted pipeline quality, conversion, and new logo acquisition. While management is making changes, the effectiveness and speed of these improvements in driving stronger H2 performance remain a key execution risk.

Bull / Bear Case

Bear Case: Significant market confusion and buyer uncertainty surrounding AI economics and deployment strategies are causing deal elongation and a 'freezing' of technology investments, leading to slower-than-anticipated total ACV growth of 7-8% in H1 2026. This makes the achievement of back-end loaded annual targets very challenging. Pega also acknowledged underperformance in its go-to-market execution during the first half of 2026, impacting pipeline quality, conversion, and new logo acquisition. While management is making changes, the effectiveness and speed of these improvements in driving stronger H2 performance remain a key execution risk. The intensely competitive and 'noisy' AI landscape, with numerous providers, contributes to customer confusion, potentially slowing adoption despite Pega's unique value proposition.
Bull Case: Pegasystems is uniquely positioned to capitalize on the AI-driven transformation of business services through its differentiated AI strategy, leveraging design-time AI (Blueprint) for workflow creation and selective runtime AI with no per-token costs. This approach directly addresses client demand for predictable outcomes and cost containment, a significant competitive advantage amidst market confusion. The continued expansion of Pega Cloud ACV, now 57% of total ACV and growing 22% year-over-year, is creating a more predictable, higher-quality revenue stream. Furthermore, the company's strong commitment to financial discipline, evidenced by record H1 2026 free cash flow of $288 million and a reaffirmed $700 million+ FCF target for 2028, provides strategic flexibility and drives long-term shareholder value. New product innovations like Infinity Studio are expected to further enhance the platform and client engagement.
More Compelling & Why: Bull. Despite recent growth challenges and market confusion, Pegasystems trades at a significant discount, with an NTM EV/EBITDA of 7.4x compared to a peer mean near 12.4x. The strongest argument for the bull case is Pega's structural differentiation in AI, offering predictable outcomes and no per-token costs, which directly addresses enterprise needs for governed and cost-effective AI. This valuation would flip to a bear view if Pega fails to demonstrate tangible improvements in ACV growth and go-to-market execution in the second half of 2026, indicating persistent market and internal challenges.

