10q10k10q10k.net

What changed in PEGASYSTEMS INC's 10-K — 2024 vs 2025

vs

Paragraph-level year-over-year comparison of PEGASYSTEMS INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+215 added−218 removedSource: 10-K (2026-02-10) vs 10-K (2025-02-12)

Top changes in PEGASYSTEMS INC's 2025 10-K

215 paragraphs added · 218 removed · 169 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

45 edited+17 added−4 removed30 unchanged
Biggest changePega’s largest partners include Aaseya, Accenture, Areteans, Capgemini, Coforge, Cognizant Technology Solutions, Evonsys Inc, Ernst & Young, HCL Tech, Infosys, LTIMindtree, Tata Consultancy Services, and Virtusa. Our Markets Target Clients Our target clients are Global 2000 organizations and government agencies that require solutions to distinguish themselves in the markets they serve.
Biggest changeOur partners are recognized through our Pega partner program, helping those organizations differentiate themselves in the marketplace. They do so by achieving distinctions in industries or across specific solutions areas and geographies. Pega’s largest partners include Aaseya, Accenture, Areteans, Capgemini, Coforge, Cognizant Technology Solutions, Evonsys Inc, Ernst & Young, HCL Tech, Infosys, LTIMindtree, Tata Consultancy Services, and Virtusa.
Our applications and low-code platform intersect with and encompass several software markets, including: • Customer Engagement, including Customer Relationship Management (“CRM”); • Digital Process Automation (“DPA”), including Business Process Management (“BPM”), Workflow, and Dynamic Case Management (“DCM”), and Business Orchestration and Automation Technologies (“BOAT”); • Low-code application development platforms (“LCAP”), including Multi-experience Development Platforms (“MXDP”); • Robotic Process Automation (“RPA”), and Task-Centric Process Automation; • Business Rules Management Systems (“BRMS”); • Decision Management, including predictive and adaptive analytics and Real-time Interaction Management (“RTIM”); and • the Vertical-Specific Software (“VSS”) market of industry solutions and packaged applications. 1:1 Customer Engagement Our omnichannel customer engagement applications are designed to maximize the lifetime value of customers and help reduce the costs of serving customers while ensuring a consistent, unified, and personalized customer experience.
Our applications and low-code platform intersect with and encompass several software markets, including: • Customer Engagement, including Customer Relationship Management (“CRM”); • Business Orchestration and Automation Technologies (“BOAT”) and Digital Process Automation (“DPA”), including Business Process Management (“BPM”), Workflow, and Dynamic Case Management (“DCM”); • Low-code application development platforms (“LCAP”), including Multi-experience Development Platforms (“MXDP”); • Robotic Process Automation (“RPA”), and Task-Centric Process Automation; • Business Rules Management Systems (“BRMS”); • Decision Management, including predictive and adaptive analytics and Real-time Interaction Management (“RTIM”); and • the Vertical-Specific Software (“VSS”) market of industry solutions and packaged applications. 1:1 Customer Engagement Our omnichannel customer engagement applications are designed to maximize the lifetime value of customers and help reduce the costs of serving customers while ensuring a consistent, unified, and personalized customer experience.
We intend to maintain and extend the support of our existing applications, and we may choose to invest in additional strategic applications that incorporate the latest business innovations. We also intend to maintain and extend the support for popular public and private cloud platforms, and integration options to facilitate easy and rapid deployment in diverse IT infrastructures.
We intend to maintain and extend the support of our existing applications, and we may choose to invest in additional strategic applications that incorporate the latest business innovations. We also intend to maintain and extend the support for popular public and private cloud platforms, and integration options to facilitate easy and rapid deployment in diverse IT infrastructures and ecosystems.
We also use third-party contractors to assist us in providing these services. 6 • Global Client Success – Global Client Success guides our clients to maximize their investment in our technology and realize the business outcomes they are targeting.
We also use third-party contractors to assist us in providing these services. • Global Client Success – Global Client Success guides our clients to maximize their investment in our technology and realize the business outcomes they are targeting.
Consistent omnichannel experiences With centrally defined business and process logic, Pega provides dynamic, open APIs to align front-end channels and business logic for consistent customer experiences. By leveraging innovative user interface (UI) technology, Pega-powered processes and decisions can be easily embedded into existing front ends or used as the basis for new employee-facing applications.
Consistent omnichannel experiences With centrally defined business and process logic, Pega provides dynamic, open APIs to align front-end channels and business logic for consistent customer experiences. By leveraging innovative user interface (“UI”) technology, Pega-powered processes and decisions can be easily embedded into existing front ends or used as the basis for new employee-facing applications.
This capability allows initial deployments into a single department or region to seamlessly scale to manage the complexity of a global, multi-line enterprise. In addition to our Center-out Business Architecture, Pega technology has been designed to be deployed rapidly, be easily changed, and scale across changing architecture needs.
This capability allows initial deployments into a single department or region to seamlessly scale to manage the complexity of a global, multi-line enterprise. In addition to our Center-out agent architecture, Pega technology has been designed to be deployed rapidly, be easily changed, and scale across changing architecture needs.
In addition, our consulting employees, business partners, and other third parties also conduct joint and separate marketing campaigns that generate sales leads.
In addition, our consulting employees, business partners, and other third parties conduct joint and separate marketing campaigns that generate sales leads.
Rapid, AI-enabled transformation Pega's approach to digital transformation projects brings business, IT, and AI together to accelerate collaboration, development, and time-to-value. We and our customers are able to begin projects in Blueprint, which leverages generative AI to analyze business requirements and legacy documentation to generate a starting point template aligned with clients' strategic business outcomes.
Rapid, AI-enabled transformation with Blueprint Pega's approach to digital transformation projects brings business, IT, and AI together to accelerate collaboration, development, and time-to-value. We and our customers can begin projects in Blueprint, which leverages generative AI to analyze business requirements and legacy documentation to generate a starting point template aligned with clients' strategic business outcomes.
For example, Pega Customer Decision Hub, a centralized, always-on “customer brain,” unleashes the power of predictive analytics, machine learning, and real-time decisioning across our clients’ data, systems, and touchpoints — orchestrating engagement across customer interaction channels and optimizing processes for better efficiency.
For example, Pega CDH, a centralized, always-on “customer brain,” unleashes the power of predictive analytics, machine learning, and real-time decisioning across our clients’ data, systems, and touchpoints — orchestrating engagement across customer interaction channels and optimizing processes for better efficiency.
Total Rewards We offer a competitive and comprehensive total rewards package that drives performance, supports well-being, and emphasizes career growth. Our compensation philosophy is designed to recognize performance and align with Pega’s success, with a mix of base pay, short term cash incentives, and long-term incentives. Beyond compensation, we provide a market competitive benefits suite that promotes health and well-being.
Total Rewards We offer a competitive and comprehensive total rewards package that drives performance, supports well-being, and emphasizes career growth. Our compensation philosophy is designed to recognize performance and align with Pega’s success, with a mix of base pay, short-term cash incentives, and long-term incentives. We also provide a suite of market competitive benefits that promote health and well-being.
Through our low-code configuration and AI-powered assistance, developers in Pega are aided in quickly building out and adapting application functionality. We refer to this process as our Pega Express™ design and implementation.
Through our low-code configuration and AI-powered assistance, developers in Pega are aided in quickly building out and adapting application functionality. We refer to this process as our Blueprint Delivered™ design and implementation.
Our powerful platform for enterprise artificial intelligence (“AI”) decisioning and workflow automation enables the world’s leading brands and government agencies to hyper-personalize customer experiences, automate customer service, and streamline operations, mission-critical business processes, and workflows. With Pega, our clients can leverage our AI technology and scalable architecture to accelerate their digital transformation.
Our powerful platform for enterprise artificial intelligence (“AI”) decisioning and workflow automation enables the world’s leading brands and government agencies to hyper-personalize customer experiences, automate customer service, and streamline operations, mission-critical business processes, and workflows, and transform legacy systems. Clients can leverage our AI technology and scalable architecture to accelerate their digital transformation.
It incorporates AI in the form of predictive and machine-learning analytics and business rules and executes these decisions in real-time to evaluate the context of each customer interaction and dynamically deliver the most relevant action, offer, content, and channel. Customer Service The Pega Customer Service™ application simplifies customer service.
It incorporates AI in the form of predictive and machine-learning analytics and business rules, and executes these decisions in real-time to evaluate the context of each customer interaction and dynamically deliver the most relevant action, offer, content, and channel.
In addition, our applications, built on the Pega Platform, provide the same flexibility and ability to adapt to our clients’ needs as the Pega Platform. We believe we compete favorably due to our expertise in our target industries and our long-standing client relationships.
In addition, our applications, built on the Pega Platform, provide the same flexibility and adaptability to our clients’ needs as the Pega Platform itself. We believe we compete favorably due to our expertise in our target industries and our long-standing client relationships.
In addition, our sales and client success teams, world-class partners, and clients are able to leverage Pega GenAI Blueprint TM (“Blueprint”) to rapidly prototype and accelerate the development and deployment of applications quickly and collaboratively.
In addition, our sales and client success teams, world-class partners, and clients can leverage Pega Blueprint TM (“Blueprint”) to rapidly prototype and accelerate the development and deployment of applications quickly and collaboratively.
At the center of our customer engagement applications is the Pega Customer Decision Hub™, our real-time, AI-powered decision engine, which can predict a customer’s behavior and recommend the “next best action” to take across channels in real-time. It is designed to enable enterprises to improve customer acquisition and experience across inbound, outbound, and paid media channels.
At the center of our customer engagement applications is the Pega Customer Decision Hub™ (“CDH”), our real-time, AI-powered decision engine, which can predict a customer’s behavior and recommend the “ next best action ” to take across channels in real-time. It is designed to enable enterprises to improve customer acquisition and experience across inbound, outbound, and paid media channels.
We regularly assess and evolve our offerings to ensure they meet the needs of our workforce, recognizing that employees' priorities change over time. Talent Cultivation Talent Cultivation is the cornerstone of our people strategy. Our dynamic approach combines continuous feedback with development, enabling employees to thrive in an ever-evolving digital landscape.
We regularly assess and evolve our offerings to ensure they meet the needs of our workforce, recognizing that employees' priorities change over time. Talent Cultivation Talent Cultivation is a key pillar of our talent strategy. Our dynamic approach combines continuous feedback with personalized development, enabling employees to thrive in an ever-evolving digital landscape.
Our goal with all products is to enhance product capabilities, implementation ease, long-term flexibility, and improve client service. Backlog As of December 31, 2024, we expected to recognize $1.6 billion in revenue from backlog on existing contracts in future periods. For additional information, see "Note 15. Revenue" in Item 8 of this Annual Report.
Our goal with all products is to enhance product capabilities through rapid innovation, implementation ease, long-term flexibility, and improve client service. Backlog As of December 31, 2025, we expected to recognize $2.1 billion in revenue from backlog on existing contracts in future periods. For additional information, see "Note 15. Revenue" in Item 8 of this Annual Report.
Our leadership development programs are designed to cultivate leaders who drive high performance while fostering inclusive team environments. Our commitment to continuous learning is backed by education reimbursement programs and external partnerships, ensuring our workforce stays ahead of industry trends and technological advancements. Corporate Information Pegasystems Inc. was incorporated in Massachusetts in 1983.
Our leadership development programs are designed to cultivate leaders who drive high performance while fostering inclusive team environments. Our commitment to continuous learning is backed by education reimbursement programs and external partnerships, ensuring our workforce stays ahead of industry trends and technological advancements.
We compete in the CRM, including marketing, sales, and customer service, and DPA, including BPM, case management, decision management, robotic automation, low-code application development, and mobile application development platform software markets, as well as in markets for the vertical applications we provide (e.g., Pega Know Your Customer TM for Financial Services, Pega Smart Dispute™).
We compete in the software markets for CRM, including marketing, sales, and customer service; AI, including decisioning, decisioning intelligence, and real-time interaction management; and BOAT, including DPA, BPM, case management, decision management, robotic automation, low-code application development, and mobile application development platforms, as well as in markets for the vertical applications we provide (e.g., Pega Know Your Customer™ and Pega Smart Dispute™ for Financial Services).
Lastly, engagement is an important part of our strategy to create a broad ecosystem passionate about Pega technology to further increase our advocates across our clients and other key stakeholders.
Lastly, engagement is an important part of our strategy to create a broad ecosystem passionate about Pega technology to further increase our advocates across our clients and other key stakeholders, and providing ongoing enablement given the pace of change of technology.
To grow our business, we intend to: • Increase market share by developing and delivering a platform for enterprise AI decisioning and workflow automation for buyers in marketing, sales, service, operations, and IT that can work together seamlessly with maximum competitive differentiation; • Deepen and expand our relationships with existing clients; • Establish relationships with new clients; and • Continue to scale our marketing efforts to support how today’s buyers discover, evaluate, and choose products and services.
To grow our business, we intend to: • Increase market share by developing and delivering a platform for enterprise AI decisioning and workflow automation for buyers in marketing, sales, service, operations, and IT that can work together seamlessly with maximum competitive differentiation; • Deepen and expand our relationships with existing clients; • Establish relationships with new clients; • Continue to scale our marketing efforts to support how today’s buyers discover, evaluate, and choose products and services; • Deepen partnerships with systems integrators and hyperscalers to drive sales and delivery of our products; and • Leverage partner-branded Blueprints to extend our market reach with strategic partners.
Our platform enables clients to increase loyalty and wallet share, simplify experiences while accelerating revenues and processes, resolve service requests across channels more quickly with less effort, drive a faster, simpler repair experience, and boost the efficiency of 5G, fiber, and cloud processes. • Healthcare – Pega’s software for AI-powered decisioning and workflow automation is used by healthcare organizations for Consumer Engagement, Onboarding and Enrollment, Customer Service, Care Management Services, and Claims/Core Admin.
Our platform enables clients to increase loyalty and wallet share, simplify experiences while accelerating revenues and processes, resolve service requests across channels more quickly with less effort, drive a faster, simpler repair experience, and boost the efficiency of 5G, fiber, and cloud processes. • Insurance – Pega’s software for AI-powered decisioning and workflow automation is used by insurance companies for Customer Engagement, Sales, Distribution, Underwriting, Policyholder Service, and Claims.
Research and Development Our research and development organization is responsible for product architecture, core technology development, product testing, and quality assurance. Our product development priority is to continue expanding our technology’s capabilities and ensure we deliver superior cloud-native solutions.
Research and Development Our research and development organization is responsible for product architecture, core technology development, design, product testing, and quality assurance. We continuously expand our technology’s capabilities and ensure we deliver superior AI-based cloud-native solutions.
