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Pega Cloud Drives Subscription Revenues: Will It Aid PEGA's Growth?

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Pegasystems PEGA is seeing accelerated momentum as its cloud segment increasingly drives subscription-based revenues. In the first quarter of 2025, Pega Cloud’s Annual Contract Value (ACV) jumped 23% year over year to $701 million, reflecting growing demand for its AI-powered, cloud-native solutions. Pega Cloud’s revenues grew 15% year over year to $151.1 million, underscoring the strength of its high-margin, recurring revenue model and its growing impact on total subscription revenues.

This cloud momentum is backed by a clear shift among enterprises toward scalable and intelligent automation. PEGA’s AI-infused platforms, like GenAI Blueprint and Pega Infinity, are simplifying digital transformation and reducing technical debt, leading to faster adoption and long-term client retention. With more workloads moving from legacy systems to the cloud, the increase in ACV reflects deeper customer engagement and more durable multi-year contracts.

Pegasystems has set an ambitious goal to grow Cloud ACV by 20% or more, and first-quarter results validate that trajectory. From just $50 million in 2017, Pega Cloud ACV now comprises nearly half of the company’s total ACV, driven by successful cross-selling, upselling and new client acquisitions. Strategic efforts to move legacy workloads to Pega Cloud are paying off.

As the cloud business continues to scale, Pegasystems is shaping up to become a more predictable, durable enterprise software company. With expanding subscription revenues, accelerating cloud adoption and strong execution, Pega Cloud is well-positioned to become a key engine of long-term shareholder value.

Rivals Challenge PEGA’s Market Position

Salesforce CRM excels in cloud-native CRM and low-code workflows, integrating Einstein AI for automation and analytics. Salesforce’s strong CRM-centric automation, extensive third-party integrations through AppExchange and scalable platform give it a competitive edge over PEGA in customer engagement. Strategic partnerships with Amazon and Alphabet enhance Salesforce’s global cloud reach.

Oracle ORCL offers a powerful cloud platform through OCI, Fusion Cloud apps and BPM tools, directly competing with PEGA in process automation. Oracle’s strengths lie in deep database integration, enterprise scalability and a full-stack cloud ecosystem. While Oracle excels in infrastructure and large-scale deployments, PEGA often outshines it in BPM usability, AI-driven decision-making and rapid implementation.

PEGA’s Price Performance, Valuation & Estimates

Pegasystems shares have gained 16% year to date, while the broader Zacks Computer and Technology sector has returned 8.2% and the Computer-Software industry has risen 17%.

PEGA YTD Price Return Performance

Zacks Investment Research

PEGA has a Value Score of F. It is currently trading at a forward 12-month Price/Sales of 5.32X compared to the industry’s 8.82X.

PEGA Forward 12-Month Price/Sales Ratio

The Zacks Consensus Estimate for PEGA’s earnings is pegged at $1.88 per share for 2025, reflecting year-over-year growth of 24.5%. The 2025 earnings estimate has been revised upward by 3 cents over the past 30 days, indicating consistent upward momentum.

PEGA stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

This article originally published on Zacks Investment Research (zacks.com).

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