Pegasystems (PEGA) Down 8.3% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Pegasystems (PEGA). Shares have lost about 8.3% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Pegasystems due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent drivers for Pegasystems Inc. before we dive into how investors and analysts have reacted as of late.Pegasystems Q1 Earnings Miss Estimates, Revenues Decrease Y/YPegasystems reported first-quarter fiscal 2026 non-GAAP earnings of 46 cents per share, missing the Zacks Consensus Estimate by 39.5%. Earnings also declined 39.5% year over year. Revenues were $430 million, down 9.6% year over year, and missed the consensus mark by 11.7%. Even with the top-line shortfall, Pega Cloud momentum remained a bright spot, with Pega Cloud annual contract value rising sharply year over year.PEGA Sees Cloud-Led Mix Shift in Q1 ResultsThe reported quarter’s revenue mix reflected a continued tilt toward subscription services. Pega Cloud revenue rose 36% year over year to $205 million, while total subscription services revenue increased 23% year over year to $280.3 million, supported by higher Pega Cloud contributions. The strength was offset by ongoing pressure in subscription license revenue, which fell 49% year over year to $94.9 million. Maintenance revenue was essentially flat, edging down 1% year over year to $75.3 million. Consulting revenue also decreased 9% year over year to $54.8 million, consistent with the broader revenue contraction.Pegasystems Expands ACV and Backlog on Cloud DemandTotal annual contract value (ACV) increased 12% year over year to $1.622 billion, or 11% in constant currency. The mix shift within ACV was notable, as Pega Cloud ACV climbed 29% year over year to $906.7 million, while maintenance ACV declined 7% year over year to $276.8 million.Backlog also grew year over year, supporting longer-term revenue visibility. The company reported a total backlog of $2.011 billion as of March 31, 2026, up from $1.728 billion a year earlier. Pega Cloud backlog increased 21% year over year and represented 75% of total backlog, underscoring the role of cloud-driven demand in shaping the forward book.PEGA’s Profitability Trends Reflect Higher Expense BaseIn the first quarter of 2026, the gross margin contracted 330 basis points (bps) year over year to 75.2%.Operating expenses rose to $286.1 million, up 16.2% year over year, with higher selling and marketing, research and development, and general and administrative costs. The result was a sizable decline in operating leverage for the quarter, though the business continued to emphasize AI-led workflow automation and cloud delivery as central to its strategy.Operating income was $37.1 million, down sharply from $127 million in the year-ago quarter, reflecting both lower revenue and a higher expense base.PEGA’s Balance Sheet & Cash FlowAs of March 31, 2026, cash and cash equivalents and marketable securities totaled $474 million, up from $425.8 million as of Dec. 31, 2025.Cash provided by operating activities increased 4% year over year to $212.3 million. Free cash flow, defined as operating cash flow less investment in property and equipment, rose 2% year over year to $206.5 million.During the quarter, Pegasystems repurchased roughly 3.5 million shares for $167.3 million at an average price of $47.47 per share, reflecting continued capital return alongside investment in the business.How Have Estimates Been Moving Since Then?Since the earnings release, investors have witnessed a upward trend in estimates review.The consensus estimate has shifted -14.69% due to these changes.VGM ScoresAt this time, Pegasystems has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for value investors.Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Pegasystems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.Free: See Our Top Stock And 4 Runners UpThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks