Earnings release
Page 1
EXHIBIT 99.1 Pega Drives Cash Flow and Releases AI Innovation in Q2 2026 • Pega Cloud Annual Contract Value (ACV) increases 22% year over year • ACV grows 7% year over year (8% in constant currency) • Cash flow from operations and free cash flow both exceed $285M in first half of 2026 • Clients react with enthusiasm to Pega’s ‘no per-token cost’ WALTHAM, Mass. — July 21, 2026 — Pegasystems Inc. (NASDAQ: PEGA), the Enterprise Transformation Company™, released its financial results for the second quarter of 2026. "Pega Infinity™ 26 uniquely deploys the power of AI with predictable outcomes and predicable costs by applying agents at design time to optimize run-time token use,” said Alan Trefler, founder and CEO, Pega. "Letting language models do everything is risky and expensive, and using AI to write mountains of code creates significant barriers to the ongoing change that enterprise clients require. Pega structures business applications in a way that makes sense to business and IT to Build for Change®.” "Pega generated record first-half cash flow and returned substantial capital to shareholders,” said Ken Stillwell, COO and CFO, Pega. “As the market shifts from AI experimentation to tokenomics and reliable business outcomes, that evolution plays directly to Pega’s strengths, and we remain confident in our strategy to capitalize on the opportunity ahead.” 1
Page 2
EXHIBIT 99.1 (continued) Financial and performance metrics Unprecedented changes in the AI market caused clients to delay their purchasing decisions. As a result, our ACV growth rate significantly slowed during the six months ended June 30, 2026, as compared to the same period last year. These factors may continue to adversely affect the ACV growth rate for the rest of the year. Reconciliation of ACV and Constant Currency ACV (in millions, except percentages) June 30, 2025 June 30, 2026 1-Year Change ACV $ 1,514 $ 1,620 7 % Impact of changes in foreign exchange rates — 10 Constant currency ACV $ 1,514 $ 1,630 8 % Note: Constant currency ACV is calculated by applying the June 30, 2025 foreign exchange rates to current period shown. Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures. (1) (1) 2
Page 3
EXHIBIT 99.1 (continued) Cash Flow Growth As a result of the factors discussed under ACV above, our cash flow generation may continue to be adversely affected for the rest of the year. (Dollars in thousands,except per share amounts) Three Months EndedJune 30, Six Months EndedJune 30, 2026 2025 Change 2026 2025 Change Total revenue $ 420,716 $ 384,512 9 % $ 850,689 $ 860,145 (1)% Net income - GAAP $ 13,334 $ 30,077 (56)% $ 46,098 $ 115,499 (60)% Net income - non-GAAP $ 59,533 $ 50,151 19 % $ 142,601 $ 190,693 (25)% Diluted earnings per share - GAAP $ 0.08 $ 0.17 (53)% $ 0.26 $ 0.63 (59)% Diluted earnings per share - non-GAAP $ 0.35 $ 0.28 25 % $ 0.81 $ 1.04 (22)%
Page 4
(Dollars inthousands) Three Months EndedJune 30, Change Six Months EndedJune 30, Change2026 2025 2026 2025 Pega Cloud $213,934 51 % $166,743 43 % $ 47,191 28 % $ 418,965 49 % $ 317,866 37 % $101,099 32 % Maintenance 74,528 18 % 79,271 21 % (4,743) (6)% 149,845 18 % 155,639 18 % (5,794) (4)% Subscriptionservices 288,462 69 % 246,014 64 % 42,448 17 % 568,810 67 % 473,505 55 % 95,305 20 % Subscriptionlicense 82,028 19 % 80,674 21 % 1,354 2 % 176,880 21 % 268,395 31 % (91,515) (34)% Subscription 370,490 88 % 326,688 85 % 43,802 13 % 745,690 88 % 741,900 86 % 3,790 1 % Consulting 50,226 12 % 57,824 15 % (7,598) (13)% 104,999 12 % 118,245 14 % (13,246) (11)% Total revenue $420,716 100 % $384,512 100 % $ 36,204 9 % $ 850,689 100 % $ 860,145 100 % $ (9,456) (1)% Quarterly conference call A conference call and audio-only webcast will be conducted at 8:00 a.m. EDT on Wednesday, July 22, 2026. Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1 (833) 461-5787 (domestic) or 1 (626) 884-3620 (international) and using Conference ID 421269211, or via https://events.q4inc.com/attendee/421269211 by logging onto www.pega.com at least five minutes prior to the event's broadcast and clicking on the webcast icon in the Investors section. 3
Page 5