Our clients represent many industries, including: • Financial services – Pega’s software for AI-powered decisioning and workflow automation is used by financial services organizations for Customer Engagement, Onboarding and KYC, Lending, Customer Service, Payment Exceptions, Bank Operations, and Managing Financial Crime.
Along with our partners, we deliver solutions tailored by industry. 7 Our clients represent many industries, including: • Financial services – Pega’s software for AI-powered decisioning and workflow automation is used by financial services organizations for Customer Engagement, Onboarding and Know Your Customer (“KYC”), Lending, Customer Service, Payment Exceptions, Bank Operations, and Managing Financial Crime.
Our platform enables clients to increase loyalty and wallet share, reduce time and effort to close loans and open accounts, address compliance more effectively while simplifying customer experiences, resolve service requests across channels more quickly with less effort, and boost the efficiency of various back-office processes with fewer human touches. • Government – Pega’s software for AI-powered decisioning and workflow automation is used by government agencies for Enterprise Modernization, Licensing, Investigative Case Management, Grants and Financial Management, Acquisition and Supply Chain Modernization, and Citizen Service.
Our platform enables clients to increase loyalty and wallet share, reduce time and effort to close loans and open accounts, address compliance more effectively while simplifying customer experiences, resolve service requests across channels more quickly with less effort, and boost the efficiency of various back-office processes with fewer human touches. • Healthcare – Pega’s software for AI-powered decisioning and workflow automation is used by healthcare organizations for Customer Engagement, Onboarding and Enrollment, Customer Service, Care Management Services, and Claims/Core Admin.
We believe we are competitively differentiated because our unified Pega Platform is designed to allow client business and IT staff, using a single, intuitive user interface, to build and evolve enterprise applications in a fraction of the time it would take with disjointed architectures and tools offered by many of our competitors.
This allows client business and IT staff, using a single, intuitive user interface, to build and evolve enterprise applications in a fraction of the time it would take with disjointed architectures and tools offered by many of our competitors.
Our Partners We collaborate with global systems integrators and technology consulting firms that provide consulting services to our clients, as well as Independent Software Vendors (“ISVs”), cloud hyperscalers, and technology partners that extend clients’ investments with integrated solutions .
Our Partners We collaborate with global systems integrators and technology consulting firms that provide consulting services to our clients, cloud hyperscalers that provide the technology infrastructure and programs that accelerate legacy transformation and AI innovation, and Independent Software Vendors (“ISVs”) that extend clients’ investment with integrated solutions.
Our platform enables clients to improve member and patient outcomes, loyalty, and retention, simplify experiences with reduced time and effort, resolve service requests faster and easier across channels, advance efficient flexible healthcare coordination, and deliver streamlined, modern experiences for members, providers, and employees. 7 • Insurance – Pega’s software for AI-powered decisioning and workflow automation is used by insurance companies for Customer Engagement, Sales, Distribution, Underwriting, Policyholder Service, and Claims.
Our platform enables clients to improve member and patient outcomes, loyalty, and retention, simplify experiences with reduced time and effort, resolve service requests faster and easier across channels, advance efficient flexible healthcare coordination, and deliver streamlined, modern experiences for members, providers, and employees. • Government – Pega’s software for AI-powered decisioning and workflow automation is used by government agencies for Enterprise Modernization, Licensing, Investigative Case Management, Grants and Financial Management, Acquisition and Supply Chain Modernization, and Citizen Service.
Our stock is traded on the NASDAQ Global Select Market under the symbol “PEGA.” Our website is at www.pega.com, and our investor relations website is at www.pega.com/about/investors. 9 Available Information We make available our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports, free of charge, through our website as soon as reasonably practicable after we electronically file such material with or furnish such material to the SEC.
Available Information We make available our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports, free of charge, through our website as soon as reasonably practicable after we electronically file such material with or furnish such material to the SEC.
With its workflow automation capabilities, the Pega Platform allows clients to break down silos, improve customer-centricity, add agility to legacy technology, and provide end-to-end automation to support the needs of customers and employees.
Pega’s automation goes beyond traditional BPM to unify technologies such as RPA and AI to enable organization-wide digital transformation. With its workflow automation capabilities, the Pega Platform allows clients to break down silos, improve customer-centricity, add agility to legacy technology, and provide end-to-end automation to support the needs of customers and employees.
We also purchase or license third-party technology, including open-source software and large language models, that we incorporate into our products and services. 8 Sales and Marketing We encourage our direct sales force and outside partners to co-market, pursue joint sales initiatives, and drive broader adoption of our technology, helping us grow our business more efficiently and focus our resources on continued innovation and enhancement of our solutions.
Sales and Marketing We encourage our direct sales force and outside partners to co-market, pursue joint sales initiatives, and drive broader adoption of our technology, helping us grow our business more efficiently and focus our resources on continued innovation and enhancement of our solutions.
Our Capabilities We drive better business outcomes for our clients in three ways: • 1:1 Customer Engagement : we enable clients to hyper-personalize interactions with their customers using our AI-powered decision engine, resulting in higher customer lifetime value. • Customer Service : we enable clients to streamline customer service and deliver better service experiences for their customers and employees, resulting in higher customer satisfaction and loyalty with reduced costs. • Workflow Automation : we enable clients to automate mission-critical workflows, resulting in improved operational efficiency, faster time to value, and lower cost. 5 We deliver our solution through our Center-out Business® Architecture™, enabling clients to transcend channels and internal data silos to achieve quick wins and long-term transformation.
This approach enables faster modernization, improved customer and employee experiences, and long-term flexibility to adapt to changing business needs. 5 Our Capabilities We drive better business outcomes for our clients in four ways: • 1:1 Customer Engagement : we enable clients to hyper-personalize interactions with their customers using our AI-powered decision engine, resulting in higher customer lifetime value. • Customer Service : we enable clients to streamline customer service and deliver better service experiences for their customers and employees, resulting in higher customer satisfaction and loyalty with reduced costs. • Workflow Automation : we enable clients to automate mission-critical workflows, resulting in improved operational efficiency, faster time to value, and lower cost. • Legacy Transformation : we enable clients to retire technical debt faster, increase agility, and eliminate maintenance costs.
Pega Express assists in the acceleration of application build out in alignment with client success criteria, emphasizing reusable components that ensure both immediate and long-term value creation, and uses an agile approach.
Blueprint Delivered uses an agile approach to assist in the acceleration of application build-out in alignment with client success criteria, emphasizing reusable components that ensure both immediate and long-term value creation. Pega Predictable AI™ 6 Pega Predictable AI brings agents and workflows together to deliver consistent, governed execution at scale.
Competitors vary in size, scope, and breadth of the products and services they offer and include some of the world’s largest companies, including International Business Machines Corporation (“IBM”), Microsoft Corporation, Oracle Corporation, Salesforce.com, SAP SE, and ServiceNow. We have been most successful in competing for clients whose businesses are characterized by a high degree of change, complexity, and/or regulation.
Competitors vary in size, scope, and breadth of the products and services they offer and include some of the world’s largest companies, including International Business Machines Corporation (“IBM”), Microsoft Corporation, Oracle Corporation, Salesforce, SAP SE, and ServiceNow.
We have obtained patents relating to our system architecture and products in strategic global markets. We enter into confidentiality, intellectual property ownership, and license agreements with our employees, partners, clients, and other third parties. To protect our proprietary rights, we also control access to and ownership of software, services, documentation, and other information.
We enter into confidentiality, intellectual property ownership, and license agreements with our employees, partners, clients, and other third parties. To protect our proprietary rights, we also control access to and ownership of software, services, documentation, and other information. We also purchase or license third-party technology, including open-source software and large language models, that we incorporate into our products and services.
Applications built on Pega’s low-code Platform leverage predictive and adaptive analytics to deliver personalized customer experiences and maximize business objectives.
The key aspects of this architecture are: Centrally-managed AI-powered decisioning Pega’s centrally-managed AI-powered decisioning ensures AI and business rules operate across all channels. Applications built on Pega’s low-code Platform leverage predictive and adaptive analytics to deliver personalized customer experiences and maximize business objectives.
Workflow Automation Pega Platform™, our software for AI-powered workflow automation, boosts the efficiency of our clients’ processes and operational workflows. This technology allows organizations to take an end-to-end approach to transformation by using intelligence and design thinking to streamline processes and create better customer and employee experiences.
This technology allows organizations to take an end-to-end approach to transformation by using intelligence and design thinking to streamline processes and create better customer and employee experiences. With Blueprint, clients can leverage the power of AI to design best practice processes for any industry domain in minutes.
For additional information, see risk factor "The market for our offerings is intensely and increasingly competitive, rapidly changing, and fragmented" in Item 1A of this Annual Report. Intellectual Property We rely primarily on a combination of copyright, patent, trademark, and trade secrets laws, as well as confidentiality procedures and contractual provisions to protect our intellectual property rights and our brand.
For additional information, see risk factor "The market for our offerings is intensely and increasingly competitive, rapidly changing, and fragmented" in Item 1A of this Annual Report.
In addition, Authorized Training Partners (“ATPs”) support Pega customers in local languages, while our Workforce Development Partners let clients outsource their recruiting . Strategic partnerships with these firms are important to our sales efforts because they influence buying decisions, identify sales opportunities, and complement our software with their domain expertise, solutions, and service capabilities.
Strategic partnerships with these firms are important to our sales efforts because they enable scalable engagement through indirect channels, influence buying decisions, identify sales opportunities, and complement our software with their domain expertise, solutions, and service capabilities. These partners may deliver strategic business planning, consulting, project management, training, and implementation services to our clients.
We foster a culture of growth where every employee can navigate their career journey through our comprehensive learning and development, mentoring, and job shadowing offerings. Our approach to development prioritizes professional growth and personal well-being. Pega Academy helps accelerate skill development across our global community of employees, clients, and partners, focusing on emerging technologies and capabilities.
We are committed to providing meaningful opportunities for our people to take ownership of their professional growth, leveraging mentorship, job shadowing, on-demand learning, and structured development programs. Pega Academy helps accelerate skill development across our global community of employees, clients, and partners, focusing on emerging technologies and capabilities.
We have also partnered with universities to provide our courseware as part of the student curriculum to expand our ecosystem of enablement content. In addition, we have robust and comprehensive documentation on our documentation portal, so people have the information at their fingertips in the moment of need.
We have partnered with universities to provide our courseware as part of the student curriculum to expand our ecosystem of enablement content. We have also added AI-enabled learning into our products so individuals are able to access real-time enablement material as they build, based on our best-in-class documentation (also available in our standalone documentation portal).
Our solutions achieve and facilitate differentiation by increasing business agility, driving growth, improving productivity, attracting and retaining customers, and reducing risk. Along with our partners, we deliver solutions tailored by industry.
Our Markets Target Clients We focus on enterprise-scale businesses and government agencies that require advanced solutions to distinguish themselves in the competitive markets they serve. Our solutions achieve and facilitate differentiation by increasing business agility, driving growth and modernization, improving productivity, attracting and retaining customers, and reducing risk.
People and Culture As of January 31, 2025, we had 5,443 employees: 1,995 in the Americas, 1,223 in Europe, 1,904 in India, and 321 across Asia-Pacific. Our people are the foundation of our success. We foster an environment where employees feel valued, supported, and empowered to do their best work.
People and Culture As of January 30, 2026, we had 5,598 employees: 2,002 in the Americas, 1,272 in Europe, 1,982 in India, and 342 across Asia-Pacific. Our talent strategy is designed to bring our business strategy to life through our people, who are the very foundation of our success.
This approach insulates business logic from back-end and front-end complexity, delivering consistent customer experiences and agility to the business. The key aspects of this architecture are: Centrally-managed AI-powered decisioning Pega’s centrally-managed AI-powered decisioning ensures AI and business rules operate across all channels.
We deliver our solution through our Center-out® agent architecture, enabling clients to transcend channels and internal data silos to achieve quick wins and long-term transformation. This approach insulates business logic from back-end and front-end complexity, delivering consistent customer experiences and agility to the business.
Removed
With Blueprint, clients can leverage the power of AI to design best practice processes for any industry domain in minutes. Pega’s automation goes beyond traditional Business Process Management (“BPM”) to unify technologies such as Robotic Process Automation (“RPA”) and AI and enable organization-wide digital transformation.
Added
Recently, we introduced Pega Customer Engagement Blueprint™, a new GenAI powered collaboration tool that helps brands easily visualize customer journeys and quickly ideate and refine strategies for better engagement. It leverages our powerful AI framework so users can collaborate online, map their vision from data models to brand strategy, and create a comprehensive roadmap for customer-centric programs that drive results.
Removed
These partners may deliver strategic business planning, consulting, project management, training, and implementation services to our clients. Our partners are recognized through our Pega partner program, helping those organizations differentiate themselves in the market place. They do so by achieving distinctions in industries or across specific solutions areas and geographies.
Added
This helps clients quickly visualize the value of Pega CDH for their marketing and data and analytics programs. Customer Service The Pega Customer Service™ application simplifies customer service.
Removed
Collaboration and fresh thinking drive how we work together, ensuring that our people can contribute meaningfully while growing in their careers. We believe that when all perspectives are considered, we make better decisions and create stronger outcomes. By actively listening to our employees, and refining our people strategies, we build a workplace of connection, engagement, and performance.
Added
Blueprint enables AI design agents to transform legacy systems, uncovering end-to-end customer journeys and centralizing processes across all channels. Workflow Automation Pega Platform™, our software for AI-powered workflow automation, boosts the efficiency of our clients’ processes and operational workflows.
Removed
Learning and Development Engaging with different perspectives strengthens learning, sharpens thinking, and enhances problem-solving across teams. We are committed to providing our people with meaningful opportunities to learn, develop skills and grow their careers. Our people are encouraged to take ownership of their professional growth, leveraging mentorship, on-demand learning, and structured development programs.
Added
Pega Platform and Blueprint, combined with industry best practices, provide the right structure and platform for clients to unlock automation for the agentic AI future. Legacy Transformation Our Legacy Transformation solution leverages Pega Platform and Blueprint to help organizations retire technical debt and modernize operations without disrupting business.
Added
It uses Blueprint to rapidly analyze existing systems and processes, uncovering end-to-end workflows and identifying opportunities for simplification. From there, the offering applies AI-powered design and low-code development to reimagine legacy applications, accelerating time-to-value while reducing risk. By insulating business logic from back-end complexity, it enables clients to preserve critical functionality while eliminating redundant systems and maintenance costs.
