Shares of Pegasystems (PEGA 0.85%), a provider of an enterprise workflow automation platform, spiked this morning after the company released better-than-expected results for its third quarter. Sales and earnings beat Wall Street's consensus estimates, and Pegasystems highlighted growth from its cloud-based services and its momentum in artificial intelligence (AI).
Investors were clearly happy with the results, sending the stock up by as much as 17%. The company's shares were up by 10.4% as of 11:56 a.m. ET.
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A blowout quarter
Pegasystems reported adjusted earnings per share (EPS) of $0.30 for the third quarter, easily surpassing analysts' consensus estimates of $0.18 and a 58% improvement over its earnings in the year-ago quarter. On the basis of generally accepted accounting principles (GAAP), the company swung back to profitability in the quarter, with net income of $43.4 million, compared to a loss of $14.4 million in the year-ago quarter.
Revenue also beat estimates, with sales rising 17% to $381.4 million, surpassing expectations of $351.5 million.
NASDAQ: PEGA
Key Data Points
Part of the reason for the strong third-quarter results came from growth in the company's annual contract value (ACV), particularly from its cloud services. The company said its Pega Cloud ACV jumped 27% in the quarter to about $1.6 billion.
Management also highlighted that its AI strategy is paying off, with CEO Alan Trefler saying, "Our differentiated AI strategy continues to resonate deeply with clients, prospects, and partners, unlocking new levels of speed, predictability, and scale in enterprise applications."
Strong momentum heading into the fourth quarter
Management doesn't update its outlook throughout the year, but its strong third-quarter results go a long way toward helping the company achieve the 2025 guidance it stated at the beginning of the year, which was for 12% ACV growth and a free cash flow increase of 30% to $440 million.
With free cash flow rising 38% in the third quarter and ACV rising 14%, chief operating officer Ken Stillwell said on the earnings call that the company is focused "on closing the year out strong and continuing the momentum that we've seen through 2025." If the third-quarter results are any indicator, Pegasystems shareholders may have more to look forward to.