Discussion of non-GAAP financial measures Our non-GAAP financial measures should only be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We believe that these measures help investors understand our core operating results and prospects, which is consistent with how management measures and forecasts our performance without the effect of often one-time charges and other items outside our normal operations. Management uses these measures to assess the performance of the company's operations and establish operational goals and incentives. They are not a substitute for financial measures prepared under U.S. GAAP. Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures. Forward-looking statements Certain statements in this press release may be "forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, including statements about the growth and development of our business and market. Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, positions, forecasts, guidance, likely, and usually or variations of such words and other similar expressions identify forward-looking statements. These statements represent our views only as of the date the statement was made and are based on current expectations and assumptions. Forward-looking statements deal with future events and are subject to risks and uncertainties that are difficult to predict, including, but not limited to: • our future financial performance and business plans; • the adequacy of our liquidity and capital resources; • the successful execution of investments in artificial intelligence; • the timing of revenue recognition; • variation in demand for our products and services; • reliance on key personnel; • potential legal and financial liabilities, as well as damage to our reputation, due to cyber-attacks; • security breaches and security flaws; • our ability to protect our intellectual property rights, costs associated with defending such rights, intellectual property rights claims, and other related claims by third parties against us, including related costs, damages, and other relief that may be granted against us; • our ongoing litigation with Appian Corp. and associated legal proceedings; • our client retention rate; and • management of our growth. These risks and others that may cause actual results to differ materially from those expressed in such forward- looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2025, and other filings we make with the SEC. Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the results included in such statements will be achieved. Although subsequent events may cause our view to change, except as required by applicable law, we do not undertake and expressly disclaim any obligation to publicly update or revise these forward-looking statements, whether as the result of new information, future events, or otherwise. Any forward-looking statements in this press release represent our views as of July 21, 2026. 4
Page 6
About Pegasystems Pega delivers the platform to reimagine, run, and evolve the processes and decisions an enterprise can't afford to get wrong. We combine AI with proven architecture to keep mission-critical operations governed, scalable, and continuously adaptable. Since 1983, the world's largest organizations have trusted Pega to turn transformation ambition into durable results. Learn more at www.pega.com. Press contact: Ilena Ryan Director of PR ilena.ryan@pega.com 617-866-6722 Investor contact: Peter Welburn VP, Corporate Development & Investor Relations PegaInvestorRelations@pega.com 617-498-8968 All trademarks are the property of their respective owners. 5
Page 7
PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Three Months EndedJune 30, Six Months EndedJune 30, 2026 2025 2026 2025 Revenue Subscription services $ 288,462 $ 246,014 $ 568,810 $ 473,505 Subscription license 82,028 80,674 176,880 268,395 Consulting 50,226 57,824 104,999 118,245 Total revenue 420,716 384,512 850,689 860,145 Cost of revenue Subscription services 53,941 41,510 103,390 79,638 Subscription license 267 364 738 752 Consulting 53,821 67,700 110,655 131,634 Total cost of revenue 108,029 109,574 214,783 212,024 Gross profit 312,687 274,938 635,906 648,121 Operating expenses Selling and marketing 165,408 147,131 321,011 285,200 Research and development 84,168 78,784 166,215 153,070 