Added
Combined with workflow automation and decisioning capabilities, our Legacy Transformation solution delivers agility, scalability, and cost efficiency – empowering enterprises to move beyond outdated technology and embrace a future-ready architecture.
Added
Starting in Blueprint, design agents rapidly model best-practice workflows aligned to business outcomes. These workflows then guide agents – human and AI – at runtime, ensuring predictable, transparent operations across channels and processes. By combining centralized decisioning with real-time analytics and machine learning, Predictable AI automates tasks, personalizes experiences, and optimizes results.
Added
Integrated with our Center-out agent architecture, this capability enables organizations to adapt quickly to change while maintaining compliance and control, accelerating transformation with confidence. Predictable AI provides the structure and intelligence to accelerate transformation, reduce risk, and deliver consistent outcomes with confidence.
Added
With this approach, we help clients unify business and IT, streamline collaboration, and scale automation across the enterprise to drive operational excellence and long-term value.
Added
We have been most successful in competing for clients whose businesses are characterized by a high degree of change, complexity, and/or regulation. 8 We believe we are competitively differentiated through the combination of Blueprint and our unified Pega Platform, which allows us to harness the power of large language models to design applications and use the power of Pega’s patented world-class workflow engine to create the appropriate context and guardrails prior to putting applications into production.
Added
Intellectual Property We rely primarily on a combination of copyright, patent, trademark, and trade secrets laws, as well as confidentiality procedures, technical safeguards, and contractual provisions, to protect our intellectual property rights and our brand. We have obtained patents relating to our system architecture and products in strategic global markets.
Added
We focus on identifying, growing, and keeping people with the right leadership, values, and growth mindset needed to deliver our business strategy now and in the future. Collaboration and fresh thinking drive how we work together, ensuring that our people can contribute meaningfully while growing in their careers.
Added
We believe when all perspectives are considered, we make better decisions and create stronger outcomes.
Added
Through continuous feedback and transparency, we build a workplace of connection, engagement, and performance. 9 Learning and Development Lifelong learning and curiosity are core to who we are, rooted in the belief that skills and intelligence aren’t fixed – but rather grow and develop through continuous learning.
Added
We encourage our people to lean into challenges, seek feedback, and be open to varying perspectives to sharpen thinking. The culture of learning enhances problem solving and allows us to turn obstacles into opportunities.
Added
We foster a culture of growth where every employee has the power to make informed choices and own their career by providing the right conditions, tools, and development pathways. Corporate Information Pegasystems Inc. was incorporated in Massachusetts in 1983.
Added
Our stock is traded on the NASDAQ Global Select Market under the symbol “PEGA.” Our website is at www.pega.com, and our investor relations website is at www.pega.com/about/investors.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

63 edited+8 added−38 removed101 unchanged
Biggest changeWe rely primarily on a combination of patent, copyright, trademark, and trade secrets laws, as well as intellectual property and confidentiality agreements to protect our proprietary rights. We also try to control access to and distribution of our technologies and other proprietary information. We have obtained patents in strategically important global markets relating to the architecture of our systems.
Biggest changeRisks Related to Intellectual Property and Government Regulation We face risks related to intellectual property claims or appropriation of our intellectual property rights. We rely primarily on a combination of patent, copyright, trademark, and trade secrets laws, as well as confidentiality procedures, technical safeguards, and contractual provisions, to protect our intellectual property rights and our brand.
We budget for our selling and marketing, product development, and other expenses based upon anticipated future bookings and revenue. If the timing or amount of revenue fails to meet our expectations, our financial performance is likely to be materially adversely affected because only a small portion of our expenses vary with revenue.
We budget for our selling and marketing, product development, and other expenses based upon anticipated future bookings and revenue. If the timing or amount of bookings and revenue fails to meet our expectations, our financial performance is likely to be materially adversely affected because only a small portion of our expenses vary with revenue.
The cost of these steps could negatively impact our operating results. While we actively work to improve vulnerability scanning, patching, threat intelligence, security event detection, security event alerting and forensics, it is possible that security breaches, whether due to unpatched vulnerabilities or otherwise, occur and may be undetected when they occur.
The cost of these steps could negatively impact our operating results. While we actively work to improve vulnerability scanning, patching, threat intelligence, security event detection, and security event alerting and forensics, it is possible that security breaches, whether due to unpatched vulnerabilities or otherwise, occur and may be undetected when they occur.
It is also possible that these claims result in treble damages if we are found to have willfully infringed patents or copyrights, cause product shipment and delivery delays, require us to enter into royalty or licensing agreements, or preclude us from making and selling the infringing software, if such proprietary rights are found to be valid.
It 16 is also possible that these claims result in treble damages if we are found to have willfully infringed patents or copyrights, cause product shipment and delivery delays, require us to enter into royalty or licensing agreements, or preclude us from making and selling the infringing software, if such proprietary rights are found to be valid.
Other factors that may cause our operating results to vary include changes in foreign currency exchange rates, income tax effects, and the impact of new accounting pronouncements. As a result, period-to-period comparisons of our operating results are not necessarily meaningful and should not be relied upon to predict future performance.
Other factors that may cause our operating results to vary include changes in foreign currency exchange rates, income tax effects, and the impact of new accounting pronouncements. 11 As a result, period-to-period comparisons of our operating results are not necessarily meaningful and should not be relied upon to predict future performance.
Factors that may influence the predictability of our license and Pega Cloud revenue include: • changes in clients’ budgets and decision-making processes that could affect both the timing and size of transactions; • the timing of the execution of an agreement or our ability to deliver the products or services; • changes in our business model; and • our ability to execute our marketing and sales strategies.
Factors that may influence the predictability of our license and Pega Cloud revenue and bookings include: • changes in clients’ budgets and decision-making processes that could affect both the timing and size of transactions; • the timing of the execution of an agreement or our ability to deliver the products or services; • changes in our business model; and • our ability to execute our marketing and sales strategies.
These service providers give us greater flexibility in efficiently delivering a more tailored, scalable customer experience and expose us to additional risks and vulnerabilities. Third-party service providers operate platforms we access and which are vulnerable to service interruptions. We may experience interruptions, delays, and outages in service and availability due to problems with our third-party service providers’ infrastructure.
These service providers give us greater flexibility in efficiently delivering a more tailored, scalable customer experience and expose 15 us to additional risks and vulnerabilities. Third-party service providers operate platforms we access and which are vulnerable to service interruptions. We may experience interruptions, delays, and outages in service and availability due to problems with our third-party service providers’ infrastructure.
The combination of these factors could negatively impact our business, operating results, and financial condition. We are exposed to fluctuations in foreign currency exchange rates that could negatively impact our financial results and cash flows. Because a significant portion of our business is conducted outside of the U.S., we face exposure to movements in foreign currency exchange rates.
The combination of these factors could negatively impact our business, operating results, and financial condition. 18 We are exposed to fluctuations in foreign currency exchange rates that could negatively impact our financial results and cash flows. Because a significant portion of our business is conducted outside of the U.S., we face exposure to movements in foreign currency exchange rates.
If we cannot license or develop technology for any infringing aspect of our business, we would be forced to limit or stop sales of our software and may be unable to compete effectively, which could have a material effect upon our business, operating results, and financial condition.
If we cannot license or develop technology for any allegedly infringing aspect of our business, we would be forced to limit or stop sales of our software and may be unable to compete effectively, which could have a material effect upon our business, operating results, and financial condition.
If our revenues and operating results do not meet the expectations of our investors or securities analysts or fall below guidance we may provide to the market, or due to other factors discussed elsewhere in this section, the price of our common stock may decline.
If our revenues, bookings and operating results do not meet the expectations of our investors or securities analysts or fall below guidance we may provide to the market, or due to other factors discussed elsewhere in this section, the price of our common stock may decline.
If we are unable to meet these challenges effectively, our operating results and financial condition could be materially adversely affected. We may not achieve the key elements of our strategy and grow our business as anticipated.
If we are unable to meet these challenges effectively, our operating results and financial condition could be materially adversely affected. 10 We may not achieve the key elements of our strategy and grow our business as anticipated.
A change in the size or volume of license and Pega Cloud arrangements, or a change in the mix between perpetual licenses, subscription licenses, and Pega Cloud arrangements, can cause our revenues and cash flows to fluctuate materially between periods.
A change in the size or volume of license and Pega Cloud arrangements, or a change in the mix between perpetual licenses, subscription licenses, and Pega Cloud arrangements, can cause our revenues, bookings, and cash flows to fluctuate materially between periods.
If our retention rate for those clients decreases, our business, operating results, and financial condition could be materially affected. 11 Investments we are making to continue to grow license and Pega Cloud arrangements may result in decreased profitability or losses and reduced or negative cash flow if we do not continue to increase the value of our license and Pega Cloud arrangements to balance our growth in expenses.
If our retention rate for those clients decreases, our business, operating results, and financial condition could be materially affected. 12 Investments we are making to continue to grow license and Pega Cloud arrangements may result in decreased profitability or losses and reduced or negative cash flow if we do not continue to increase the value of our license and Pega Cloud arrangements to balance our growth in expenses.
We market our products and services to clients based outside of the U.S., representing 44% of our revenue over the last three years. We have established offices in the Americas, Europe, Asia, and Australia. We anticipate hiring personnel to accommodate increased international demand, and we may also enter into agreements with local distributors, representatives, or resellers.
We market our products and services to clients based outside of the U.S., representing 45% of our revenue over the last three years. We have established offices in the Americas, Europe, Asia, and Australia. We anticipate hiring personnel to accommodate increased international demand, and we may also enter into agreements with local distributors, representatives, or resellers.
While we believe we have the financial strength to pay the judgment and accrued interest thereon if it ever became necessary, it is possible that we may not be able to engage in financing activities on desirable terms, which could have a material adverse effect on our business, financial condition, and operating results.
While we believe we have the financial strength to pay any future judgment and accrued interest thereon if it ever became necessary, it is possible that we may not be able to engage in financing activities on desirable terms, which could have a material adverse effect on our business, financial condition, and operating results.
The timing of our license and Pega Cloud revenue is difficult to predict, which may cause our operating results to vary considerably.
The timing of our license and Pega Cloud revenue and bookings is difficult to predict, which may cause our operating results to vary considerably.
If we are not able to execute these actions, our business may not grow as we anticipate, and our operating results and financial condition could be materially adversely affected. If we are not successful in executing our investments in AI, including generative AI, our business, financial condition, and results of operations may be harmed.
If we are not able to execute these actions, our business may not grow as we anticipate, and our operating results and financial condition could be materially adversely affected. If we are not successful in executing our investments in AI, including generative AI, our business, financial condition, and results of operations may be harmed. We are investing significantly in AI.
We currently intend to grow our business by pursuing strategic initiatives consistent with becoming a Rule of 40 company, meaning a company with combined Annual Contract Value (“ACV”) growth rate and free cash flow margin of at least 40%.
We currently intend to grow our business by pursuing strategic initiatives consistent with Rule of 40 principles, meaning a company with combined Annual Contract Value (“ACV”) growth rate and free cash flow margin of at least 40%.
Material adverse developments in global economic conditions, or the occurrence of certain other world events, could affect demand for our products, increase our costs of operation and harm our business. Global economic uncertainty has produced, and continues to produce, substantial stress, volatility, illiquidity and disruption of global credit and other financial markets.
General Risk Factors Material adverse developments in global economic conditions, or the occurrence of certain other world events, could affect demand for our products, increase our costs of operation and harm our business. Global economic uncertainty has produced, and continues to produce, substantial stress, volatility, illiquidity and disruption of global credit and other financial markets.
We expect that software product developers, including us, will increasingly be subject to infringement and other intellectual property violation claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps.
We expect that software product developers, including us, will increasingly be subject to alleged infringement and other intellectual property violation claims as we become increasingly successful, the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps.
We depend on key personnel, including our Chief Executive Officer, and must attract and retain qualified personnel in the future. 10 Our business is dependent on key, highly skilled technical, managerial, consulting, sales, and marketing personnel, including our Chief Executive Officer, who is also our founder and largest stockholder.
We depend on key personnel, including our Chief Executive Officer (“CEO”), and must attract and retain qualified personnel in the future. Our business is dependent on key, highly skilled technical, managerial, consulting, sales, and marketing personnel, including our CEO, who is also our founder and largest stockholder.
Errors in our software could affect its ability to work with hardware or other software or delay the development or release of new products or new versions of our software. Additionally, detecting and correcting any security flaws, including those introduced by our use of open-source, can be time-consuming and costly.
Errors in our software could affect its ability to work with hardware or other software or delay the development or release of new products or new versions of our software. Additionally, detecting and correcting any security flaws, including those that may be introduced by our use of open-source code or AI, can be time-consuming and costly.
Although it is not possible to predict timing, the entirety of the appeals process could potentially take years to complete. We continue to believe we did not misappropriate any alleged trade secrets and that sales of our products at issue were not caused by, or the result of, any alleged misappropriation of trade secrets.
Although it is not possible to predict timing, the entirety of the litigation process, including retrial and possible future appeals, could potentially take years to complete. We continue to believe we did not misappropriate any alleged trade secrets and that sales of our products at issue were not caused by, or the result of, any alleged misappropriation of trade secrets.
Our security measures, those of our suppliers, third-party technology providers, and our clients may be breached because of third-party actions or those of employees, consultants, clients, or others, including intentional misconduct by computer hackers, system errors, human errors, technical flaws in our products, or otherwise.
Our security measures, those of our suppliers, third-party technology providers, and our clients may be breached because of third-party actions or those of employees, consultants, clients, or others, including intentional misconduct by computer hackers, system errors, human errors, errors introduced by our use of AI internally and in our products, technical flaws in our products, or otherwise.
Commitments And Contingencies" in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report and the preceding risk factor captioned “If we are unsuccessful in the appeal of the trial court judgment in our litigation with Appian Corp., our operating results and financial condition would be adversely impacted.” Although we attempt to limit the amount and type of our contractual liability for infringement or other violation of the proprietary rights of third parties and assert ownership of work product and intellectual property rights as appropriate, there are often exceptions, and limitations may not be applicable and enforceable in all cases.
Commitments And Contingencies" in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report and the preceding risk factor captioned “If we are unsuccessful in our trade secret litigation with Appian Corp. our operating results and financial condition could be adversely impacted.” Although we attempt to limit with our clients the amount and type of our contractual liability for alleged infringement or other violation of the proprietary rights of third parties and assert ownership of work product and intellectual property rights as appropriate, there are often exceptions, and limitations may not be applicable and enforceable in all cases.
If it becomes necessary or desirable to repatriate our foreign cash balances to the United States, we may be subject to increased taxes, other restrictions, and limitations. As of December 31, 2024, $185.6 million of our cash and cash equivalents were held in our foreign subsidiaries.
