Overview

• Enterprise software firm's Q2 revenue rose 9% yr/yr but missed analyst expectations

• Adjusted EPS for Q2 missed analyst expectations

• Company saw Pega Cloud ACV rise 22% yr/yr, but AI market changes slowed overall ACV growth

Outlook

• Company says AI market changes may continue to weigh on ACV growth for rest of yr

• Pegasystems says cash flow generation may remain under pressure through year-end

Result Drivers

• AI MARKET UNCERTAINTY - Co said unprecedented changes in the AI market led clients to delay purchasing decisions, slowing overall ACV growth

• PEGA CLOUD GROWTH - Pega Cloud ACV increased 22% yr/yr, outpacing overall ACV growth

• AI OFFERING RECEPTION - Co said clients reacted positively to its 'no per-token cost' AI approach

Company press release: ID:nBw83TM6ta

Key Details

Metric	Beat/Miss	Actual	Consensus Estimate
Q2 Revenue	Miss	$420.72 mln	$426.24 mln (11 Analysts)
Q2 Adjusted EPS	Miss	$0.35	$0.43 (11 Analysts)
Q2 EPS		$0.08
Q2 Adjusted Net Income	Miss	$59.53 mln	$78.96 mln (11 Analysts)
Q2 Net Income		$13.33 mln

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 13 "strong buy" or "buy", no "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the software peer group is "buy"

• Wall Street's median 12-month price target for Pegasystems Inc is $57.00, about 79.9% above its July 20 closing price of $31.69

• The stock recently traded at 11 times the next 12-month earnings vs. a P/E of 15 three months ago

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