General and administrative 43,740 31,788 92,313 65,616 Restructuring 2,735 (44) 2,582 (33) Total operating expenses 296,051 257,659 582,121 503,853 Income from operations 16,636 17,279 53,785 144,268 Foreign currency transaction (loss) gain (1,364) (14,008) 486 (19,333) Interest income 2,500 3,248 5,454 8,583 Interest expense (45) (1) (89) (1,028) (Loss) on capped call transactions — — — (223) Other income (loss), net 786 18,729 (1,418) 19,290 Income before provision for (benefit from) income taxes 18,513 25,247 58,218 151,557 Provision for (benefit from) income taxes 5,179 (4,830) 12,120 36,058 Net income $ 13,334 $ 30,077 $ 46,098 $ 115,499 Earnings per share Basic $ 0.08 $ 0.18 $ 0.28 $ 0.67 Diluted $ 0.08 $ 0.17 $ 0.26 $ 0.63 Weighted-average number of common shares outstanding Basic 165,613 170,776 167,206 171,287 Diluted 171,765 182,160 175,294 185,477 6
Page 8
PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) June 30, 2026 December 31, 2025 Assets Current assets: Cash and cash equivalents $ 185,110 $ 212,447 Marketable securities 176,797 213,352 Total cash, cash equivalents, and marketable securities 361,907 425,799 Accounts receivable, net 143,213 264,713 Unbilled receivables, net 154,029 166,478 Other current assets 102,559 121,305 Total current assets 761,708 978,295 Long-term unbilled receivables, net 77,947 102,544 Goodwill 81,265 81,506 Long-term deferred income taxes 176,903 175,472 Other long-term assets 286,220 294,027 Total assets $ 1,384,043 $ 1,631,844 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 52,964 $ 12,924 Accrued expenses 92,295 44,847 Accrued compensation and related expenses 87,583 148,797 Deferred revenue 462,532 509,275 Other current liabilities 23,886 21,935 Total current liabilities 719,260 737,778 Long-term operating lease liabilities 56,996 60,825 Other long-term liabilities 47,403 45,860 Total liabilities 823,659 844,463 Total stockholders’ equity 560,384 787,381 Total liabilities and stockholders’ equity $ 1,384,043 $ 1,631,844 PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Six Months EndedJune 30, 2026 2025 Net income $ 46,098 $ 115,499 Adjustments to reconcile net income to cash provided by operating activities Non-cash items 125,635 123,170 Change in operating assets and liabilities, net 126,492 51,827 Cash provided by operating activities 298,225 290,496 Cash provided by investing activities 25,832 212,995 Cash (used in) financing activities (349,030) (646,316) Effect of exchange rate changes on cash, cash equivalents, and restricted cash (2,299) 7,407 Net (decrease) in cash, cash equivalents, and restricted cash (27,272) (135,418) Cash, cash equivalents, and restricted cash, beginning of period 216,360 341,529 Cash, cash equivalents, and restricted cash, end of period $ 189,088 $ 206,111 7
Page 9
PEGASYSTEMS INC. RECONCILIATION OF SELECTED GAAP AND NON-GAAP MEASURES (in thousands, except percentages and per share amounts) Three Months EndedJune 30, Six Months EndedJune 30, 2026 2025 Change 2026 2025 Change Net income - GAAP $ 13,334 $ 30,077 (56)% $ 46,098 $ 115,499 (60)% Stock-based compensation 36,226 36,730 82,041 78,155 Legal fees 17,950 6,409 37,914 12,953 Amortization of intangible assets 237 675 1,020 1,376 Restructuring 2,735 (44) 2,582 (33) Foreign currency transaction loss (gain) 1,364 14,008 (486) 19,333 Interest on convertible senior notes — — — 394 Capped call transactions — — — 223 Other (700) (18,729) 1,533 (19,480) Income taxes (11,613) (18,975) (28,101) (17,727) Net income - non-GAAP $ 59,533 $ 50,151 19 % $ 142,601 $ 190,693 (25)% Diluted earnings per share - GAAP $ 0.08 $ 0.17 (53)% $ 0.26 $ 0.63 (59)% non-GAAP adjustments 0.27 0.11 0.55 0.41 Diluted earnings per share - non-GAAP $ 0.35 $ 0.28 25 % $ 0.81 $ 1.04 (22)% Diluted weighted-average number of common sharesoutstanding - GAAP 171,765 182,160 (6)% 175,294 185,477 (5)% Capped call transactions — — — (2,412) Diluted weighted-average number of common sharesoutstanding - non-GAAP 171,765 182,160 (6)% 175,294 183,065 (4)% Our non-GAAP financial measures reflect the following adjustments: • Stock-based compensation: We have excluded stock-based compensation from our non-GAAP operating expenses and profitability measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to our revenues recognized during the periods presented and is expected to contribute to our future revenues, we continue to evaluate our business performance, excluding stock-based compensation. • Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance. • Amortization of intangible assets: We have excluded the amortization of intangible assets from our non-GAAP operating expenses and profitability measures. Amortization of intangible assets fluctuates in amount and frequency and is significantly affected by the timing and size of acquisitions. Investors should note that intangible assets contributed to our revenues recognized during the periods presented and are expected to contribute to future revenues. Amortization of intangible assets is likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods. • Restructuring: We have excluded restructuring from our non-GAAP financial measures. Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as these amounts are not representative of our core business operations and ongoing operational performance. • Foreign currency transaction loss (gain): We have excluded foreign currency transaction gains and losses from our non-GAAP profitability measures. Foreign currency transaction gains and losses fluctuate in amount and frequency and are significantly affected by foreign exchange market rates. Foreign currency transaction gains and losses are likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods. • Interest on convertible senior notes: In February 2020, we issued convertible senior notes (the “Notes”), due March 1, 2025, in a private placement. The Notes accrued interest at an annual rate of 0.75%, paid semi-annually in arrears on March 1 and September 1. The outstanding Notes were repaid in their entirety at maturity. We believe that excluding the amortization of issuance costs provides a useful comparison of our operational performance in different periods. • Capped call transactions: We have excluded gains and losses related to our capped call transactions held at fair value under U.S. GAAP. The capped call transactions were expected to reduce common stock dilution and/or offset any potential cash payments we must make, other than for principal and interest, upon conversion of the Notes. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance. (1) (2) 8
Page 10
• Other: We have excluded gains and losses from our venture investments and other one-time, non-operating items. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance. • Diluted weighted-average number of common shares outstanding: • Capped call transactions: In periods of GAAP net income, the shares calculated by applying the if-converted method related to our Notes are included in the diluted weighted-average shares outstanding if they are dilutive. The capped call transactions were expected to reduce common stock dilution and/or offset any potential cash payments we must make, other than for principal and interest, upon conversion of the Notes. We believe that including the expected impact of the capped call transactions in our non-GAAP financial measures provides a useful comparison of our operational performance in different periods. (1) Stock-based compensation: Three Months EndedJune 30, Six Months EndedJune 30, (Dollars in thousands) 2026 2025 2026 2025 Cost of revenue $ 6,752 $ 7,288 $ 14,628 $ 15,111 Selling and marketing 14,555 14,378 33,009 30,159 Research and development 7,943 7,490 17,962 15,875 General and administrative 6,976 7,574 16,442 17,010 $ 36,226 $ 36,730 $ 82,041 $ 78,155 Income tax benefit $ (7,091) $ (566) $ (16,255) $ (1,153) (2) Effective income tax rates: Six Months EndedJune 30, 2026 2025 GAAP 21 % 24 % non-GAAP 22 % 22 % Our GAAP effective income tax rate is subject to significant fluctuations due to several factors, including our stock-based compensation plans, research and development tax credits, and the valuation allowance on our deferred tax assets in the U.S. and U.K. We determine our non-GAAP income tax rate using applicable rates in taxing jurisdictions and assessing certain factors, including historical and forecasted earnings by jurisdiction, discrete items, and ability to realize tax assets. We believe it is beneficial for our management to review our non-GAAP results consistent with our annual plan’s effective income tax rate as established at the beginning of each year, given tax rate volatility. 9