If it becomes necessary or desirable to repatriate our foreign cash balances to the United States, we may be subject to increased taxes, other restrictions, and limitations. As of December 31, 2025, $168 million of our cash and cash equivalents were held in our foreign subsidiaries.
We are unable to reasonably estimate possible damages because of, among other things, uncertainty as to the outcome of appellate proceedings and/or any potential new trial resulting from the appellate proceedings. We believe we have strong grounds to prevail in the appeal and a potential retrial.
We are unable to reasonably estimate possible damages because of, among other things, uncertainty as to the outcome of any new trial or subsequent appellate proceedings. We believe we have strong grounds to prevail in a potential retrial.
But if we are ultimately unsuccessful in prevailing in the matter in its entirety or in substantially reducing any judgment, we may be required to incur additional debt or otherwise engage in capital markets transactions, which may include a public offering or private placement of our equity securities or a sale or license of assets.
But if we are ultimately unsuccessful in prevailing in the matter, we may be required to incur additional debt or otherwise engage in capital markets transactions, which may include a public offering or private placement of our equity securities or a sale or license of assets.
Although we have not experienced any material product liability claims to date, a product liability suit or action claiming a breach of warranty, whether meritorious, could result in substantial costs and a diversion of management’s attention and our resources. We may require additional capital in the future.
Although we have not experienced any material product liability claims to date, a product liability suit or action claiming a breach of warranty, whether meritorious, could result in substantial costs and a diversion of management’s attention and our resources.
If it becomes necessary or desirable to repatriate foreign funds, we may have to pay federal, state, and local income taxes as well as foreign withholding taxes upon repatriation. We consider the earnings of our foreign subsidiaries to be permanently reinvested. As a result, domestic and foreign taxes on such earnings have not been provided in our financial statements.
If it becomes necessary or desirable to repatriate foreign funds, we may have to pay federal, state, and local income taxes as well as foreign withholding taxes upon repatriation. Because we consider some of the earnings of our foreign subsidiaries to be permanently reinvested, our financial statements may not reflect the domestic and foreign taxes on such earnings.
A panel of the Court of Appeals of Virginia heard oral arguments on November 15, 2023, and issued a written opinion on July 30, 2024. The Court of Appeals reversed the judgment on Appian’s Virginia Uniform Trade Secrets Act claim and ordered a new trial on that claim.
On July 30, 2024, the Court of Appeals of Virginia issued a written opinion that reversed judgment on Appian’s Virginia Uniform Trade Secrets Act claim and ordered a new trial on that claim.
Competitors may also be able to devote greater managerial and financial resources to develop, promote, and distribute products and to provide related consulting and training services. 13 We believe the principal competitive factors within our market include: • product adaptability, scalability, functionality, and performance; • proven success in delivering cost-savings and efficiency improvements; • proven success in enabling improved customer interactions; • ease-of-use for developers, business units, and end-users; • timely development and introduction of new products and product enhancements; • establishment of a significant base of reference clients; • effective and efficient integration of AI into products; • ability to integrate with other products and technologies; • customer service and support; • product price; • vendor reputation; and • relationships with systems integrators.
We believe the principal competitive factors within our market include: • product adaptability, scalability, functionality, and performance; • proven success in delivering cost-savings and efficiency improvements; • proven success in enabling improved customer interactions; • ease-of-use for developers, business units, and end-users; • timely development and introduction of new products and product enhancements; • establishment of a significant base of reference clients; • effective and efficient integration of AI into products; • ability to integrate with other products and technologies; • customer service and support; • product price; • vendor reputation; and • relationships with systems integrators.
We do not have any control over these analysts. If our financial performance fails to meet analyst estimates or one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our stock price will likely decline.
If our financial performance fails to meet analyst estimates or one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our stock price will likely decline.
Threats to IT security can take a variety of forms. Individual hackers, groups of hackers, and sophisticated organizations, including state-sponsored organizations, or nation-states themselves, may take steps that threaten our clients, suppliers, third-party technology providers, and us.
Individual hackers, groups of hackers, and sophisticated organizations, including state-sponsored organizations, or nation-states themselves, may take steps that threaten our clients, suppliers, third-party technology providers, and us.
As evidenced by our previously mentioned litigation with Appian Corp., depending on when and how asserted, these claims, with or without merit, are often time-consuming, result in costly litigation, and subject us to significant liability for damages.
As evidenced by our previously mentioned litigation with Appian Corp., depending on when and how asserted, these claims, with or without merit, are often time-consuming, result in costly litigation, divert the attention of our management and key personnel from our business operations, and subject us to significant potential liability for damages.
If we are unsuccessful in the appeal of the trial court judgment in our litigation with Appian Corp., our operating results and financial condition would be adversely impacted. We are currently party to litigation with Appian Corp. — see Part I, Item 3 “Legal Proceedings” and "Note 20.
If we are unsuccessful in our trade secret litigation with Appian Corp. our operating results and financial condition could be adversely impacted. We are currently party to litigation with Appian Corp. — see Part I, Item 3 “Legal Proceedings” and "Note 20.
Our success depends in part on maintaining and increasing our sales to clients in the public sector. We derive a portion of our revenues from contracts with domestic and foreign governments and related agencies. We believe that our business’s success and growth will continue to depend on our successful procurement of government contracts.
We derive a portion of our revenues from contracts with domestic and foreign governments and related agencies. We believe that our business’s success and growth will continue to depend on our successful procurement of government contracts.
Many jurisdictions in the US are considering or have passed laws governing the development or use of AI. Similarly, Europe has enacted laws governing cyber resilience, and we expect more laws will be considered and passed on this issue.
In addition, Europe has finalized a comprehensive legal framework for governance of the development and use of AI, and other jurisdictions, including jurisdictions in the US, are considering or have passed laws governing the development or use of AI. Similarly, Europe has enacted laws governing cyber resilience, and we expect more laws will be considered and passed on this issue.
Any failure to comply with these laws and regulations could subject us to, among other things, penalties and legal expenses that could harm our reputation or otherwise have a material adverse effect on our business, financial condition, and results of operations. We are subject to extensive federal, state, and foreign laws and regulations, including but not limited to the U.S.
Any failure to comply with these laws and regulations could subject us to, among other things, penalties and legal expenses that could harm our reputation or otherwise have a material adverse effect on our business, financial condition, and results of operations.
Contingencies deemed not probable or for which losses were not estimable in one period may become probable, or losses may become estimable in later periods which may have a material impact on our results of operations and financial position.
Contingencies deemed not probable or for which losses were not estimable in one period may become probable, or losses may become estimable in later periods which may have a material impact on our results of operations and financial position. Our success depends in part on maintaining and increasing our sales to clients in the public sector.
We encounter significant competition from: • customer engagement vendors, including Customer Relationship Management application vendors; • Digital Process Automation vendors and platforms, including Business Process Management vendors, low-code application development platforms, and service-oriented architecture middleware vendors; • case management vendors; • decision management, data science, and AI vendors, as well as vendors of solutions that leverage decision making and data science in managing customer relationships and marketing; • robotic automation and workforce intelligence software providers; • companies that provide application-specific software for financial services, healthcare, insurance, and other specific markets; • mobile application platform vendors; • co-browsing software providers; • social listening, text analytics, and natural language processing vendors; • commercialized open-source vendors; • professional services organizations that develop their own products or create custom software in conjunction with rendering consulting services; and • clients’ in-house information technology departments, which may seek to modify their existing systems or develop their own proprietary systems.
We encounter significant competition from: • customer engagement vendors, including Customer Relationship Management application vendors; • Digital Process Automation vendors and platforms, including Business Process Management vendors, low-code application development platforms, and service-oriented architecture middleware vendors; • case management vendors; • decision management, data science, and AI vendors, as well as vendors of solutions that leverage decision making and data science in managing customer relationships and marketing; • robotic automation and workforce intelligence software providers; • companies that provide application-specific software for financial services, healthcare, insurance, and other specific markets; • mobile application platform vendors; • co-browsing software providers; • social listening, text analytics, and natural language processing vendors; • commercialized open-source vendors; • professional services organizations that develop their own products or create custom software in conjunction with rendering consulting services; and • clients’ in-house information technology departments, which may seek to modify their existing systems or develop their own proprietary systems. 13 Many of our competitors, such as International Business Machines Corporation (“IBM”), Microsoft Corporation, Oracle Corporation, Salesforce, SAP SE, and ServiceNow, have far greater resources than we do and may be able to respond more quickly and efficiently to new or emerging technologies, programming languages or standards, or changes in client requirements or preferences.
All these factors could materially impact our operating results, financial condition, and cash flows. 20 The market price of our common stock has been and is likely to continue to be volatile . The market price of our common stock may be highly volatile and fluctuate due to a variety of factors, some of which are related in complex ways.
The market price of our common stock has been and is likely to continue to be volatile . The market price of our common stock may be highly volatile and fluctuate due to a variety of factors, some of which are related in complex ways.
Our Pega Cloud offering involves hosting client applications on the servers of third-party technology providers. We also rely on third-party systems and technology, including encryption, virtualized infrastructure, and support, and employ a shared security model with our clients and third-party technology providers.
We also rely on third-party systems and technology, including encryption, virtualized infrastructure, and support, and employ a shared security model with our clients and third-party technology providers.
Any such security breach could result in a loss of confidence in the security of our services, damage our reputation, disrupt our business, require us to incur significant costs of investigation, remediation and/or payment of a ransom, lead to legal liability, negatively impact our future sales, and result in a substantial financial loss. 15 We rely on third-party hosting providers to deliver our offerings, and any disruption or interference with our use of these services could adversely affect our business.
Any such security breach could result in a loss of confidence in the security of our services, damage our reputation, disrupt our business, require us to incur significant costs of investigation, remediation and/or payment of a ransom, lead to legal liability, negatively impact our future sales, and result in a substantial financial loss.
Our use of third-party hosting facilities requires us to rely on the functionality and availability of the third-party services and their data security, which, despite our due diligence, may be or become inadequate.
We rely on third-party hosting providers to deliver our offerings, and any disruption or interference with our use of these services could adversely affect our business. Our use of third-party hosting facilities requires us to rely on the functionality and availability of the third-party services and their data security, which, despite our due diligence, may be or become inadequate.
Furthermore, if we make downward revisions of our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors, or other interested parties, our common stock price may decline.
Furthermore, if we make downward revisions of our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors, or other interested parties, our common stock price may decline. 19 If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline.
Conversely, if we are unable to achieve an appropriate balance of sales and marketing personnel to meet future demand or research and development personnel to enhance our current products or develop new products, we may not be able to achieve our sales and profitability targets . We rely on third-party relationships.
Conversely, if we are unable to achieve an appropriate balance of sales and marketing personnel to meet future demand or research and development personnel to enhance our current products or develop new products, we may not be able to achieve our sales and profitability targets . We face risks from operations and clients based outside of the United States.
Moreover, like most software companies, we incorporate open-source code into our software products and services, which also creates a potential risk. We deal with security issues regularly and have experienced security incidents from time to time.
Moreover, like most software companies, we incorporate open-source code into our software products and services, which also creates a potential risk. We deal with security issues regularly and have experienced security incidents from time to time. Our Pega Cloud offering involves hosting client applications on the servers of third-party technology providers.
Third parties have claimed and may claim in the future that we have misappropriated, misused, or infringed other parties' intellectual property rights, and customers have sought and may seek future indemnification for intellectual property claims to which they are subject.
Third parties have claimed and may claim in the future that we have misappropriated, misused, or infringed other parties' intellectual property rights, and customers have sought and may seek future indemnification for intellectual property claims to which they are subject. We are currently party to litigation with Appian Corp. — see Part I, Item 3 “Legal Proceedings”, "Note 20.
If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline. The trading market for our common stock depends partly on the research and reports that securities and industry analysts publish about us or our business.
The trading market for our common stock depends partly on the research and reports that securities and industry analysts publish about us or our business. We do not have any control over these analysts.
Technical developments, client requirements, programming languages, industry standards, and regulatory requirements frequently change in the markets in which we operate. The introduction of third-party solutions embodying new technologies, including generative AI and the emergence of new industry standards could make our existing and future software solutions obsolete and unmarketable.
The introduction of third-party solutions embodying new technologies, including generative AI and the emergence of new industry standards, could make our existing and future software solutions obsolete and unmarketable.
However, we may not be successful in demonstrating this value for several reasons, including the performance of our products, the quality of the services and support provided by our partners and us, or external factors. Also, some of our smaller clients may have limited additional sales opportunities available.
Once a client has realized the value of our software, we work with the client to identify opportunities for follow-on sales. However, we may not be successful in demonstrating this value for several reasons, including the performance of our products, the quality of the services and support provided by our partners and us, or external factors.
Similar laws and regulations exist in many other countries where we do or intend to do business. 18 Within recent years, there has been an increase in the scope and enforcement of data privacy laws in the jurisdictions in which we do business.
Within recent years, there has been an increase in the scope and enforcement of data privacy laws in the jurisdictions in which we do business including California, other states in the US, and Europe.
Further, the use of third-party hosting facilities requires us to rely on the functionality and availability of the third parties’ services, as well as their data security, which despite our due diligence, may be or become inadequate, as further discussed below under the risk factor “We rely on third-party hosting providers to deliver our offerings, and any disruption or interference with our use of these services could adversely affect our business.” We face risks from operations and clients based outside of the United States.
Further, the use of third-party hosting facilities requires us to rely on the functionality and availability of the third parties’ services, as well as their data security, which despite our due diligence, may be or become inadequate, as further discussed below under the risk factor “We rely on third-party hosting providers to deliver our offerings, and any disruption or interference with our use of these services could adversely affect our business.” The number and value of license and Pega Cloud arrangements has been increasing, and we may not be able to sustain this growth unless our partners and we can provide sufficient high-quality consulting, training, and maintenance resources to enable our clients to realize significant business value from our software.
Business" of this Annual Report. Our Chief Executive Officer is our largest stockholder and can exert significant influence over matters submitted to our stockholders, which could materially adversely affect our other stockholders. As of December 31, 2024, our Chief Executive Officer beneficially owned approximately 46 percent of our outstanding common stock.
All these factors could materially impact our operating results, financial condition, and cash flows. Our CEO is our largest stockholder and can exert significant influence over matters submitted to our stockholders, which could materially adversely affect our other stockholders. As of December 31, 2025, our CEO beneficially owned approximately 45 percent of our outstanding common stock.
We cannot be certain that such patents will not be challenged, invalidated, or circumvented, or that rights granted thereunder, or the claims contained therein will provide us with competitive advantages.
