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Investing.com -- Pegasystems Inc . (NASDAQ:PEGA) reported better-than-expected second quarter results on Thursday, but shares tumbled 17.5% as investors focused on a concerning decline in subscription license revenue.
The enterprise software company posted adjusted earnings of $0.28 per share for the second quarter, exceeding analyst estimates of $0.24. Revenue came in at $384.5 million, surpassing the consensus forecast of $362.5 million and representing a 9% increase from the same period last year.
Despite the overall revenue growth, subscription license revenue fell 6% to $80 million compared to the same quarter last year, raising concerns about a potential slowdown in new business. The stock’s sharp decline reflects investor disappointment with this key metric, which is considered an important indicator of future growth.
"Our unique approach to AI was a key driver of our strong first half results," said Alan Trefler, Pega founder and CEO. "Pega harnesses AI’s creative potential where it can best drive transformation—during workflow design with Pega Blueprint."
The company’s Pega Cloud revenue grew 24% YoY to $166.7 million, now representing 43% of total revenue. Maintenance revenue declined slightly by 1% to $79.3 million. Total (EPA:TTEF) subscription revenue, which combines cloud, maintenance and subscription license, increased 9% to $326 million.
Consulting services revenue rose 11% to $57.8 million compared to the second quarter of 2024.
The company’s Annual Contract Value (ACV) grew 16% year-over-year to $1.51 billion, or 14% on a constant currency basis, showing continued expansion of the company’s recurring revenue base despite the subscription license weakness.
For the first half of 2025, Pegasystems reported a significant improvement in profitability with non-GAAP net income of $190.7 million, more than double the $88 million reported in the first half of 2024.
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