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WALTHAM, Mass. - Pegasystems Inc. (NASDAQ:PEGA), a software company with a market capitalization of $8.79 billion, reported a 16% year-over-year increase in Annual Contract Value (ACV) for the second quarter of 2025, reaching $1.51 billion, according to a press release issued Tuesday. According to InvestingPro analysis, the company appears to be trading above its Fair Value, despite maintaining impressive gross profit margins of 75.74%.
The enterprise software company saw its Pega Cloud ACV grow by 28% compared to the same period last year, while Pega Cloud backlog increased 30%. In constant currency terms, these metrics rose 14%, 25%, and 26% respectively. The company’s strong performance is reflected in its overall revenue growth of 14.29% over the last twelve months, with InvestingPro data showing three analysts recently revising their earnings expectations upward for the upcoming period.
The company reported second-quarter revenue of $384.5 million, up 9% from $351.2 million in the same period last year. GAAP net income surged to $30.1 million, or $0.17 per diluted share, compared to $6.6 million, or $0.04 per share, in the second quarter of 2024.
Cash flow from operations and free cash flow both increased more than 30% year over year, with free cash flow reaching $286.5 million for the first half of 2025, up from $218.4 million in the same period last year.
"Our first half of 2025 results show what happens when strategy, innovation, and execution come together," said Ken Stillwell, Pega’s COO and CFO, in the press release. "Our disciplined focus on Rule of 40 principles is fueling both accelerated growth and margin expansion." This execution excellence is reflected in the company’s Financial Health Score, which InvestingPro rates as ’GREAT’, with particularly strong scores in growth and profitability metrics. For deeper insights into PEGA’s financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
Subscription services revenue, which includes Pega Cloud and maintenance, grew 15% to $246 million in the second quarter. Subscription revenue, including both services and license, increased 9% to $326 million, representing 85% of total revenue.
The company’s non-GAAP net income for the quarter was $50.2 million, or $0.28 per diluted share, compared to $45.8 million, or $0.26 per share, in the same period last year.
Pegasystems will host a conference call to discuss these results on Wednesday, July 23, at 8:00 a.m. EDT.
In other recent news, Pegasystems Inc. has announced a five-year strategic collaboration with Amazon Web Services (AWS) to integrate AWS’s generative AI services with Pega’s enterprise software solutions. This collaboration aims to enhance legacy system modernization and AI-powered workflow automation. Additionally, Pegasystems has achieved FedRAMP High Authority to Operate status for its generative AI solutions, allowing government agencies to deploy these tools while adhering to federal security standards.
Several analysts have adjusted their price targets for Pegasystems following a recent two-for-one stock split. Wedbush has reduced its price target to $68 while maintaining an Outperform rating, citing confidence in Pegasystems’ growth and cash flow generation. Loop Capital has raised its price target to $60, reflecting refined estimates post-split, and Citi has adjusted its target to $66, maintaining a Buy rating. These developments highlight the analysts’ varied perspectives on Pegasystems’ future performance.
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