We also try to control access to and distribution of our technologies and other proprietary information. We have obtained patents relating to the architecture of our systems. We cannot be certain that such patents will not be challenged, invalidated, or circumvented, or that rights granted thereunder, or the claims contained therein will provide us with competitive advantages.
There can be no assurance that one or more of these factors will not have a material adverse effect on our international operations and, consequently, on our business, operating results, and financial condition. 12 Our consulting revenue is significantly dependent upon our consulting personnel implementing new license and Pega Cloud arrangements.
There can be no assurance that one or more of these factors will not have a material adverse effect on our international operations and, consequently, on our business, operating results, and financial condition. The market for our offerings is intensely and increasingly competitive, rapidly changing, and fragmented.
We have developed and implemented a compliance program based on what we believe are reasonable practices, including the background checking of our current partners and prospective clients and partners. We cannot guarantee, however, that we, our employees, our consultants, our partners, our vendors, or our contractors are or will be compliant with all federal, state, and foreign regulations.
Compliance with these varying regimes has caused and will cause us to incur additional costs, and may challenge our business and the expansion of that business, including as may result from any non-compliance or asserted non-compliance. 17 Although we have developed and implemented a compliance program based on what we believe are reasonable practices, we cannot guarantee that we, our employees, our consultants, our partners, our vendors, or our contractors are or will be compliant with all federal, state, and foreign regulations.
The California Consumer Privacy Act (as amended by the California Privacy Rights Acts, the “CCPA”) and other similar laws in a number of US states require, among other things, covered companies to provide disclosure to consumers about such companies’ data collection, use and sharing practices, provide such consumers ways to make requests about their personal information, including requests to delete their personal information, to know what information a company has about the consumer, and to opt-out of certain sales, transfers, or sharing of personal information.
Data privacy laws throughout the world impose many compliance obligations concerning the handling of personal data, including, among other things, requiring companies to provide disclosure to consumers and other individuals about such companies’ data collection, use and sharing practices; requiring companies to provide consumers and other individuals ways to make requests about their personal information, including requests to delete their personal information, to know what information a company has about the individual, and to opt-out of certain sales, transfers, or sharing of personal information; and providing consumers and other individuals with additional causes of action.
We derive a substantial portion of our consulting revenue from implementations of new license and Pega Cloud arrangements managed by our consulting personnel and consulting for partner and client-led implementation efforts. Our strategy is to support and encourage partner-led and client-led implementations to increase the breadth, capability, and depth of market capacity to deliver implementation services to our clients.
Business" of this Annual Report. Our consulting revenue is significantly dependent upon our consulting personnel implementing new license and Pega Cloud arrangements. We derive a substantial portion of our consulting revenue from implementations of new license and Pega Cloud arrangements managed by our consulting personnel and consulting for partner and client-led implementation efforts.
Significant judgments are required for the determination of probability and the range of the outcomes in any legal dispute, and the estimates are based only on the information available to us at the time. Due to the inherent uncertainties involved in claims, legal proceedings, and in estimating the losses that may arise, actual outcomes may differ from our estimates.
Significant judgments are required for the determination of probability and the range of the outcomes in any legal dispute such as, but not limited to, our litigation with Appian Corp., and the estimates are based only on the information available to us at the time.
Accordingly, if our consulting personnel’s involvement in future implementations decreases, this could materially adversely affect our consulting revenue. We frequently enter into a series of license or Pega Cloud arrangements that each focus on a specific purpose or area of operations.
We frequently enter into a series of license or Pega Cloud arrangements that each focus on a specific purpose or area of operations. If we are not successful in obtaining follow-on business from these clients, our financial performance could be materially adversely affected.
We may not obtain follow-on sales, or the follow-on sales may be delayed, and our future revenue could be limited. We will need to acquire or develop new products, evolve existing ones, address defects or errors, and adapt to technology changes.
We will need to acquire or develop new products, evolve existing ones, address defects or errors, and adapt to technology changes. Technical developments, client requirements, programming languages, industry standards, and regulatory requirements frequently change in the markets in which we operate.
Removed
We are investing significantly in AI, including through our development and deployment of our Pega Customer Decision Hub TM , Pega Customer Service TM , PegaPlatfom TM , and Pega GenAI Blueprint TM .
Added
Also, some of our smaller clients may have limited additional sales opportunities available. We may not obtain follow-on sales, or the follow-on sales may be delayed, and our future revenue could be limited. We rely on third-party relationships.
Removed
The number and value of license and Pega Cloud arrangements has been increasing, and we may not be able to sustain this growth unless our partners and we can provide sufficient high-quality consulting, training, and maintenance resources to enable our clients to realize significant business value from our software.
Added
Competitors may also be able to devote greater managerial and financial resources to develop, promote, and distribute products and to provide related consulting and training services.
Removed
If we are not successful in obtaining follow-on business from these clients, our financial performance could be materially adversely affected. Once a client has realized the value of our software, we work with the client to identify opportunities for follow-on sales.
Added
Our strategy is to support and encourage partner-led and client-led implementations to increase the breadth, capability, and depth of market capacity to deliver implementation services to our clients. Accordingly, if our consulting personnel’s involvement in future implementations decreases, this could materially adversely affect our consulting revenue.
Removed
The market for our offerings is intensely and increasingly competitive, rapidly changing, and fragmented.
Added
On January 8, 2026, the Supreme Court of Virginia issued a written opinion unanimously affirming the ruling of the Court of Appeals of Virginia and on January 29, 2026 remanded Appian’s trade secret case to the Court of Appeals with direction to remand to the Circuit Court of Fairfax County for further proceedings in accordance with its written opinion.
Removed
Many of our competitors, such as International Business Machines Corporation (“IBM”), Microsoft Corporation, Oracle Corporation, Salesforce.com, SAP SE, and ServiceNow, have far greater resources than we do and may be able to respond more quickly and efficiently to new or emerging technologies, programming languages or standards, or changes in client requirements or preferences.
Added
Threats to IT security can take a variety of forms and continue to evolve and become more sophisticated and more difficult to detect and defend against, including by the increased use of AI to enhance attacks.
Removed
The Company filed a notice of appeal from the judgment the same day with the Court of Appeals of Virginia. On September 29, 2022, the circuit court approved the $25,000,000 letter of credit obtained by the Company to secure the judgment and suspended the judgment during the pendency of the Company’s appeal.
Added
Due to the inherent uncertainties involved in claims, legal proceedings, and in estimating the losses that may arise, actual outcomes may differ from our estimates.
Removed
Appian filed a petition for appeal with the Supreme Court of Virginia on August 29, 2024, and we filed a response to the petition on October 21, 2024. Under the Court’s rules, Appian is entitled to a 10-minute oral argument in support of its petition. The Supreme Court of Virginia scheduled that argument for February 11, 2025.
Added
We are subject to extensive federal, state, and foreign laws and regulations, including but not limited to anti-bribery laws, data privacy, information security, resiliency, and AI laws.
Removed
We have a standing Compliance and Risk Governing Committee composed of senior representatives across the Company that reports to and assists the Audit Committee and the Board as a whole in the oversight of compliance and risk management programs, including cybersecurity measures.
Added
It is not practical to estimate the amount of tax we would have to pay upon repatriation of our unremitted earnings deemed to be permanently reinvested due to the complexity of the tax laws and other factors. We have provided a deferred tax liability associated with the tax cost of repatriating unremitted earnings which we do not consider indefinitely reinvested.
Removed
In addition, we have a standing Security Steering Group, whose members include our Chief Information Security Officer, Chief Product Officer, and Vice President of Cloud Technology, and which is charged with providing strategic direction for the implementation and ongoing operation of our cyber security program.

… 29 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

16 edited+5 added−1 removed10 unchanged
Biggest changeFor systems in our corporate environment where our cloud certifications have an operational dependency, we also maintain ISO/IEC 27001 certifications relating to overall IT processes and controls and ISO 22301 certification relating to business continuity. 22 Product Security Posture To facilitate identification of security vulnerabilities in our products, we periodically conduct third party penetration tests and participate in the independent Verified By Veracode program, as detailed on its website (https://www.veracode.com/verified/directory/pegasystemsInc) which is included as an inactive reference and the content of which is not incorporated by reference into this Annual Report .
Biggest changeFor systems in our corporate environment where our cloud certifications have an operational dependency, we also maintain ISO/IEC 27001 certifications relating to overall IT processes and controls and ISO 22301 certification relating to business continuity.
Technical Safeguards We regularly assess and deploy technical safeguards designed to protect our information systems from cybersecurity threats. Such safeguards are regularly evaluated and improved based on vulnerability assessments, cybersecurity threat intelligence, and incident response experience. Incident Response and Recovery Planning We have implemented Cyber Incident Response Programs, which are within the scope of our ISO 27001 certifications.
Technical Safeguards We regularly assess and deploy technical safeguards designed to protect our information systems from cybersecurity threats. Such safeguards are regularly evaluated and improved based on vulnerability assessments, cybersecurity threat intelligence, and incident response experience. 20 Incident Response and Recovery Planning We have implemented Cyber Incident Response Programs, which are within the scope of our ISO 27001 certifications.
Our cybersecurity program focuses on the following key areas: Collaboration We have implemented a governance structure and processes to aggregate reported cybersecurity risks on behalf of Pega Cloud, Pega’s software products, and the corporate environment. Our SSG is responsible for providing strategic direction for implementing and maintaining our cyber risk management program.
Our cybersecurity program focuses on the following key areas: Collaboration We have implemented a governance structure and processes to aggregate reported cybersecurity risks on behalf of Pega Cloud, Pega’s software products, and the corporate environment. Our SQSG is responsible for providing strategic direction for implementing and maintaining our cyber risk management program.
Education and Awareness We require all employees to participate in security awareness training, including frequent phishing tests. Currently, our mandatory employee training courses include Security Awareness, Physical Security Awareness, Mobile Device Security, Business Continuity and Phishing, Work From Home, and AI Chatbot.
Education and Awareness We require all employees to participate in security awareness training, including frequent phishing tests. Currently, our mandatory employee training courses include Security Awareness, Physical Security Awareness, Mobile Device Security, Business Continuity and Phishing, Work From Home, and AI Use.
The SSG is charged with providing strategic direction for the implementation and ongoing operation of our cyber security program. The SSG meets at least quarterly. Our CISO chairs the SSG and decisions and recommendations are based on a consensus of the members. Our CISO has over twenty years of professional experience, with twelve years in information security roles.
The SQSG is charged with providing strategic direction for the implementation and ongoing operation of our cyber security program. The SQSG meets at least quarterly. Our CISO chairs the SQSG and decisions and recommendations are based on a consensus of the members. Our CISO has over twenty years of professional experience, with thirteen years in information security roles.
A key component of this is our standing Security Steering Group (“SSG”), whose members include, among others, our Chief Information Security Officer (“CISO”), Chief Product Officer, and Vice President of Cloud Technology.
A key component of this is our standing Security and Quality Steering Group (“SQSG”), whose members include, among others, our Chief Information Security Officer (“CISO”), Chief Product Officer, and Vice President of Cloud Technology.
Our Board of Directors (the “Board”), the Audit Committee of the Board (the “Audit Committee”), and our management are actively involved in the oversight of our risk management program, of which cybersecurity represents an important component. We have established policies, standards, processes, and practices for assessing, identifying, and managing material risks from cybersecurity threats.
Our Board of Directors (the “Board”), the Risk Subcommittee of the Audit Committee of the Board (the “Risk Subcommittee”), and our management are actively involved in the oversight of our risk management program, of which cybersecurity represents an important component. We have established policies, standards, processes, and practices for assessing, identifying, and managing material risks from cybersecurity threats.
He has been with Pega for five years and has a Master of Science degree from Northwestern University. Our Chief Product Officer has been with Pega for thirty-two years, has extensive experience in software development, and has a Bachelor of Science from the Indiana University of Pennsylvania.
He has been with Pega for over six years and has a Master of Science degree from Northwestern University. Our Chief Product Officer has been with Pega for over thirty years, has extensive experience in software development, and has a Bachelor of Science from the Indiana University of Pennsylvania.
The results of the assessments are provided to our SSG and are used to drive alignment on, and prioritization of, initiatives to enhance our security controls, make recommendations to improve processes, and inform our broader enterprise-level risk assessment. Key findings of these assessments are periodically presented to the Board and the Audit Committee.
The results of the assessments are provided to our SQSG and are used to drive alignment on, and prioritization of, initiatives to enhance our security controls, make recommendations to improve processes, and inform our broader enterprise-level risk assessment. Key findings of these assessments are periodically presented to the Board and the Risk Subcommittee.
Risk Assessment Our cyber risk management program is designed to follow the ISO 31000 and the NIST Special Publication 800-37 frameworks and is within the scope of our ISO 27001 certifications.
Risk Assessment Our cyber risk management program is designed to follow the ISO 31000, NIST SP 800-37, and NIST SP 800-53 frameworks and is within the scope of our ISO 27001 certifications.
Our CISO periodically meets with the Board and Audit Committee to inform and update them on our cybersecurity program. SSG and Key Personnel We have a standing SSG whose members include, among others, our CISO, Chief Product Officer, and Vice President of Cloud Technology.
Our CISO periodically meets with the Board and Risk Subcommittee to inform and update them on our cybersecurity program. 21 SQSG and Key Personnel We have a standing SQSG whose members include, among others, our CISO, Chief Product Officer, and Vice President of Cloud Technology.
Our Vice President of Cloud Technology has been with Pega for seven years and has twenty-five years of networking and security management experience, with seventeen years of leadership roles in cloud services and related information security issues.
Our Vice President of Cloud Technology has been with Pega for over eight years and has twenty-six years of networking and security management experience, with eighteen years of leadership roles in cloud services and related information security issues.
There can be no guarantee that our policies, standards, processes, and practices will be properly followed in every instance or that they will be effective. 21 Although we are not aware of having experienced any prior material data breaches, regulatory non-compliance incidents, or cyber security incidents, we may in the future be impacted by such an event, exposing our clients and us to the risk of someone obtaining access to our information, to the information of our clients or their customers, or to our intellectual property, disabling or degrading service, or sabotaging systems or information.
Although we are not aware of having experienced any prior material data breaches, regulatory non-compliance incidents, or cyber security incidents, we may in the future be impacted by such an event, exposing our clients and us to the risk of someone obtaining access to our information, to the information of our clients or their customers, or to our intellectual property, disabling or degrading service, or sabotaging systems or information.
