Strong Cloud Subscription Aids PEGA's Prospects: What's More to Come?
In second-quarter 2025, PEGA's cloud revenues surged 24% year over year to $166.7 million, driven by increasing adoption as clients continued migrating from legacy systems to its cloud-native solutions. The company's Cloud Annual Contract Value (ACV) increased 28% year over year to $761 million. This robust cloud momentum underscores the increasing impact of subscription revenues on PEGA's overall performance.
The company's Gen-AI-powered Blueprint plays a pivotal role in client base expansion. Its latest integration of Amazon's AWS Transform product is expected to allow enterprises to modernize legacy systems without disruption, directly feeding demand for Pega Cloud.
The availability of the PEGA software on AWS Marketplace will improve accessibility and streamline client onboarding. Each incremental dollar of ACV is expected to boost subscription billings, creating a scalable and predictable revenue stream for the company. The Zacks Consensus Estimate for PEGA's third-quarter 2025 cloud revenues is pegged at $180 million, indicating a 25% year-over-year growth.
PEGA's Public Sector positioning has strengthened with its FedRAMP High certification, a United States government security standard for cloud services, aligning with the government's push toward cloud adoption and AI-driven digital transformation. With a 28% growth in current backlog expected to convert to revenue, Pegasystems' cloud subscriptions remain a key driver of top-line growth.
PEGA Faces Intense Competition in Cloud Subscriptions
Pegasystems faces stiff competition from players like Salesforce CRM and ServiceNow NOW
Salesforce offers its cloud-native CRM platform with an expanded suite of generative-AI tools through its AI Cloud offering. The company recently introduced Marketing Cloud Next, a major evolution of its marketing solution that uses Autonomous AI agents to enable personalized customer engagements at scale. Salesforce's industry-focused solutions like Life Sciences Cloud and Agentforce strengthen its position in delivering AI-powered, data-driven engagement through the cloud.
ServiceNow, through its cloud-based platform, empowers enterprises to digitize workflows, serving more than 85% of Fortune 500 companies. NOW recently announced a partnership with the Ferrari Hypercar team as its official platform provider, deploying its AI-powered platform to streamline real-time race operations and IT workflows across its global divisions. With third-quarter 2025 subscription revenues projected between $3.260 billion and $3.265 billion, ServiceNow maintains a strong competitive edge in delivering enterprise workflow automation.
PEGA's Share Price Performance, Valuation, and Estimates
Pegasystems shares have appreciated 29.5% in the year-to-date period, outperforming the Zacks Computer and Technology sector's return of 11.2%.
PEGA's YTD Price Performance
PEGA stock is currently trading at a discount, with a forward 12-month Price/Sales of 5.98X compared to the industry's 8.99X. PEGA has a Value Score of F.
PEGA Valuation
The Zacks Consensus Estimate for PEGA's 2025 earnings is pegged at $1.98 per share, up 5.3% over the past 30 days, suggesting 31.13% year-over-year growth.
PEGA currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
#1 Semiconductor Stock to Buy (Not NVDA)
The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.
One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.
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This article originally published on Zacks Investment Research (zacks.com).
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