Page 11
PEGASYSTEMS INC. RECONCILIATION OF FREE CASH FLOW AND OTHER METRICS (in thousands, except percentages) Six Months EndedJune 30, Change2026 2025 Cash provided by operating activities $ 298,225 290,496 3 % Investment in property and equipment (9,967) (4,015) Free cash flow $ 288,258 $ 286,481 1 % Supplemental information Legal fees $ 9,188 $ 10,020 Restructuring 11,449 1,354 Interest paid on convertible senior notes — 1,754 Other (689) — Income taxes, net of refunds 10,842 (702) $ 30,790 $ 12,426 (1) Our non-GAAP free cash flow is defined as cash provided by operating activities less investment in property and equipment. Investment in property and equipment fluctuates in amount and frequency and is significantly affected by the timing and size of investments in our facilities and equipment. We provide information on free cash flow to enable investors to assess our ability to generate cash without incurring additional external financings. This information is not a substitute for financial measures prepared under U.S. GAAP. (2) The supplemental information below identifies certain items included in operating cash flow that may affect comparability between periods. • Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business. • Restructuring: Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities. • Interest paid on convertible senior notes: In February 2020, we issued the Notes, due March 1, 2025, in a private placement. The Notes accrued interest at an annual rate of 0.75%, paid semi-annually in arrears on March 1 and September 1. The outstanding Notes were repaid in their entirety at maturity. • Other: One-time cash flow items not part of our ongoing operations. • Income taxes, net of refunds: Direct income taxes paid net of refunds received. PEGASYSTEMS INC. ANNUAL CONTRACT VALUE (in thousands, except percentages) Annual contract value (“ACV”) - ACV represents the annualized value of our active contracts as of the measurement date. The contract's total value is divided by its duration in years to calculate ACV. ACV is a performance measure that we believe provides useful information to our management and investors. June 30, 2026 June 30, 2025 Change Constant CurrencyChange Pega Cloud $ 926,290 $ 761,051 $ 165,239 22 % 22 % Maintenance 271,328 301,375 (30,047) (10)% (9)% Subscription services 1,197,618 1,062,426 135,192 13 % 13 % Subscription license 422,316 451,591 (29,275) (6)% (6)% $ 1,619,934 $ 1,514,017 $ 105,917 7 % 8 % (1) (1) (2) 10
Page 12
PEGASYSTEMS INC. BACKLOG (in thousands, except percentages) Remaining performance obligations (“Backlog”) - Expected future revenue from existing non-cancellable contracts: As of June 30, 2026: Subscription services Subscriptionlicense Consulting TotalPega Cloud Maintenance 1 year or less $ 704,447 $ 198,492 $ 42,537 $ 47,220 $ 992,696 49 % 1-2 years 393,855 82,004 1,546 3,747 481,152 24 % 2-3 years 222,052 50,070 7,583 899 280,604 14 % Greater than 3 years 241,679 20,480 958 1,062 264,179 13 % $ 1,562,033 $ 351,046 $ 52,624 $ 52,928 $ 2,018,631 100 % % of Total 77 % 17 % 3 % 3 % 100 % Change since June 30, 2025 $ 240,835 $ (45,683) $ (21,826) $ 9,976 $ 183,302 18 % (12)% (29)% 23 % 10 % As of June 30, 2025: Subscription services Subscriptionlicense Consulting TotalPega Cloud Maintenance 1 year or less $ 603,683 $ 220,954 $ 62,222 $ 39,798 $ 926,657 51 % 1-2 years 334,586 79,345 4,262 2,846 421,039 23 % 2-3 years 172,513 49,587 746 252 223,098 12 % Greater than 3 years 210,416 46,843 7,220 56 264,535 14 % $ 1,321,198 $ 396,729 $ 74,450 $ 42,952 $ 1,835,329 100 % % of Total 72 % 22 % 4 % 2 % 100 % PEGASYSTEMS INC. RECONCILIATION OF GAAP BACKLOG AND CONSTANT CURRENCY BACKLOG (in millions, except percentages) June 30, 2025 June 30, 2026 1 Year GrowthRate Backlog - GAAP $ 1,835 $ 2,019 10 % Impact of changes in foreign exchange rates — 20 Constant currency backlog $ 1,835 $ 2,039 11 % Note: Constant currency backlog is calculated by applying the June 30, 2025 foreign exchange rates to current period shown. 11