Pegasystems (NASDAQ:PEGA) shares fell about 15% following the release of its second quarter 2026 results, after the enterprise software company missed Wall Street expectations on both earnings and revenue.
The company reported adjusted earnings per share of $0.35 for the quarter, below analyst estimates of $0.43.
Revenue came in at $420.7 million, compared with consensus expectations of $427.4 million.
Revenue increased 9% year over year from $384.5 million, driven by growth in subscription-related businesses. Pega Cloud revenue rose 28% year over year to $213.9 million, while subscription services revenue increased 17% to $288.5 million. Consulting revenue declined 13% to $50.2 million.
Pegasystems highlighted growth in annual contract value (ACV), with total ACV increasing 7% year over year to $1.62 billion, or 8% on a constant currency basis. Pega Cloud ACV grew 22% year over year.
The company also reported strong cash generation during the first half of the year, with operating cash flow reaching $298 million and free cash flow totaling $288 million.
“Pega generated record first-half cash flow and returned substantial capital to shareholders,” Pegasystems’ chief operating officer and chief financial officer Ken Stillwell said in a statement.
“As the market shifts from AI experimentation to tokenomics and reliable business outcomes, that evolution plays directly to Pega’s strengths, and we remain confident in our strategy to capitalize on the opportunity ahead.”
Pegasystems CEO Alan Trefler highlighted the company’s AI-focused product developments, including the release of Pega Infinity 26, which the company said is designed to help enterprises deploy AI with more predictable costs and outcomes.
“Pega Infinity 26 uniquely deploys the power of AI with predictable outcomes and predictable costs by applying agents at design time to optimize run-time token use,” Trefler wrote.
Pegasystems noted that changes in the artificial intelligence market have caused some customers to delay purchasing decisions, impacting ACV growth during the first half of the year. The company warned that these factors could continue to weigh on ACV growth for the remainder of 2026.