Oct 21, 2026 earnings call — AI strategy and go-to-market overhaul
Management announced go-to-market changes to speed execution and reported ACV of $1.66 billion, with $32 million net new ACV added in Q3.
Revenue $0.4B (est $0.4B) · EPS $0.35 (est $0.45)
Key quotes
"Our workflows wrap AI in a control and governance structure that feeds exactly the knowledge and context it needs at the right time."
"Taken together, these 4 actions are designed to improve execution in the near term while positioning Pega to deliver long-term durable ACV and cash flow growth to our shareholders."
"Annual contract value, or ACV, grew 7% year-over-year in constant currency to $1.66 billion."
Analyst Q&A 9
Timing of org and sales changes
Q (Raimo Lenschow · Barclays): Is the organization and go-to-market change happening now or in the new fiscal year? Also asked about Q4 renewal pool and how next year may progress.
A: Management said many changes are already made and more are coming in the near weeks. They want to start 2027 with as many improvements as possible, and they expect growth from Q3 and Q4 into 2027.
"We want to prepare ourselves so that we start 2027 with as many of the improvements as we can get done." — Ken Stillwell
Timing of changes and ACV outlook
Q (Steve Enders · Citi): How long will the changes take to drive better execution and ACV growth? Also asked to clarify comment about ACV not meeting the second-half plan. Finally, asked about decisioning models like Jev and competitive impact.
A: They are moving fast and many changes are already done; they expect to see improvements in early to mid 2027. On ACV, they expect growth from here but do not see a path where ACV growth exceeds 10% for 2026. On decisioning models, they watch and may use new models but say these models do not fix lack of transparency and governance when run at runtime.
"I do not see a path where our ACV growth would be above 10% for the 2026 year." — Ken Stillwell
Pipeline, new logos, public sector timing
Q (Devin Au · KeyBanc): How mature is the pipeline entering Q4 and how much growth is from new logos? Also asked about public sector performance and any election-related delays.
A: They said new logos are driving a lot of pipeline activity and growth, but close rates are harder to predict because they lack history. Opportunities entering Q4 are more mature than earlier in the year. For public sector, federal buying is less predictable due to procurement changes, but U.S. government business is steady across quarters and Q4 is not unusually large.
"I would say we're definitely getting growth from new logos." — Ken Stillwell
Salesforce-Braze deal and M&A interest
Q (Patrick Walravens · Citizens): Thoughts on Salesforce buying Braze and what it means for the industry and Pega? Also asked if Pega would be open to being acquired and what it might buy.
A: They said Pega does not compete with Braze and the deal is not meaningful to them. They see more M&A activity and believe software and data are valuable, but they declined to discuss being acquired and said they have no active shopping list.
"I can't actually think of a time when we've ever competed against Braze." — Alan Trefler (CEO)
Infinity Studio feedback and pricing trends
Q (Blair Abernethy · Rosenblatt): Any early feedback on Infinity Studio after adding Blueprint? And are you seeing changes in pricing, renewals, or term lengths given the pipeline execution shifts?
A: Customers have responded with enthusiasm to Infinity Studio, though the product is still young, and many more clients moved to Infinity '26 versus Infinity '25 after release. On pricing and terms, term lengths have not notably changed, but IT budgets are under pressure from AI spend leading to more scrutiny on price escalations and CPI.
"We're seeing customers respond with enthusiasm to it." — Alan Trefler (CEO)
Free cash flow outlook and deployment blockers
Q (Patrick McIlwee · William Blair): You kept the fiscal 2028 free cash flow target despite weaker ACV and cash. What assumptions underlie that target now? Also asked what prevents customers from moving projects into production.
A: Ken said much of this year's weaker cash flow is from non-recurring legal settlements and upcoming restructuring charges, and they see adjusted free cash flow above $600 million next year and on a $700 million path in 2028. For deployment, they said AI deployments need a different mindset and Pega must put engineering, professional services, and solution consultants with clients to drive value; Alan added that customers were historically slow to adopt new releases and Pega must push updates faster via Pega Cloud.
"I would see a path of where that adjusted free cash flow would be above $600 million next year and then on to a $700 million path in 2028." — Ken Stillwell
Impact of delayed deals on ACV
Q (Lucky Schreiner · D.A. Davidson): You noted stronger net new ACV and earlier said the year would be back-half weighted. Did some push deals still close or did others slip into Q4, and how did that affect net new ACV this quarter?
A: They said some deals closed later than expected and some slipped into Q4. They are entering Q4 with the strongest pipeline they have seen in a Q4, but the market is less predictable and execution will be key.
"We are entering it with the strongest pipeline that we have ever had, I think maybe in a Q4 ever." — Ken Stillwell
Public sector AI spending vs commercial
Q (Mark Schappel · Loop): Are you seeing the same AI-driven purchasing behavior and budget scrutiny in public sector as in commercial customers?
A: They said commercial clients, especially financial services, have spent a lot on AI and tested many things. The public sector has not spent as much; AI is important there but budgets have not been as distracted by AI spending.
"I would say in the public sector, not as much." — Ken Stillwell
Cloud ACV backlog to revenue timing
Q (Alexei Gogolev · JPMorgan): With Cloud ACV at 59% and a strong cloud backlog, how should we think about the lag from Cloud ACV and backlog to cloud revenue, given deployment challenges?
A: Ken clarified that adoption help concerns are about pipeline opportunities, not items already in Pega Cloud backlog. He said items in Pega Cloud backlog typically roll into revenue over the next 2 to 3 quarters, and RPO tends to convert a couple of quarters after entering.
"The things that are in Pega Cloud backlog typically come into revenue over the next 2 to 3 quarters, typically." — Ken Stillwell