$PEGA · PEGASYSTEMS INC
Pegasystems filed its Q3 FY2026 10-Q, reporting revenue of $393.4M (+3.1% YoY) and net income of $14.1M, down 68% from $43.4M in Q3 2025. Diluted EPS fell to $0.08 from $0.24. For the nine months, revenue was flat at $1.24B while net income dropped 62% to $60.2M. The quarter included a $16M litigation settlement charge. Stockholders' equity declined to $549.1M from $787.4M at year-end 2025, driven by $432.7M in stock repurchases over nine months.
- Q3 net income fell to $14.1M from $43.4M YoY, a 68% decline, despite 3% revenue growth to $393.4M.
- Nine-month net income dropped 62% to $60.2M from $158.9M, driven by a $16M litigation settlement and higher operating costs.
- Pega Cloud revenue grew 19% YoY to $218.9M, now 56% of total revenue, while subscription license revenue fell 9%.
- Stockholders' equity shrank to $549.1M from $787.4M at year-end 2025, largely due to $432.7M in stock repurchases.
- Operating margin compressed to 3.8% in Q3 2026; nine-month operating income fell 57% to $68.6M from $158.7M.
Extended-hours trading shows PEGA at $34.55, down 4.64% from the regular-session close of $36.23. The sharp net income decline and equity erosion from aggressive buybacks are driving the negative after-hours reaction.
The combination of a 68% net income drop, a $16M litigation hit, and $432.7M in buybacks shrinking equity by 30% in nine months signals both operational and capital-allocation stress.
Pega's cloud transition continues with Pega Cloud now 56% of revenue, but the 19% cloud growth rate trails enterprise-software peers in the AI-driven modernization cycle. Consulting revenue fell 18% YoY, suggesting weaker services demand.
The $16M litigation settlement recorded in Q3 2026 signals ongoing legal exposure. Stockholders' equity has been cut by 30% in nine months through $432.7M in buybacks, reducing the balance-sheet cushion against future shocks.
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