Low-code automation software company Pegasystems (NASDAQ: PEGA) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 17.3% year on year to $381.4 million. Its non-GAAP profit of $0.30 per share was 50.1% above analysts’ consensus estimates.
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Pegasystems (PEGA) Q3 CY2025 Highlights:
- Revenue: $381.4 million vs analyst estimates of $351.6 million (17.3% year-on-year growth, 8.5% beat)
- Adjusted EPS: $0.30 vs analyst estimates of $0.20 (50.1% beat)
- Adjusted Operating Income: $55.16 million vs analyst estimates of $39.47 million (14.5% margin, 39.7% beat)
- Operating Margin: 3.8%, up from -3.6% in the same quarter last year
- Free Cash Flow Margin: 13.6%, down from 21.9% in the previous quarter
- Market Capitalization: $9.37 billion
Company Overview
With a "Center-out Business Architecture" approach that transcends organizational silos, Pegasystems (NASDAQ: PEGA) develops software that helps organizations automate workflows and use artificial intelligence to improve customer experiences and business processes.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Pegasystems grew its sales at a 11.7% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.
We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Pegasystems’s annualized revenue growth of 13.1% over the last two years is above its five-year trend, but we were still disappointed by the results. 
This quarter, Pegasystems reported year-on-year revenue growth of 17.3%, and its $381.4 million of revenue exceeded Wall Street’s estimates by 8.5%.
Looking ahead, sell-side analysts expect revenue to grow 2.7% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
Pegasystems’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a highly competitive environment where there is little differentiation between Pegasystems’s products and its peers.
Key Takeaways from Pegasystems’s Q3 Results
We enjoyed seeing Pegasystems beat analysts’ revenue expectations this quarter. Zooming out, we think this was a solid print. The stock traded up 7.8% to $61.50 immediately following the results.
Pegasystems had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