Key Factors5 rows

Key Factor	Why It Matters	What To Watch	What It Signals	Where/How To Track	Free Alt Data	Paid Alt Data
Pega Cloud Annual Contract Value (ACV) Growth Rate	Pega Cloud is the fastest-growing and most important component of Pega's subscription model. Its growth rate is the best indicator of underlying execution and future revenue predictability.	Year-over-year growth rate of Pega Cloud ACV in constant currency. Management noted moderation to 27% in Q1 2026 and 22% in Q2 2026. Watch for re-acceleration above 22%.	Bullish if Pega Cloud ACV growth re-accelerates above 27% (Q1 2026 level) or maintains strong growth above 22% (Q2 2026 level). Bearish if growth continues to decelerate below 22%.	Pega's quarterly earnings reports and conference calls. The next update will be in the Q3 2026 earnings call (likely late October/early November 2026).	Financial news outlets covering Pega earnings, investor relations section of Pega's website.	Bloomberg Terminal: PEGA ACV data; S&P Capital IQ: Subscription revenue trends.
Total ACV Growth Rate & H2 2026 Net New ACV Add Achievement	Total ACV growth reflects overall business momentum. Management stated 2/3 of net new ACV for 2026 was modeled for H2, making H2 execution critical to meet annual targets.	Total ACV growth rate (reported and constant currency) in Q3 and Q4 2026. Specifically, monitor if the company can recover the first-half shortfall and achieve a significant portion of the projected 2/3 net new ACV add in H2.	Bullish if total ACV growth re-accelerates significantly above 7-8% (Q2 2026 level) and management indicates progress in making up the H1 shortfall. Bearish if total ACV growth remains flat or decelerates further, indicating continued challenges in H2 execution.	Pega's quarterly earnings reports and conference calls. The next update will be in the Q3 2026 earnings call (likely late October/early November 2026).	Company press releases, financial news services.	FactSet: Consensus ACV estimates; AlphaSense: Keyword searches for "ACV," "net new ACV," "pipeline conversion."
Client Adoption and Impact of Blueprint AI & Infinity Studio on Sales Cycles	These new AI-powered tools are Pega's core differentiator, designed to transform the sales process from conceptual to experiential and accelerate application design, build, and evolution, directly addressing market confusion and cost concerns.	Management commentary on the uptake of Blueprint and Infinity Studio, specific examples of how these tools are shortening sales cycles, and their contribution to new logo acquisition and existing client expansion.	Bullish if management highlights strong client engagement, positive feedback, and quantifiable evidence of Blueprint/Infinity Studio leading to faster deal closures or increased ACV from new/expanded applications. Bearish if there's limited uptake or no clear impact on sales cycle efficiency.	Pega's quarterly earnings calls, PegaWorld event summaries, and product announcements on pega.com. The next update will be in the Q3 2026 earnings call (likely late October/early November 2026).	Google Trends: "Pega Blueprint," "Pega Infinity Studio" search volume; Industry forums/reviews discussing new Pega features.	G2 Crowd/Capterra: User reviews and sentiment analysis for Pega's AI tools; Clickstream data (e.g., Similarweb): Traffic to Pega's product pages related to Blueprint/Infinity Studio.
Go-to-Market Execution Improvement and New Logo Acquisition	Management acknowledged underperformance in H1 2026 in this area and is focused on increasing prospecting, executive engagement, and new logo acquisition to drive H2 growth.	Commentary from management on the effectiveness of new go-to-market strategies, specifically mentioning increased new logo contribution, improved pipeline quality, conversion rates, and sales productivity.	Bullish if management reports tangible improvements in new logo wins and expansion activity, leading to better-than-expected ACV growth in H2. Bearish if commentary indicates continued struggles in go-to-market execution and pipeline conversion.	Pega's quarterly earnings calls and investor presentations. The next update will be in the Q3 2026 earnings call (likely late October/early November 2026).	Pega's press releases announcing new customer wins or significant expansions.	Thinknum: Sales & Marketing job postings for Pega (growth/decline); Gartner/Forrester: Reports on Pega's market share or customer adoption.
Free Cash Flow (FCF) Generation and Progress Towards 2028 Target	Strong FCF generation demonstrates financial discipline and provides strategic flexibility for capital allocation, including share repurchases, which is a stated priority.	Quarterly FCF figures. Management generated $288 million in H1 2026. Watch for continued strong FCF in H2 2026 and any updates on the $700 million+ FCF target for 2028.	Bullish if FCF continues to grow strongly in H2 2026, exceeding prior year's H2 FCF, and management reaffirms or provides a clear path to the 2028 target. Bearish if FCF significantly declines or the 2028 target is re-evaluated downwards due to sustained ACV weakness.	Pega's quarterly earnings reports and conference calls. The next update will be in the Q3 2026 earnings call (likely late October/early November 2026).	SEC filings (10-Q, 10-K), Pega investor relations website.	Refinitiv Eikon: FCF historical data and analyst estimates; Bloomberg Terminal: Capital allocation details.

Key Reported Metrics, Reratings Triggers & Results3 rows

A critical measure of value creation and business health, demonstrating financial discipline and strategic flexibility. It's central to the company's commitment

Upcoming print · 2026-10-20

Key reported metrics
Metric	Last period	Why it matters
Free Cash Flow Growth	1% (H1 2026 YoY)	A critical measure of value creation and business health, demonstrating financial discipline and strategic flexibility. It's central to the company's commitment to Rule of 40 performance and long-term shareholder value.
Pega Cloud ACV Growth	22%	As the fastest-growing and most important segment, its continued expansion reinforces the success of the subscription transition and is key to achieving a predictable, higher-quality revenue stream.
Total ACV Growth	7%	This is the best indicator of underlying execution and business momentum in a subscription model. Given H1's slower-than-anticipated start and market confusion, acceleration in H2 is crucial for annual targets.

Key Questions

Will Pegasystems' intensified go-to-market efforts and the impact of Blueprint and Infinity Studio lead to a material reacceleration in total ACV growth in Q3 2

Will Pegasystems' intensified go-to-market efforts and the impact of Blueprint and Infinity Studio lead to a material reacceleration in total ACV growth in Q3 2026, helping to recover the first-half shortfall?