Pega Cloud also maintains several security certifications, which are listed at https://pega.com/trust, which is included as an inactive reference and the content of which is not incorporated by reference into this Annual Report. Pega Cloud for Government is rated FedRAMP Moderate and undergoes several security assessments a year as part of the FedRAMP certification process.
Pega Cloud Security Posture Pega Cloud undergoes several security assessments a year. Redacted versions of these reports are made available to our clients. Pega Cloud also maintains several security, quality, and industry certifications, which are listed at https://pega.com/trust, which is included as an inactive reference and the content of which is not incorporated by reference into this Annual Report.
Our Vice President of Cloud Technology reviews these assessments and provides updates to our SSG. Governance Board Oversight As part of our corporate governance process, the Board, along with the Audit Committee, oversee our risk management process, which includes cybersecurity and related risks.
Governance Board Oversight As part of our corporate governance process, the Board, along with the Risk Subcommittee, oversee our risk management process, which includes cybersecurity and related risks.
However, even after we make these updates available, it is possible that clients do not implement these updates or use products on extended support that do not include security updates. Pega Cloud Security Posture Pega Cloud undergoes several security assessments a year. Redacted versions of these reports are made available to our clients.
We regularly release new versions of our products to address identified security vulnerabilities, enabling clients to stay updated with the latest product releases. However, even after we make these updates available, it is possible that clients do not implement these updates or use products on extended support that do not include security updates.
Removed
Our Chief Product Officer reviews these findings and provides updates to our SSG. We regularly release new versions of our products to address identified security vulnerabilities, enabling clients to stay updated with the latest product releases.
Added
There can be no guarantee that our policies, standards, processes, and practices will be properly followed in every instance or that they will be effective.
Added
Product Security Posture To facilitate identification of security vulnerabilities in our products, we periodically conduct third party penetration tests and participate in the independent Verified By Veracode program.
Added
Our Chief Product Officer reviews these findings and provides updates to our SQSG. Our AI products maintain an ISO/IEC 42001:2023 certification, an international standard for establishing, implementing, maintaining, and improving an Artificial Intelligence Management System (AIMS) to ensure responsible, ethical, and trustworthy AI use.
Added
Certification helps to validate our commitment to managing AI risks (like bias, privacy, and security), enhances stakeholder trust, and provides a structured framework for AI governance. We make Software Bill of Materials (“SBOM”) for products under standard support available to clients, listing the components of our software, providing clients transparency into open-source risk.
Added
Pega Cloud for Government is rated FedRAMP High and undergoes several security assessments a year as part of the FedRAMP certification process. Our Vice President of Cloud Technology reviews these assessments and provides updates to our SQSG.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
Biggest changeITEM 2. PROPERTIES Our principal administrative, sales, marketing, support, and research and development operations are in Cambridge, Massachusetts, our corporate headquarters, and Hyderabad, India. Effective January 1, 2025, our corporate headquarters was relocated to Waltham, Massachusetts. We also maintain offices elsewhere in the Americas, Europe, and the Asia-Pacific regions. All of our properties are leased.
Biggest changeITEM 2. PROPERTIES Our principal administrative, sales, marketing, support, and research and development operations are in Waltham, Massachusetts, our corporate headquarters, and Hyderabad, India. We also maintain offices elsewhere in the Americas, Europe, and the Asia-Pacific regions. All of our properties are leased.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+7 added−0 removed0 unchanged
Biggest change(2) Shares withheld to cover the option exercise price and tax withholding obligations under the net settlement provisions of our stock compensation awards have been included in these amounts. 24 Stock performance graph and cumulative total stockholder return (1) The following performance graph represents a comparison of the cumulative total stockholder return, assuming the reinvestment of dividends, for a $100 investment on December 31, 2019 in our common stock, the Total Return Index for the NASDAQ Composite, a broad market index, and the Standard & Poor’s (“S&P”) North American Technology Sector - Software Index™ (“S&P NA Tech Software”), a published industry index.
Biggest change(4) Amounts presented are exclusive of the U.S. excise tax on share repurchases. 23 Stock performance graph and cumulative total stockholder return (1) The following performance graph represents a comparison of the cumulative total stockholder return, assuming the reinvestment of dividends, for a $100 investment on December 31, 2020 in our common stock; the Total Return Index for the NASDAQ Composite and Standard & Poor’s (“S&P”) MidCap 400 ® Index, broad market indices; and the S&P North American Technology Sector - Software Index™ (“S&P NA Tech Software”), a published industry index.
Issuer purchases of equity securities (1) Common stock repurchased in the three months ended December 31, 2024: (in thousands, except per share amounts) Total Number of Shares Purchased (2) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Share Repurchase Program Approximate Dollar Value of Shares That May Yet Be Purchased at Period End Under Publicly Announced Share Repurchased Programs October 1, 2024 - October 31, 2024 158 $ 74.01 146 $ 287,492 November 1, 2024 - November 30, 2024 237 $ 88.55 215 $ 268,356 December 1, 2024 - December 31, 2024 321 $ 95.27 293 $ 240,443 Total 716 $ 88.35 (1) For additional information, see "Stock Repurchase Program" in Item 7 of this Annual Report.
Issuer purchases of equity securities (1) Common stock repurchased in the three months ended December 31, 2025: (in thousands, except per share amounts) Total Number of Shares Purchased (2) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Share Repurchase Program Approximate Dollar Value of Shares That May Yet Be Purchased at Period End Under Publicly Announced Share Repurchased Programs (3) (4) October 1, 2025 - October 31, 2025 1,465 $ 56.11 1,356 $ 272,254 November 1, 2025 - November 30, 2025 575 $ 53.79 560 $ 242,254 December 1, 2025 - December 31, 2025 52 $ 57.49 — $ 242,254 Total 2,092 $ 55.51 (1) For additional information, see "Stock Repurchase Program" in Item 7 of this Annual Report.
Dividends During 2024, 2023, and 2022, we paid a quarterly cash dividend of $0.03 per share of common stock. We expect to pay a quarterly cash dividend of $0.03 per share; however, the Board of Directors may terminate or modify this dividend program without prior notice.
While we expect to continue to pay a quarterly cash dividend, our Board of Directors may terminate or modify this dividend program without prior notice.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market information Our common stock is quoted on the NASDAQ Global Select Market under the symbol “PEGA.” Holders As of January 31, 2025, we had 62 stockholders of record.
All share, per share, and equity award information for all periods presented within this Annual Report have been recast to reflect the effect of the Stock Split. Market information Our common stock is quoted on the NASDAQ Global Select Market under the symbol “PEGA.” Holders As of January 30, 2026, we had 65 stockholders of record.
December 31, 2019 2020 2021 2022 2023 2024 Pegasystems Inc. $ 100.00 $ 167.49 $ 140.66 $ 43.19 $ 61.78 $ 117.99 NASDAQ Composite $ 100.00 $ 144.92 $ 177.06 $ 119.45 $ 172.77 $ 223.87 S&P NA Tech Software $ 100.00 $ 151.90 $ 175.13 $ 112.05 $ 178.86 $ 223.41 (1) The graph lines merely connect measurement dates and do not reflect fluctuations between those dates.
December 31, 2020 2021 2022 2023 2024 2025 Pegasystems Inc. $ 100.00 $ 83.99 $ 25.79 $ 36.90 $ 70.48 $ 90.49 NASDAQ Composite $ 100.00 $ 122.18 $ 82.43 $ 119.22 $ 154.48 $ 187.14 S&P MidCap 400 (2) $ 100.00 $ 124.76 $ 108.47 $ 126.29 $ 143.89 $ 154.68 S&P NA Tech Software $ 100.00 $ 115.29 $ 73.76 $ 117.75 $ 147.08 $ 154.55 (1) The graph lines merely connect measurement dates and do not reflect fluctuations between those dates.
Added
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Stock Split On February 12, 2025, our Board of Directors approved a two-for-one forward stock split (the “Stock Split”) of our common stock, par value $0.01 (“Common Stock”), to be effected as a stock dividend and a proportionate increase in the number of authorized shares of Common Stock from 200,000,000 to 400,000,000 (the “Authorized Share Increase”).
Added
The Authorized Share Increase was subject to shareholder approval of an amendment to our Restated Articles of Organization. The requisite shareholder approval was obtained on June 17, 2025.
Added
On June 20, 2025, each shareholder of record at the close of business on June 10, 2025 (the “Record Date”) received one additional share of Common Stock for each share of Common Stock held on the Record Date.
Added
Dividends During 2025, 2024, and 2023, we paid a quarterly cash dividend. Following the Stock Split, and commencing with the third quarter of 2025, we paid and expect to continue to pay a quarterly cash dividend of $0.03 per share, or the equivalent of $0.06 per share prior to the Stock Split.
Added
(2) Shares withheld to cover the option exercise price and tax withholding obligations under the net settlement provisions of our stock compensation awards have been included in these amounts.
Added
(3) On April 22, 2025, our Board of Directors extended the expiration date of the share repurchase program from December 31, 2025 to June 30, 2026 and increased the authorized repurchase amount by $500 million.
Added
(2) During 2025, our common stock was added to the S&P MidCap 400 ® Index. As such, we have included the S&P MidCap 400 ® Index as an additional broad market equity index comparative.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

36 edited+9 added−6 removed33 unchanged
Biggest changeRESULTS OF OPERATIONS Revenue (Dollars in thousands) 2024 2023 Change Pega Cloud $ 558,734 37 % $ 461,328 32 % $ 97,406 21 % Maintenance 323,304 22 % 331,856 24 % (8,552) (3) % Subscription services 882,038 59 % 793,184 56 % 88,854 11 % Subscription license 398,102 27 % 407,625 28 % (9,523) (2) % Subscription 1,280,140 86 % 1,200,809 84 % 79,331 7 % Perpetual license 3,767 — % 10,101 1 % (6,334) (63) % Consulting 213,273 14 % 221,706 15 % (8,433) (4) % $ 1,497,180 100 % $ 1,432,616 100 % $ 64,564 5 % • The increase in Pega Cloud revenue in 2024 was primarily due to expanded adoption of Pega Cloud by our existing clients. • The decrease in maintenance revenue in 2024 was primarily due to our clients’ shift to Pega Cloud-based offerings, which do not generally result in maintenance revenue. • The decrease in subscription license revenue in 2024 was primarily due to our clients’ shift to Pega Cloud-based offerings, and several large multi-year subscription license contracts recognized in revenue in 2023. • The decrease in perpetual license revenue in 2024 reflects our strategy of promoting subscription-based arrangements. • The decrease in consulting revenue in 2024 was primarily due to decreases in consultant billable hours. 28 Gross profit 2024 2023 (Dollars in thousands) Gross Profit % Gross Profit % Change Pega Cloud $ 434,261 78 % $ 342,670 74 % $ 91,591 27 % Maintenance 297,859 92 % 306,264 92 % (8,405) (3) % Subscription services 732,120 83 % 648,934 82 % 83,186 13 % Subscription license 396,214 100 % 405,019 99 % (8,805) (2) % Subscription 1,128,334 88 % 1,053,953 88 % 74,381 7 % Perpetual license 3,750 100 % 10,034 99 % (6,284) (63) % Consulting (25,569) (12) % (9,854) (4) % (15,715) (159) % $ 1,106,515 74 % $ 1,054,133 74 % $ 52,382 5 % The gross profit change in 2024 was primarily due to a shift in the revenue mix.
Biggest changeRESULTS OF OPERATIONS Revenue (Dollars in thousands) 2025 2024 Change Pega Cloud $ 695,902 40 % $ 558,734 37 % $ 137,168 25 % Maintenance 314,593 18 % 323,304 22 % (8,711) (3) % Subscription services 1,010,495 58 % 882,038 59 % 128,457 15 % Subscription license 507,368 29 % 401,869 27 % 105,499 26 % Subscription 1,517,863 87 % 1,283,907 86 % 233,956 18 % Consulting 227,949 13 % 213,273 14 % 14,676 7 % $ 1,745,812 100 % $ 1,497,180 100 % $ 248,632 17 % • The increase in Pega Cloud revenue in 2025 was primarily due to expanded adoption of Pega Cloud by our existing clients. • The decrease in maintenance revenue in 2025 was primarily due to our clients’ shift to Pega Cloud-based offerings, which do not generally result in maintenance revenue. • The increase in subscription license revenue in 2025 was primarily due to our clients’ shift to Pega Cloud-based offerings, and several large multi-year subscription license contracts recognized in revenue in 2025. • The increase in consulting revenue in 2025 was primarily due to an increase in consultant billable hours in our International regions. 27 Gross profit 2025 2024 (Dollars in thousands) Gross Profit % Gross Profit % Change Pega Cloud $ 548,523 79 % $ 434,261 78 % $ 114,262 26 % Maintenance 292,725 93 % 297,859 92 % (5,134) (2) % Subscription services 841,248 83 % 732,120 83 % 109,128 15 % Subscription license 505,986 100 % 399,964 100 % 106,022 27 % Subscription 1,347,234 89 % 1,132,084 88 % 215,150 19 % Consulting (22,804) (10) % (25,569) (12) % 2,765 11 % $ 1,324,430 76 % $ 1,106,515 74 % $ 217,915 20 % The gross profit change in 2025 was primarily due to a shift in the revenue mix.
Commitments And Contingencies" in Item 8 of this Annual Report for further information. ◦ 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 on convertible senior notes : In February 2020, we issued convertible senior notes, due March 1, 2025, in a private placement.
Commitments And Contingencies" in Item 8 of this Annual Report for further information. ◦ 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.
Revenue" in Item 8 of this Annual Report Goodwill impairment Our goodwill arises from our previous business acquisitions. • Goodwill is tested for impairment at least annually or as circumstances indicate its value may no longer be recoverable. • We do not have any intangible assets with indefinite useful lives other than goodwill. • We perform our annual goodwill impairment test as of November 30th.
Revenue" in Item 8 of this Annual Report. 31 Goodwill impairment Our goodwill arises from our previous business acquisitions. • Goodwill is tested for impairment at least annually or as circumstances indicate its value may no longer be recoverable. • We do not have any intangible assets with indefinite useful lives other than goodwill. • We perform our annual goodwill impairment test as of November 30th.
Investment in property and equipment fluctuates in amount and frequency and is significantly affected by the timing and size of investments in our facilities. 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.
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.
We review all contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the potential loss or range of the loss can be made. See "Note 2. Significant Accounting Policies" and "Note 20. Commitments And Contingencies" in Item 8 of this Annual Report for additional information.
We review all contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the potential loss or range of the loss can be made. 32 See "Note 2. Significant Accounting Policies" and "Note 20. Commitments And Contingencies" in Item 8 of this Annual Report for additional information.
