Shares of Pegasystems (PEGA 4.60%) were surging higher Thursday after the low-code software company breezed past estimates in its fourth-quarter earnings report.
As of 1 p.m. ET, the stock was up 31.9%.
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How Pegasystems wowed the market
Pegasystems' revenue growth accelerated from earlier in the year to 20%, reaching $474.2 million, which was much better than the consensus estimate of $413.6 million.
Growth in annual contract value increased 11% to $1.26 billion as the company is seeing demand for AI products start to ramp up. This earnings report came out just days after Pega introduced Pega GenAI Blueprint, a collaborative generative AI application intended to "turbocharge the app design process."
On the bottom line, Pega's profits surged. Adjusted earnings per share more than doubled from $0.82 to $1.77, which was well ahead of the consensus estimate of $1.00.
"We delivered transformative innovation to change the way the world builds software while deepening and expanding our client relationships," said CEO Alan Trefler.
Management also said it was on track "to achieve the Rule of 40 as we exit 2024," meaning its revenue growth rate and free cash flow margin combined will be at least 40%.
Where Pega goes from here
Pega's guidance also topped expectations as management forecast annual contract value growth of 11% and revenue of $1.5 billion, which essentially matched estimates, but represents just 4.7% growth. On the bottom line, it sees adjusted EPS improving from $2.48 to $2.75, ahead of the $2.43 consensus estimate.
Excitement for generative AI software like Pega's new GenAI Blueprint is clearly building, and investors seem to be betting that this momentum will carry through 2024, lifting results past guidance.
If Pega can keep surprising to the upside with its financials, the software stock will move higher.