Question 2: As enterprises move beyond AI experimentation, will Pegasystems' differentiated 'design-time AI, no per-token cost' strategy resonate strongly enough to unlock delayed deals and drive significant new client adoption in Q3 2026, amidst ongoing market confusion?
Question 3: Can Pegasystems continue to deliver strong free cash flow in Q3 2026 and demonstrate a clear path to its 2028 FCF target, effectively balancing investment prioritization with disciplined spending, even if ACV growth remains challenged?

Earnings Transcript SummaryTable

2026-07-21 · 2026Q2 Earnings Call

3 Things Management Is Most Focused On	Call Takeaway & Tone	Prior Quarter'S Y/Y Growth By Segment	3 Things Analysts Most Pressed On (And Mgmt Responses)	Revenue Segments
1. Differentiated AI Strategy and Product Innovation: Management is heavily focused on Pega's unique approach to AI, emphasizing 'AI at design time' with Blueprint and Infinity Studio, and 'selective AI at runtime' with no per-token costs, believing this provides predictable outcomes and costs. 2. Improving Go-to-Market Execution and Pipeline Conversion: Management acknowledged underperformance in go-to-market execution in the first half and is focused on increasing prospecting, expanding executive engagement, identifying new workflow opportunities, strengthening new logo acquisition, and using Blueprint to shorten sales cycles. 3. Disciplined Financial Management and Free Cash Flow Generation: Management is committed to operating as a 'Rule of 40 cash flow generating company' and achieving the $700 million+ free cash flow target by 2028, planning to leverage AI for internal efficiency, temper spending, and make appropriate adjustments to investment priorities.	The overall takeaway is that Pegasystems is navigating a period of significant market confusion and elongated sales cycles due to the evolving AI landscape, which impacted its Q2 2026 ACV growth. Despite these short-term challenges, management expressed strong confidence in its differentiated AI strategy (design-time AI, no per-token cost) and product innovations (Blueprint, Infinity Studio) as a long-term competitive advantage. The tone was cautious regarding near-term market conditions and execution, but optimistic and resolute about the company's strategic direction, financial discipline, and ability to generate strong free cash flow in the long term.	In Q1 2026, Pega Cloud ACV grew 29% year-over-year (as reported and in constant currency). Total ACV increased 12% year-over-year.	1. Demand Environment and Deal Elongation: Analysts repeatedly questioned the 'max confusion' in the market and whether deals were unlocking. Management acknowledged significant buyer uncertainty and deal elongation in Q2 due to market confusion around AI economics, stating that while deals are moving, the pace of unlocking is uncertain, but opportunities are not going away. 2. Confidence in Free Cash Flow Targets Amidst Slower ACV Growth: Analysts questioned the feasibility of free cash flow guidance (e.g., $575 million for 2026, $700 million+ by 2028) given slower ACV growth. Management affirmed commitment to strong cash generation and the Rule of 40, stating they would temper investments and re-evaluate priorities to meet targets, while acknowledging an ACV shortfall would pressure current year's cash flow. 3. Accountability for Performance and Guidance Philosophy: Analysts pressed on how much of the first-half challenges were within Pega's control and why guidance wasn't de-risked. Management admitted underperformance on go-to-market changes and that much is in their control. They explained their philosophy of not frequently updating guidance, providing color on the back-end loaded year and the difficulty of making up the first-half shortfall.	Pega Cloud ACV increased by 22% year-over-year (as reported and in constant currency). Total ACV grew 7% as reported and 8% in constant currency year-over-year. Maintenance ACV and Subscription License ACV decreased.

