Pegasystems Earnings: Clear Momentum in AI Provides Boost to Strong Results

We are raising our fair value estimate for no-moat Pegasystems to $70 per share from $65, after the firm reported strong second-quarter results that materially beat our expectations on both the top and bottom lines. The firm does not provide quarterly guidance, so results are somewhat prone to meaningful swings. Still, we view the results as robust and believe Pegasystems is on track to exceed its annual targets. We adjusted our near-term growth estimates slightly higher, while modestly increasing our profitability assumptions over the next several years. The firm’s artificial intelligence investments are creating product momentum and bringing new clients to the platform. In fact, the company is making a nuanced shift to target new logos again in a focused manner. After nearly doubling over the past nine months, we see shares as fairly valued.