PEGASYSTEMS INC
For the period ended Jun 30, 2026. Filed Jul 21, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Jul 21, 2026
PEGA$32.40-3.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-04-21.
0001013857-26-000026
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-07-21.
0001013857-26-000050
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 91 previous paragraphs and 93 current paragraphs.
67 unchanged; 18 reworded; 8 added; 6 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 15 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
Unprecedented changes in the AI market caused clients to delay their purchasing decisions. As a result, our ACV growth rate significantly slowed during the six months ended June 30, 2026, as compared to the same period last year. These factors may continue to adversely affect the ACV growth rate for the rest of the year.
Current report
As a result of the factors discussed under ACV above, our cash flow generation may continue to be adversely affected for the rest of the year.
Current report
(2) The supplemental information below identifies certain items included in operating cash flow that may affect comparability between periods.
Current report
•Other: One-time cash flow items not part of our ongoing operations.
Current report
•The decreases in maintenance gross profit percent in the three and six months ended June 30, 2026 were primarily due to higher compensation and benefits from increased headcount.
Current report
•The increases in restructuring in the three and six months ended June 30, 2026 were primarily due to cash severance and related costs incurred in connection with workforce reductions intended to better align roles to an AI-first delivery model. For additional information, see "Note 10. Restructuring" in Part I, Item 1 of this Quarterly Report.
Current report
Provision for (benefit from) income taxes
Current report
There have been no material changes in our contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
Removed paragraphs (6)
Previous report
(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.
Previous report
Provision for income taxes
Previous report
As of March 31, 2026, our contractual obligations were:
Previous report
(1) Represents the fixed amount owed for purchase obligations including software licenses, hosting services, and sales and marketing programs.
Previous report
(2) Represents the maximum funding under existing venture investment agreements. Our venture investment agreements generally allow us to withhold unpaid funds at our discretion.
Previous report
(3) We cannot reasonably estimate the timing of this cash outflow due to uncertainties in the timing of the effective settlement of tax positions.
Reworded paragraphs (18)
Previous wording
•The increase in Pega Cloud revenue in the three months ended March 31, 2026 was primarily due to expanded adoption of Pega Cloud by our clients.
Current wording
•The increases in Pega Cloud revenue in the three and six months ended June 30, 2026 were primarily due to expanded adoption of Pega Cloud by our clients.
Previous wording
•The decrease in maintenance revenue in the three months ended March 31, 2026 was primarily due to our clients’ shift to Pega Cloud-based offerings, which do not result in maintenance revenue.
Current wording
•The decreases in maintenance revenue in the three and six months ended June 30, 2026 were primarily due to our clients’ shift to Pega Cloud-based offerings, which do not result in maintenance revenue.
Previous wording
•The decrease in subscription license revenue in the three months ended March 31, 2026 was primarily due to several large multi-year contracts recognized in revenue in the three months ended March 31, 2025.
Current wording
•The increase in subscription license revenue in the three months ended June 30, 2026 was primarily due to the timing of client contract renewals. The decrease in subscription license revenue in the six months ended June 30, 2026 was primarily due to several large multi-year contracts recognized in revenue in the six months ended June 30, 2025.
Previous wording
•The decrease in consulting revenue in the three months ended March 31, 2026 was primarily due to a decrease in consultant billable hours in our Americas region.
Current wording
•The decreases in consulting revenue in the three and six months ended June 30, 2026 were primarily due to a decrease in consultant billable hours in our Americas region.
Previous wording
•The decrease in Pega Cloud gross profit percent in the three months ended March 31, 2026 was primarily due to an increase in personnel-related costs associated with investments made to support our cloud operations.
Current wording
•The decreases in Pega Cloud gross profit percent in the three and six months ended June 30, 2026 were primarily due to increases in personnel-related costs associated with investments made to support the expansion of our cloud operations.
Previous wording
•The increase in consulting gross profit percent in the three months ended March 31, 2026 was primarily due to a decrease in compensation and benefits of $6.4 million, which was attributable to our restructuring initiatives in 2025. As our technology strategy continues to evolve, we may periodically evaluate our organizational structure to align resources with business priorities.
Current wording
•The increases in consulting gross profit percent in the three and six months ended June 30, 2026 were primarily due to decreases in compensation and benefits of $12.1 million and $18.5 million, respectively, which were attributable to our restructuring initiatives in 2025. As our technology strategy continues to evolve, we may periodically evaluate our organizational structure to align resources with business priorities.
Previous wording
•The increase in selling and marketing in the three months ended March 31, 2026 was primarily due to increase in compensation and benefits of $10.7 million attributable to increases in headcount and equity compensation.
Current wording
•The increases in selling and marketing in the three and six months ended June 30, 2026 were primarily due to increases in compensation and benefits of $12.6 million and $23.2 million, respectively, attributable to higher headcount as we continue to expand our prospective and current client engagement.