(2) The supplemental information discloses items that affect our cash flows and are considered by management not to be representative of our core business operations and ongoing operational performance. ◦ Litigation settlement, net of recoveries : Cost to settle litigation, net of insurance recoveries, arising from proceedings outside the ordinary course of business. See "Note 20.
GAAP. (2) The supplemental information discloses items that affect our cash flows and are considered by management not to be representative of our core business operations and ongoing operational performance. ◦ Litigation settlement, net of recoveries : Cost to settle litigation, net of insurance recoveries, arising from proceedings outside the ordinary course of business. See "Note 20.
Our solutions achieve and facilitate differentiation by increasing business agility, driving growth, improving productivity, attracting and retaining customers, and reducing risk. Along with our partners, we deliver solutions tailored by industry.
Our solutions achieve and facilitate differentiation by increasing business agility, driving growth and modernization, improving productivity, attracting and retaining customers, and reducing risk. Along with our partners, we deliver solutions tailored by industry.
They are not a substitute for financial measures prepared under U.S. GAAP. A reconciliation of GAAP and non-GAAP measures is located with each non-GAAP measure. 25 BUSINESS OVERVIEW We develop, market, license, host, and support enterprise software that helps organizations optimize decisions and processes in real-time so they can deliver outcomes that transform their business.
They are not a substitute for financial measures prepared under U.S. GAAP. A reconciliation of GAAP and non-GAAP measures is located with each non-GAAP measure. 24 BUSINESS OVERVIEW We develop, market, license, host, and support enterprise software that helps organizations optimize decisions and processes in real-time so they can deliver outcomes that transform their business.
Performance metrics We use performance metrics to analyze and assess our overall performance, make operating decisions, and forecast and plan for future periods, including: Annual Contract Value (“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.
Performance metrics We use performance metrics to analyze and assess our overall performance, make operating decisions, and forecast and plan for future periods, including: 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.
Our powerful platform for enterprise AI decisioning and workflow automation enables the world’s leading brands and government agencies to hyper-personalize customer experiences, automate customer service, and streamline operations, mission-critical business processes, and workflows. With Pega, our clients can leverage our AI technology and scalable architecture to accelerate their digital transformation.
Our powerful platform for enterprise AI decisioning and workflow automation enables the world’s leading brands and government agencies to hyper-personalize customer experiences, automate customer service, and streamline operations, mission-critical business processes, and workflows, and transform legacy systems. Clients can leverage our AI technology and scalable architecture to accelerate their digital transformation.
Changes in the valuation of goodwill could materially impact our operating results and financial position. 32 As of December 31, 2024, we had $81.1 million of goodwill. Changes in the valuation of long-lived assets could materially impact our operating results and financial position. To date, there have been no impairments of goodwill. For additional information see "Note 2.
Changes in the valuation of goodwill could materially impact our operating results and financial position. As of December 31, 2025, we had $81.5 million of goodwill. Changes in the valuation of long-lived assets could materially impact our operating results and financial position. To date, there have been no impairments of goodwill. For additional information see "Note 2.
If it becomes necessary or desirable to repatriate foreign funds, we may have to pay federal, state, and local income taxes as well as foreign withholding taxes upon repatriation. However, estimating the taxes we would have to pay is impracticable due to the complexity of income tax laws and regulations.
If it becomes necessary or desirable to repatriate foreign funds, we may have to pay federal, state, and local income taxes as well as foreign withholding taxes upon repatriation. However, estimating the taxes we would have to pay on the amounts we consider indefinitely reinvested is impracticable due to the complexity of income tax laws and regulations.
For additional information, see risk factor "If it becomes necessary or desirable to repatriate our foreign cash balances to the United States, we may be subject to increased taxes, other restrictions, and limitations" in Item 1A of this Annual Report.
For additional information, see risk factor "If it becomes necessary or desirable to repatriate our foreign cash balances to the United States, we may be subject to increased taxes, other restrictions, and limitations" in Item 1A of this Annual Report. Operating activities The change in cash provided by operating activities in 2025 was primarily due to increase in client collections.
LIQUIDITY AND CAPITAL RESOURCES (in thousands) 2024 2023 Cash provided by (used in) Operating activities $ 345,926 $ 217,785 Investing activities (202,576) (50,750) Financing activities (30,214) (81,963) Effect of exchange rate changes on cash, cash equivalents, and restricted cash (4,434) 2,701 Net increase in cash, cash equivalents, and restricted cash $ 108,702 $ 87,773 December 31, (in thousands) 2024 2023 Held in U.S. entities $ 474,509 $ 263,453 Held in foreign entities 265,464 159,885 Total cash, cash equivalents, and marketable securities 739,973 423,338 Restricted cash included in other current assets 98 — Restricted cash included in other long-term assets 4,328 2,925 Total cash, cash equivalents, marketable securities, and restricted cash $ 744,399 $ 426,263 We believe that our current cash, marketable securities, cash flow provided by operations, borrowing capacity, and ability to engage in capital market transactions will be sufficient to fund our operations, settlement of our convertible senior notes due on March 1, 2025, stock repurchases, and quarterly cash dividends for at least the next 12 months and to meet our known long-term cash requirements.
LIQUIDITY AND CAPITAL RESOURCES (in thousands) 2025 2024 Cash (used in) provided by Operating activities $ 505,227 $ 345,926 Investing activities 197,246 (202,576) Financing activities (834,630) (30,214) Effect of exchange rate changes on cash, cash equivalents, and restricted cash 6,988 (4,434) Net (decrease) increase in cash, cash equivalents, and restricted cash $ (125,169) $ 108,702 December 31, (in thousands) 2025 2024 Held in U.S. entities $ 157,449 $ 474,509 Held in foreign entities 268,350 265,464 Total cash, cash equivalents, and marketable securities 425,799 739,973 Restricted cash included in other current assets 1,577 98 Restricted cash included in other long-term assets 2,336 4,328 Total cash, cash equivalents, marketable securities, and restricted cash $ 429,712 $ 744,399 We believe that our current cash, marketable securities, cash flow provided by operations, borrowing capacity, and ability to engage in capital market transactions will be sufficient to fund our operations, stock repurchases, and quarterly cash dividends for at least the next 12 months and to meet our known long-term cash requirements.
We expect to continue to incur legal fees and related costs arising from proceedings outside the ordinary course of business. For additional information, see "Note 20. Commitments And Contingencies" in Item 8 of this Annual Report.
We expect to continue to incur additional costs for these proceedings. For additional information, see "Note 20. Commitments And Contingencies" in Item 8 of this Annual Report.
For additional information, see "Note 11. Debt" in Item 8 of this Annual Report.
For additional information, see "Note 13. Fair Value Measurements" in Item 8 of this Annual Report.
In addition, our sales and client success teams, world-class partners, and clients are able to leverage Pega GenAI Blueprint TM (“Blueprint”) to rapidly prototype and accelerate the development and deployment of applications quickly and collaboratively. Our target clients are Global 2000 organizations and government agencies that require solutions to distinguish themselves in the markets they serve.
In addition, our sales and client success teams, world-class partners, and clients can leverage Blueprint to rapidly prototype and accelerate the development and deployment of applications quickly and collaboratively. We focus on enterprise-scale businesses and government agencies that require advanced solutions to distinguish themselves in the competitive markets they serve.
Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2023.
A detailed discussion and analysis of the 2024 year-over-year changes can be found in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2024.
The convertible senior notes accrue interest at an annual rate of 0.75%, payable semi-annually in arrears on March 1 and September 1. ◦ Other: Fees related to canceled in-person sales and marketing events. ◦ Income taxes : Direct income taxes paid net of refunds received. 27 Reconciliation of Backlog and Constant Currency Backlog (Non-GAAP) (in millions, except percentages) December 31, 2023 December 31, 2024 1-Year Growth Rate Backlog - GAAP $ 1,463 $ 1,623 11 % Impact of changes in foreign exchange rates — 39 Constant currency backlog $ 1,463 $ 1,662 14 % Note: Constant currency Backlog is calculated by applying the December 31, 2023 foreign exchange rates to all periods shown.
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. ◦ Income taxes, net of refunds : Direct income taxes paid net of refunds received. 26 Reconciliation of Backlog and Constant Currency Backlog (Non-GAAP) (in millions, except percentages) December 31, 2024 December 31, 2025 1-Year Growth Rate Backlog - GAAP $ 1,623 $ 2,074 28 % Impact of changes in foreign exchange rates — (80) Constant currency backlog $ 1,623 $ 1,994 23 % Note: Constant currency Backlog is calculated by applying the December 31, 2024 foreign exchange rates to current period shown.
On October 22, 2024, the Company’s Board of Directors further extended the expiration date of the share repurchase program from June 30, 2025 to December 31, 2025 and increased the authorized repurchases by $250 million to $310 million as of that date . (2) All purchases under this program have been made on the open market.
On February 10, 2026, our Board of Directors further extended the expiration date of the share repurchase program from June 30, 2026 to June 30, 2027 and increased the authorized repurchase amount by $1 billion. (3) All purchases under this program have been made on the open market.
Investing activities The change in cash (used in) investing activities in 2024 was primarily due to our increased investments in financial instruments and reduced investment in property and equipment as we optimized our office space. 30 Financing activities Debt financing In February 2020, we issued $600 million in aggregate principal amount of convertible senior notes, which mature on March 1, 2025.
Investing activities The change in cash provided by (used in) investing activities in 2025 was primarily due to scheduled maturities of our investments in financial instruments in anticipation of the repayment of the maturing Notes and the consideration received from the sale of a venture investment. 29 Financing activities Debt financing In February 2020, we issued $600 million in aggregate principal amount of Notes, which matured on March 1, 2025.
(Dollars in thousands) December 31, 2024 December 31, 2023 Change Constant Currency Change Pega Cloud $ 652,443 $ 552,998 $ 99,445 18 % 21 % Maintenance 291,807 324,091 (32,284) (10) % (8) % Subscription services 944,250 877,089 67,161 8 % 10 % Subscription license 427,268 377,794 49,474 13 % 14 % $ 1,371,518 $ 1,254,883 $ 116,635 9 % 11 % Reconciliation of ACV and constant currency ACV (in millions, except percentages) December 31, 2023 December 31, 2024 1-Year Change ACV $ 1,255 $ 1,372 9 % Impact of changes in foreign exchange rates — 23 Constant currency ACV $ 1,255 $ 1,395 11 % Note: Constant currency ACV is calculated by applying the December 31, 2023 foreign exchange rates to all periods shown. 26 (Dollars in thousands) 2024 2023 Cash provided by operating activities $ 345,926 $ 217,785 59 % Investment in property and equipment (7,712) (16,781) Free cash flow (1) $ 338,214 $ 201,004 68 % Supplemental information (2) Litigation settlement, net of recoveries $ 32,403 $ — Legal fees 16,197 14,645 Restructuring 5,252 29,401 Interest on convertible senior notes 3,810 4,134 Other — 601 Income taxes 82,317 11,664 $ 139,979 $ 60,445 (1) Our non-GAAP free cash flow is defined as cash provided by operating activities less investment in property and equipment.
(Dollars in thousands) December 31, 2024 December 31, 2025 Change Constant Currency Change Pega Cloud $ 652,443 $ 866,612 $ 214,169 33 % 28 % Maintenance 291,807 288,873 (2,934) (1) % (4) % Subscription services 944,250 1,155,485 211,235 22 % 18 % Subscription license 427,268 452,902 25,634 6 % 4 % $ 1,371,518 $ 1,608,387 $ 236,869 17 % 14 % Reconciliation of ACV and constant currency ACV (in millions, except percentages) December 31, 2024 December 31, 2025 1-Year Change ACV $ 1,372 $ 1,608 17 % Impact of changes in foreign exchange rates — (46) Constant currency ACV $ 1,372 $ 1,562 14 % Note: Constant currency ACV is calculated by applying the December 31, 2024 foreign exchange rates to current period shown. 25 (Dollars in thousands) 2024 2025 Change Cash provided by operating activities $ 345,926 $ 505,227 46 % Investment in property and equipment (7,712) (14,504) Free cash flow (1) $ 338,214 $ 490,723 45 % Supplemental information (2) Litigation settlement, net of recoveries $ 32,403 $ — Legal fees 16,197 35,484 Restructuring 5,252 2,056 Interest paid on convertible senior notes 3,810 1,754 Income taxes, net of refunds 82,317 21,630 $ 139,979 $ 60,924 (1) Our non-GAAP free cash flow is defined as cash provided by operating activities less investment in property and equipment.
Fair Value Measurements" in Item 8 of this Annual Report. 29 Provision for income taxes (Dollars in thousands) 2024 2023 Provision for income taxes $ 43,447 $ 27,632 Effective income tax rate 30 % 29 % The effective income tax rate in 2024 was primarily driven by the valuation allowance on our deferred tax assets and tax expense in the U.S. and U.K., partially offset by available tax attributes.
(Benefit from) provision for income taxes (Dollars in thousands) 2025 2024 (Benefit from) provision for income taxes $ (112,810) $ 43,447 Effective income tax rate (40) % 30 % The effective income tax rate and tax benefit recorded in 2025 was primarily driven by the release of the valuation allowance on our net deferred tax assets in the U.S. and U.K.
In November 2019, and as since amended, we entered into a five-year $100 million senior secured revolving credit agreement (the “Credit Facility”) with PNC Bank, National Association. As of December 31, 2024 and December 31, 2023, we had $27.3 million in outstanding letters of credit under the Credit Facility, reducing available borrowing capacity, but no outstanding cash borrowings.
In November 2019, and as since amended, we entered into a five-year $100 million senior secured revolving credit agreement (the “Credit Facility”) with PNC Bank, National Association. Effective as of February 4, 2025, the Credit Facility was amended to extend the expiration date to February 4, 2027.
Also contributing to the change was: • The increase in Pega Cloud gross profit percent in 2024 was primarily due to increased cost efficiency, primarily for hosting services and employee compensation and benefits, as Pega Cloud continues to grow and scale. • The decrease in consulting gross profit percent in 2024 was primarily due to a decrease in utilization rates.
Also contributing to the change was: • The increase in Pega Cloud gross profit percent in 2025 was primarily due to increased hosting cost efficiencies as Pega Cloud continues to grow and scale and a reallocation of certain headcount from Pega Cloud to Maintenance to align with the change in the nature of their responsibilities. • The increase in consulting gross profit percent in 2025 was primarily due to an increase in consultant utilization rates offset by an increase in contracted services of $6.1 million.
The Company determined that the objectively and verifiable negative evidence outweighed the positive evidence, as such maintained a valuation allowance on our U.S. and U.K. deferred tax assets. We assess our income tax positions and record tax benefits based on management’s evaluation of the facts, circumstances, and information available at the reporting date.
