Pegasystems (PEGA) Stock Forecast & Price Target

Pegasystems demonstrated strong financial performance with a year-over-year revenue growth of 17%, reaching $381.4 million in Q3, significantly exceeding both internal estimates and market consensus. The robust growth in cloud revenue, which rose to $184.5 million—up 28% organically—highlights the company's effective positioning to capitalize on the increasing demand for digital transformation among large enterprises. Additionally, the company's backlog (RPO) grew by 19% year-over-year to $1.8 billion, with cloud backlog making up 73% of this total, indicating a solid foundation for future revenue generation.

Pegasystems has provided FY25 revenue guidance of $1,700 million, which is approximately $7 million below consensus expectations, reflecting an anticipated 14% year-over-year growth that may not align with market forecasts. The company's operating margins in Q3 fell to 15%, underperforming the forecasted 15.5%, while a projected decline in term licenses raises concerns about future revenue stability. Moreover, multiple risks, including unfavorable macroeconomic conditions and variability in annual contract value growth rates, coupled with potential service disruptions and a slow progress towards 2023 financial targets, contribute to a negative outlook for Pegasystems’s stock.