PEGASYSTEMS INC
For the period ended Sep 30, 2026. Filed Oct 20, 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.
Sep 30, 2026 · Filed Oct 20, 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 2026-06-30; filed 2026-07-21.
0001013857-26-000050
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-10-20.
0001013857-26-000058
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 93 previous paragraphs and 95 current paragraphs.
72 unchanged; 21 reworded; 2 added; 0 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 14 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 (2)
Current report
•Litigation settlement: Cost to settle litigation arising from proceedings outside the ordinary course of business. See "Note 16. Commitments and Contingencies" in Item 1 of this Quarterly Report for further information.
Current report
•The increases in litigation settlement in the three and nine months ended September 30, 2026 were primarily due to the estimated cost to settle ongoing litigation arising from proceedings outside the ordinary course of business. For additional information, see "Note 16. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report.
Reworded paragraphs (21)
Previous wording
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 wording
Purchasing behaviors continue to evolve as clients subject large technology investments to greater scrutiny as AI disrupts the industry. As a result, our ACV growth rate significantly slowed during the nine months ended September 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.
Previous 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.
Current wording
•The increases in Pega Cloud revenue in the three and nine months ended September 30, 2026 were primarily due to expanded adoption of Pega Cloud by our clients.
Previous 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.
Current wording
•The decreases in maintenance revenue in the three and nine months ended September 30, 2026 were primarily due to our clients’ shift to Pega Cloud-based offerings, which do not result in maintenance revenue.
Previous 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.
Current wording
•The decrease in subscription license revenue in the three months ended September 30, 2026 was primarily due to the timing of client contract renewals. The decrease in subscription license revenue in the nine months ended September 30, 2026 was primarily due to several large multi-year contracts recognized in revenue in the nine months ended September 30, 2025.
Previous 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.
Current wording
•The decreases in consulting revenue in the three and nine months ended September 30, 2026 were primarily due to a decrease in consultant billable hours in our Americas region.
Previous 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.
Current wording
•The decreases in Pega Cloud gross profit percent in the three and nine months ended September 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 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 wording
•The decreases in maintenance gross profit percent in the three and nine months ended September 30, 2026 were primarily due to higher compensation and benefits from increased headcount.
Previous 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.
Current wording
•The increases in consulting gross profit percent in the three and nine months ended September 30, 2026 were primarily due to decreases in compensation and benefits of $11.1 million and $29.6 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 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.
Current wording
•The increase in selling and marketing in the three months ended September 30, 2026 was primarily due to marketing program spend of $2.9 million to support future growth. The increase in selling and marketing in the nine months ended September 30, 2026 was primarily due to an increase in compensation and benefits of $20.4 million 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 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.
Current wording
•The decrease in research and development in the three months ended September 30, 2026 was primarily due to a decrease in compensation and benefits of $7.1 million attributable to incentive compensation. The increase in research and development in the nine months ended September 30, 2026 was primarily due to an increase in cloud hosting expenses of $3.7 million and outside professional services of $2.1 million.
Previous 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.
Current wording
•The decrease in general and administrative in the three months ended September 30, 2026 was primarily due to a decrease in compensation and benefits of $7.9 million attributable to equity compensation. The increase in general and administrative in the nine months ended September 30, 2026 was primarily due to $28 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 16. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report.
Previous wording
•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 wording
•The increases in restructuring in the three and nine months ended September 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.
Previous 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.
Current wording
•The changes in foreign currency transaction gain (loss) in the three and nine months ended September 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 decreases in interest income in the three and six months ended June 30, 2026 were primarily due to lower investment balances.
Current wording
•The decreases in interest income in the three and nine months ended September 30, 2026 were primarily due to lower investment balances.
Previous 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.
Current wording
•The decrease in interest expense in the nine months ended September 30, 2026 was primarily due to the repayment of the Notes at maturity on March 3, 2025.
Previous 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.
Current wording
•The decrease in other income (loss), net in the nine months ended September 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 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.
Current wording
Our effective income tax rate increased in the nine months ended September 30, 2026 as compared to the prior period, primarily due to a decrease in excess tax benefits from stock-based compensation recognized in the current period and the absence of a benefit related to the valuation allowance associated with substantially all of our U.S. and U.K. deferred tax assets in the prior period.
Previous 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.
Current wording
The change in cash provided by operating activities in the nine months ended September 30, 2026 was primarily due to the timing of cash disbursements related to legal fees and related expenses arising from proceedings that originated outside of the ordinary course of business, restructuring activities, and a litigation settlement. For additional information, see “Note 16. Commitments and Contingencies” and “Note 10. Restructuring” in Part I, Item 1 of this Quarterly Report.
Previous 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.
Current wording
The change in cash provided by investing activities in the nine months ended September 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
In November 2019, and as since amended, we entered into a five-year $100 million senior secured revolving credit agreement (the “Credit Facility”) with PNC Bank, National Association. Effective as of February 4, 2025, the Credit Facility was amended to extend the expiration date to February 4, 2027.
Current wording
In November 2019, and as since amended, we entered into a $100 million senior secured revolving credit agreement (the “Credit Facility”) with PNC Bank, National Association. On October 16, 2026, the Credit Facility was amended to, among other changes, increase the borrowing capacity to $200 million and extend the expiration date to October 16, 2031.
Previous 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.
Current wording
During the nine months ended September 30, 2026 and 2025, instead of receiving cash from the equity holders, we withheld shares with a value of $2.8 million and $16.2 million, respectively, for the exercise price of options. These amounts are not included in the table above.