Transcript TidbitsTable

2026-07-21

About Expanding Eligible Market	About Competition	About The Broader Industry	Where Things Are Headed	Updates On Theme	Broader Themes Emerging	Bullish-Leaning Quotes (Short)	Bearish-Leaning Quotes (Short)	Hiring
AI dramatically expands what is possible for software. Pega's approach to AI agents with no per-token costs addresses client demand for predictable outcomes and costs, playing directly to Pega's strengths. Blueprint is transforming how Pega engages clients and prospects at the front end of the sales cycle, moving from a conceptual to an experiential and product-led process. The release of Pega Infinity 26 makes Blueprint AI available for existing clients to reimagine and improve their applications, and the entire Pega development environment is available via MCP, lowering barriers to entry. Every workflow in Pega, new and existing, is automatically available through MCP, allowing any agent built on any platform to invoke a Pega workflow. Pega is seeing strong engagement from new logos and existing clients, growing Blueprint adoption, and increasing interest in solutions that help organizations move from AI experimentation to AI-powered business outcomes.	AI providers initially offered products for free or low cost, but are now seeking returns on billions/trillions invested in data centers, leading to token-based pricing with cost uncertainty. Pega differentiates from the 'code it yourself' approach, arguing that AI generates more opaque and harder-to-change code. Pega also contrasts its approach with using AI agents to reason through every process at runtime, which can be hugely expensive, offering a calculator on pega.com to show the difference. Pega believes its architecture, which separates design-time AI inspiration from predictable runtime execution, is a key structural differentiator that competitors would find hard to emulate. The market is incredibly noisy with various players like Microsoft, Salesforce, Anthropic, OpenAI, Sierra, and Decagon shouting at customers, causing confusion. Pega states it is the best workflow company by far.	The software market is undergoing a structural shift driven by AI, still in early stages of fundamental transformation. Frontier model providers are now under pressure to generate meaningful revenue from their massive data center investments, leading to token-based pricing and cost uncertainty. This cost uncertainty is causing many organizations to freeze technology investments and take a more deliberate approach, lengthening decision cycles. The market experienced a 'token maxing mindset' followed by a whiplash to tightly monitoring and controlling token usage, creating significant buyer uncertainty and longer buying cycles. Several software companies have noted delays in purchasing patterns, with businesses not going away but clients being 'frozen in the confusion'. Clients are increasingly focused on measurable business outcomes, governance, and total cost of ownership for AI, moving beyond experimentation. The proliferation of open-source and open-weight models is seen as inevitable, with model makers becoming largely commoditized.	Pega's goal is to help clients avoid 'AI chaos' by delivering predictable outcomes at predictable costs. Pega expects Infinity Studio to completely change the build and delivery experience, much like Blueprint did for design. The company plans to leverage its AI technology to improve efficiency and create additional operating leverage, tempering spend to meet free cash flow needs. Pega Cloud ACV is expected to continue increasing as a percentage of total ACV, aiming for approximately 75% over time, which will create a more predictable, higher-quality revenue stream and improved cash flow visibility. Pega anticipates market disruption and buyer confusion to remain factors in the near term but is optimistic that long-term ACV growth will be stronger than Q2 results indicate. The company expects to generate $700 million plus of free cash flow in 2028, supported by cloud scale, mix shift, sales productivity, gross margin improvement, and disciplined investment prioritization. Pega's long-term conviction has strengthened, and it remains confident in its market opportunity and ability to deliver growing free cash flow while sustaining strong Rule of 40 performance.	Agentic	AI Monetization Evolution & Flexible Consumption Models, AI regulation (US, EU, state-level), AI workforce transformation.	AI dramatically expands what is possible. Our clients' demand for predictable outcomes and predictable costs plays directly and uniquely to Pega's strengths. Blueprint is transforming how we engage clients and prospects at the front end of the sales cycle. I'm optimistic though that our ACV growth over the long term will be stronger than our Q2 results would indicate. Our long-term conviction has only strengthened. Pega is uniquely positioned at the intersection of all of those trends.	token consumption is opaque until the bill arrives. This cost uncertainty is leading many, many organizations to sort of freeze. Decision cycles have lengthened as clients seek greater clarity around technology strategies. The first half of '26 had challenges for 3 primary reasons. Our progress in the first half was slower than we anticipated. It remains difficult for us to assess the magnitude or duration of potential IT spending reallocations. People are just confused. It's really almost a max confusion moment.	Pega plans to use its AI technology to improve efficiency and create additional operating leverage, and will temper spend accordingly vis-a-vis free cash flow needs. The company will look at opportunities to rightsize investment spend based on growth trajectory and optimize operations by leveraging technology and organizing more effectively. This includes driving efficiency in all parts of the business, from gross margin to functional area spend.