Previous wording
•The increase in research and development in the three months ended March 31, 2026 was primarily due to increase in compensation and benefits of $5.6 million attributable to increases in headcount and equity compensation.
Current wording
•The increase in research and development in the three months ended June 30, 2026 was primarily due to an increase in outside professional services of $2.1 million and an increase in cloud hosting expenses of $1.5 million. The increase in research and development in the six months ended June 30, 2026 was primarily due to an increase in compensation and benefits of $4.7 million attributable to increases in headcount and equity compensation and an increase in cloud hosting expenses of $2.8 million.
Previous wording
•The increase in general and administrative in the three months ended March 31, 2026 was primarily due to an increase of $13.4 million in legal fees and related expenses arising from legal proceedings outside the ordinary course of business. We expect to continue to incur additional costs for these proceedings. For additional information, see "Note 17. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report.
Current wording
•The increases in general and administrative in the three and six months ended June 30, 2026 were primarily due to increases of $11.5 million and $25 million, respectively, in legal fees and related expenses arising from legal proceedings outside the ordinary course of business. We expect to continue to incur additional costs for these proceedings. For additional information, see "Note 16. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report.
Previous wording
•The changes in foreign currency transaction gain (loss) in the three months ended March 31, 2026 were primarily due to fluctuations in foreign currency exchange rates associated with foreign currency-denominated receivables and intercompany balances held by our subsidiary in the United Kingdom.
Current wording
•The changes in foreign currency transaction (loss) gain in the three and six months ended June 30, 2026 were primarily due to fluctuations in foreign currency exchange rates associated with foreign currency-denominated receivables and intercompany balances held by our subsidiary in the United Kingdom.
Previous wording
•The decrease in interest income in the three months ended March 31, 2026 were primarily due to lower investment balances as a result of the repayment of the Notes at maturity on March 3, 2025.
Current wording
•The decreases in interest income in the three and six months ended June 30, 2026 were primarily due to lower investment balances.
Previous wording
•The decrease in interest expense in the three months ended March 31, 2026 were primarily due to the repayment of the Notes at maturity on March 3, 2025.
Current wording
•The decrease in interest expense in the six months ended June 30, 2026 was primarily due to the repayment of the Notes at maturity on March 3, 2025.
Previous wording
•The decrease in other (loss) income, net in the three months ended March 31, 2026 was primarily due to valuation losses from our venture investments portfolio. For additional information, see "Note 12. Fair Value Measurements" in Part I, Item 1 of this Quarterly Report.
Current wording
•The decrease in other income (loss), net in the three and six months ended June 30, 2026 was primarily due to the gain from the partial sale of a venture investment in 2025. For additional information, see "Note 11. Fair Value Measurements" in Part I, Item 1 of this Quarterly Report.
Previous wording
Our effective income tax rate decreased in the three months ended March 31, 2026 as compared to the prior period, primarily due to excess tax benefits from stock-based compensation recognized in the current period and the absence of a valuation allowance on substantially all of our U.S. and U.K. deferred tax assets.
Current wording
Our effective income tax rate decreased in the six months ended June 30, 2026 as compared to the prior period, primarily due to excess tax benefits from stock-based compensation recognized in the current period and the absence of a valuation allowance on substantially all of our U.S. and U.K. deferred tax assets.
Previous wording
The change in cash provided by operating activities in the three months ended March 31, 2026 was primarily due to increase in client collections.
Current wording
The change in cash provided by operating activities in the six months ended June 30, 2026 was primarily due to increase in client collections.
Previous wording
The change in cash provided by investing activities in the three months ended March 31, 2026 was primarily due to scheduled maturities of our investments in financial instruments in anticipation of the repayment of the maturing Notes in the three months ended March 31, 2025.
Current wording
The change in cash provided by investing activities in the six months ended June 30, 2026 was primarily due to scheduled maturities of our investments in financial instruments in anticipation of the repayment of the maturing Notes in 2025.
Previous wording
As of March 31, 2026 and December 31, 2025, we had letters of credit of $26.7 million under the Credit Facility; however we had no cash borrowings. For additional information, see "Note 10. Debt" in Part I, Item 1 of this Quarterly Report.
Current wording
As of June 30, 2026 and December 31, 2025, we had letters of credit of $1.7 million and $26.7 million, respectively, under the Credit Facility; however we had no cash borrowings. For additional information, see "Note 9. Debt" in Part I, Item 1 of this Quarterly Report.
Previous wording
During the three months ended March 31, 2026 and 2025, instead of receiving cash from the equity holders, we withheld shares with a value of $1.9 million and $1.5 million, respectively, for the exercise price of options. These amounts are not included in the table above.
Current wording
During the six months ended June 30, 2026 and 2025, instead of receiving cash from the equity holders, we withheld shares with a value of $2.3 million and $7.3 million, respectively, for the exercise price of options. These amounts are not included in the table above.