As of December 31, 2025, we concluded that substantially all of our deferred tax assets are more likely than not to be realized. We assess our income tax positions and record tax benefits based on management’s evaluation of the facts, circumstances, and information available at the reporting date.
Other income and expenses (Dollars in thousands) 2024 2023 Change Foreign currency transaction (loss) gain $ (912) $ (5,242) $ 4,330 83 % Interest income 25,779 9,259 16,520 178 % Interest expense (6,835) (6,876) 41 1 % (Loss) on capped call transactions (663) (1,348) 685 51 % Other income, net 1,385 18,693 (17,308) (93) % $ 18,754 $ 14,486 $ 4,268 29 % • The change in foreign currency transaction (loss) gain in 2024 was primarily due to the impact of fluctuations in foreign currency exchange rates associated with foreign currency-denominated cash and receivables held by our subsidiary in the United Kingdom. • The increase in interest income in 2024 was primarily due to higher investment balances and higher interest rate yields. • The change in (loss) on capped call transactions in 2024 was due to fair value adjustments for our capped call transactions. • The decrease in other income, net in 2024, was due to a reduction of $7.4 million in the gain from repurchases of our convertible senior notes and a reduction of $10 million in the gain in the value of equity securities held in our venture investments portfolio.
Other income and expenses (Dollars in thousands) 2025 2024 Change Foreign currency transaction (loss) $ (14,890) $ (912) $ (13,978) * Interest income 13,641 25,779 (12,138) (47) % Interest expense (1,285) (6,835) 5,550 81 % (Loss) on capped call transactions (223) (663) 440 66 % Other income, net 20,284 1,385 18,899 * $ 17,527 $ 18,754 $ (1,227) (7) % * Not meaningful • The change in foreign currency transaction (loss) in 2025 was primarily due to the impact of fluctuations in foreign currency exchange rates associated with foreign currency-denominated receivables held by our subsidiary in the United Kingdom. 28 • The decrease in interest income in 2025 was primarily due to lower investment balances as a result of the repayment of the Notes at maturity during the three months ended March 31, 2025. • The change in (loss) on capped call transactions in 2025 was due to the expiration of the capped call transactions in the three months ended March 31, 2025. • The increase in other income, net in 2025 was primarily due to the gain from the partial sale of a venture investment.
Stock repurchase program Changes in the remaining stock repurchase authority: (in thousands) 2024 December 31, 2023 $ 60,000 Authorizations (1) 250,000 Repurchases (2) (69,557) December 31, 2024 $ 240,443 (1) On April 23, 2024, the Company’s Board of Directors extended the expiration date of the share repurchase program from June 30, 2024 to June 30, 2025.
Stock repurchase program Changes in the remaining stock repurchase authority: (in thousands) (1) 2025 December 31, 2024 $ 240,443 Authorizations (2) 500,000 Repurchases (3) (498,189) December 31, 2025 $ 242,254 (1) Amounts presented are exclusive of the U.S. excise tax on share repurchases.
Operating expenses 2024 2023 Change (Dollars in thousands) % of Revenue % of Revenue Selling and marketing $ 534,780 36 % $ 559,177 39 % $ (24,397) (4) % Research and development $ 298,074 20 % $ 295,512 21 % $ 2,562 1 % General and administrative $ 112,848 8 % $ 96,743 7 % $ 16,105 17 % Litigation settlement, net of recoveries $ 32,403 2 % $ — — % $ 32,403 * Restructuring $ 4,528 — % $ 21,747 2 % $ (17,219) (79) % * not meaningful • The decrease in selling and marketing in 2024 was primarily due to a decrease in compensation and benefits of $27.8 million due to reduced headcount from the optimization of our go-to-market strategy.
Operating expenses 2025 2024 Change (Dollars in thousands) % of Revenue % of Revenue Selling and marketing $ 578,637 33 % $ 534,780 36 % $ 43,857 8 % Research and development $ 312,681 18 % $ 298,074 20 % $ 14,607 5 % General and administrative $ 148,722 9 % $ 112,848 8 % $ 35,874 32 % Litigation settlement, net of recoveries $ 9,750 1 % $ 32,403 2 % $ (22,653) * Restructuring $ 11,540 1 % $ 4,528 — % $ 7,012 155 % * Not meaningful • The increase in selling and marketing in 2025 was primarily due to an increase in compensation and benefits of $31.3 million attributable to increases in headcount and incentive compensation. • The increase in research and development in 2025 was primarily due to an increase in compensation and benefits of $11.6 million attributable to increases in headcount and incentive compensation. • The increase in general and administrative in 2025 was primarily due to an increase of $20.4 million in legal fees and related expenses arising from legal proceedings outside the ordinary course of business.
These amounts are not included in the table above. Dividends (in thousands) 2024 2023 Dividend payments to stockholders $ 10,199 $ 9,964 We intend to pay a quarterly cash dividend of $0.03 per share. However, the Board of Directors may terminate or modify the dividend program without prior notice.
Dividends (in thousands) 2025 2024 Dividend payments to stockholders $ 15,422 $ 10,199 Following the Stock Split and commencing with the third quarter of 2025, we paid and intend to continue to pay a quarterly cash dividend of $0.03 per share, or the equivalent of $0.06 per share prior to the Stock Split.
For additional information, see "Note 12. Restructuring" in Item 8 of this Annual Report. • The increase in general and administrative in 2024 was primarily due to an increase of $10.7 million in compensation and benefits including $4.8 million of stock based compensation expense associated with performance stock options granted in 2023 (see "Note 16.
The plan resulted in a restructuring expense of approximately $13 million in 2025, associated with severance and benefits for impacted employees. For additional information, see "Note 12. Restructuring" in Item 8 of this Annual Report.
(2) Represents the fixed amount owed for purchase obligations including software licenses, hosting services, and sales and marketing programs. (3) Represents the maximum funding under existing venture investment agreements. Our venture investment agreements generally allow us to withhold unpaid funds at our discretion.
(2) Represents the maximum funding under existing venture investment agreements. Our venture investment agreements generally allow us to withhold unpaid funds at our discretion. (3) We cannot reasonably estimate the timing of this cash outflow due to uncertainties in the timing of the effective settlement of tax positions.
Commitments And Contingencies" in Item 8 of this Annual Report. • The restructuring in 2024 and 2023 was primarily due to our efforts to optimize our go-to-market organization and office space. For additional information, see "Note 12. Restructuring" in Item 8 of this Annual Report.
For additional information, see "Note 20. Commitments And Contingencies" in Item 8 of this Annual Report. • During the fourth quarter of 2025, management committed to a restructuring plan, primarily within our consulting organization, intended to better align roles and capacity to an AI-first delivery model.
Common stock repurchases 2024 2023 (in thousands) Shares Amount Shares Amount Repurchases paid 809 $ 68,057 — — Repurchases unpaid at period end 16 1,500 — — Stock repurchase program 825 69,557 — — Tax withholdings for net settlement of equity awards 75 5,435 44 1,916 900 $ 74,992 44 $ 1,916 In 2024 and 2023, instead of receiving cash from the equity holders, we withheld shares with a value of $6.3 million and $1.2 million, respectively, for the exercise price of options.
Common stock repurchases 2025 2024 (in thousands) Shares Amount Shares Amount Repurchases paid 10,659 $ 498,189 1,618 $ 68,057 Repurchases unpaid at period end — — 32 1,500 Stock repurchase program (1) 10,659 498,189 1,650 69,557 Tax withholdings for net settlement of equity awards 328 17,541 150 5,435 10,987 $ 515,730 1,800 $ 74,992 (1) Amounts presented are exclusive of the U.S. excise tax on share repurchases.
On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework that was supported by over 130 countries worldwide.
The Organization for Economic Co-operation and Development (“OECD”) has introduced new global minimum tax regulations, known as Pillar Two, that was supported by over 130 countries worldwide. Certain aspects of Pillar Two are effective for tax years beginning on or after January 1, 2024.
In 2024, we paid $33.9 million to repurchase $34.4 million in aggregate principal amount of convertible senior notes. As of December 31, 2024, we had $468 million in aggregate principal amount of convertible senior notes outstanding due on March 1, 2025. For additional information, see "Note 11. Debt" in Item 8 of this Annual Report.
The remaining outstanding principal balance on the Notes and accrued interest totaling $469.6 million was repaid in its entirety at maturity during the three months ended March 31, 2025. For additional information, see "Note 11. Debt" in Item 8 of this Annual Report.
Removed
Stock-Based Compensation" ) and an increase of $4.8 million in legal fees and related expenses arising from legal proceedings outside the ordinary course of business. We expect to continue to incur additional costs for these proceedings. For additional information, see "Note 20.
Added
In 2025 we experienced an increase of $11.8 million in compensation and benefits attributable to equity compensation and a reallocation of certain headcount from research and development to general and administrative to align with the change in the nature of their responsibilities. • The decrease in litigation settlement, net of recoveries in 2025 was primarily due to the estimated cost to settle ongoing litigation arising from proceedings outside the ordinary course of business.
Removed
For additional information, see "Note 11. Debt" and "Note 13.
Added
Although the U.S. has not enacted legislation to adopt Pillar Two, certain countries in which we operate have already adopted, or are in the process of adopting, legislation to implement Pillar Two. We do not expect this legislation to have a material impact on our consolidated financial statements.
Removed
The EU effective dates were January 1, 2024, and January 1, 2025, for different aspects of the directive. The impact of the Pillar Two Framework on the Company’s income tax provision in 2024 was not material. The Company is continuing to evaluate the potential impact of the Pillar Two Framework on future periods, pending legislative adoption by additional individual countries.
Added
We will continue to monitor and evaluate new legislation and guidance, which could change our current assessment.
Removed
Operating activities The change in cash provided by operating activities in 2024 was primarily due to growth in client collections and the impact of our cost-efficiency initiatives. For additional information, see "Note 12. Restructuring" in Item 8 of this Annual Report.
Added
We have provided a deferred tax liability associated with the tax cost of repatriating unremitted earnings which we do not consider indefinitely reinvested.
Removed
Contractual obligations As of December 31, 2024, our contractual obligations were: Payments due by period (in thousands) 2025 2026 2027 2028 2029 and thereafter Other Total Convertible senior notes (1) $ 469,618 $ — $ — $ — $ — $ — $ 469,618 Purchase obligations (2) 134,631 150,178 165,000 28,242 1,003 — 479,054 Operating lease obligations 18,106 15,404 13,972 13,367 34,277 — 95,126 Venture investment commitments (3) 500 500 — — — — 1,000 Liability for uncertain tax positions (4) — — — — — 15,956 15,956 $ 622,855 $ 166,082 $ 178,972 $ 41,609 $ 35,280 $ 15,956 $ 1,060,754 (1) Includes principal and interest.
Added
As of December 31, 2025 and December 31, 2024, we had letters of credit of $26.7 million and $27.3 million, respectively, under the Credit Facility, however we had no cash borrowings.
Removed
(4) We cannot reasonably estimate the timing of this cash outflow due to uncertainties in the timing of the effective settlement of tax positions. 31 A detailed discussion and analysis of the 2023 year-over-year changes can be found in "Item 7.
Added
(2) On April 22, 2025, our Board of Directors extended the expiration date of the share repurchase program from December 31, 2025 to June 30, 2026 and increased the authorized repurchase amount by $500 million.
Added
On June 20, 2025, we effected the Stock Split of our Common Stock described within "Note 1. Basis Of Presentation" in Item 8 of this Annual Report. All share and per share amounts in our consolidated financial statements and in the accompanying notes for all prior periods presented have been recast to reflect the effect of the Stock Split.
Added
In 2025 and 2024, instead of receiving cash from the equity holders, we withheld shares with a value of $22.4 million and $6.3 million, respectively, for the exercise price of options. These amounts are not included in the table above.
Added
However, the Board of Directors may terminate or modify the dividend program without prior notice. 30 Contractual obligations As of December 31, 2025, our contractual obligations were: Payments due by period (in thousands) 2026 2027 2028 2029 2030 and thereafter Other Total Purchase obligations (1) $ 143,478 $ 190,521 $ 46,489 $ 721 $ 775 $ 381,984 Operating lease obligations 18,275 16,635 14,879 12,046 25,263 — 87,098 Venture investment commitments (2) 1,600 — — — — — 1,600 Liability for uncertain tax positions (3) — — — — — 23,331 23,331 $ 163,353 $ 207,156 $ 61,368 $ 12,767 $ 26,038 $ 23,331 $ 494,013 (1) Represents the fixed amount owed for purchase obligations including software licenses, hosting services, and sales and marketing programs.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed1 unchanged
Biggest changeHowever, our international sales are also primarily denominated in foreign currencies, partially offsetting our foreign currency exposure. 33 A hypothetical 10% strengthening in the U.S. dollar against other currencies would have resulted in the following: 2024 2023 2022 (Decrease) in revenue (4) % (4) % (3) % (Decrease) increase in net income (9) % (8) % 2 % Remeasurement risk We incur transaction gains and losses from the remeasurement of monetary assets and liabilities denominated in currencies other than the functional currency of the entities in which they are recorded.
Biggest changeA hypothetical 10% strengthening in the U.S. dollar against other currencies would have resulted in the following: 2025 2024 2023 (Decrease) in revenue (4) % (4) % (4) % (Decrease) in net income (4) % (9) % (8) % Remeasurement risk We incur transaction gains and losses from the remeasurement of monetary assets and liabilities denominated in currencies other than the functional currency of the entities in which they are recorded.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss from adverse changes in financial market prices and rates. Foreign currency exposure Translation risk Our international operations’ operating expenses are primarily denominated in foreign currencies.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss from adverse changes in financial market prices and rates. Foreign currency exposure Translation risk Our international operations’ operating expenses are primarily denominated in foreign currencies. However, our international sales are also primarily denominated in foreign currencies, partially offsetting our foreign currency exposure.
A hypothetical 10% strengthening in the British pound exchange rate in comparison to the Australian dollar, Euro, and U.S. dollar would have resulted in the following impact: (in thousands) December 31, 2024 December 31, 2023 December 31, 2022 Foreign currency (loss) $ (19,337) $ (11,892) $ (10,164) 34
A hypothetical 10% strengthening in the British pound exchange rate in comparison to the Australian dollar, Euro, and U.S. dollar would have resulted in the following impact: (in thousands) December 31, 2025 December 31, 2024 December 31, 2023 Foreign currency gain (loss) $ (23,438) $ (19,337) $ (11,892) 33

Other PEGA 10-K year-over-year comparisons