PEGA's Cloud Backlog Climbs: A Sign of Strong Revenue Visibility?

Pegasystems PEGA is riding on the momentum of its robust cloud business, signaling strong prospects for future revenues. In the second quarter of 2025, Pega Cloud backlog rose 30% year over year to about $1.32 billion, with total backlog reaching $1.84 billion. This growth reflects significant committed business that has yet to be recognized as revenues, ensuring a healthy pipeline for the coming quarters.

Driving this momentum is Annual Contract Value (ACV) growth, which rose 16% year over year to $1.514 billion, while Pega Cloud ACV jumped 28%. This increase underscores strong demand for PEGA’s AI-powered solutions, such as Pega Blueprint and Predictable AI. The company’s pivot to a subscription-based model contributes the majority of its revenues, further enhances predictability, and minimizes reliance on one-time licenses.

Significantly, the current cloud backlog, expected to convert within the next 12 months, grew 28% year over year, offering near-term revenue visibility. Historically, backlog expansion has aligned with steady revenue growth. In early 2024, cloud backlog crossed $1 billion for the first time, and since then, quarterly revenues have consistently trended upward, with second-quarter 2025 revenues up 9% year over year.

With this robust backlog and strategic execution, PEGA appears well-positioned to sustain revenue growth. The Zacks Consensus Estimate for fiscal 2025 and 2026 indicates that revenues will grow 13.71% and 5.83%, respectively, on a year-over-year basis.

PEGA’s Key Competitors in Cloud & Enterprise Software

Pegasystems faces strong competition in the cloud market, particularly from Oracle ORCL and Salesforce CRM.

Oracle is gaining momentum through its expanding Oracle Cloud Infrastructure, supported by a full suite of Oracle Cloud Applications, including its CX platform. It now operates in 23 cloud regions with 47 more planned, reinforcing its global scale. With strengths in AI-driven databases, integrated enterprise solutions, and robust cash flow, Oracle is positioned to compete effectively with Pegasystems and others, while its growing cloud footprint secures the company’s long-term competitive advantage in the enterprise software market.

Salesforce stands as a leader in cloud-based CRM, leveraging its AppExchange marketplace, Einstein AI and scalable SaaS framework to deliver unmatched flexibility. Unlike Pegasystems’ hybrid and on-premise options, Salesforce is fully cloud-native, ensuring seamless access and integration across enterprises. The company consistently wins praise for its intuitive design, rapid adoption and strong third-party ecosystem. With superior usability and a vast developer community, Salesforce continues to set the benchmark in customer engagement and enterprise cloud solutions.

PEGA’s Price Performance, Valuation & Estimates

Pegasystems’ shares have gained 9.7% year to date, while the broader Zacks Computer and Technology sector has returned 10.8% and the Computer-Software industry has risen 16.3%.

PEGA’s YTD Price Performance

PEGA has a Value Score of D. It is currently trading at a forward 12-month price-to-earnings ratio of 24.66X compared to the industry’s 32.73X.

PEGA’s Valuation

The Zacks Consensus Estimate for PEGA’s earnings is pegged at $1.98 per share for 2025, reflecting year-over-year growth of 31.13%, and rising 7.6% over the past 30 days.

PEGA stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

This article originally published on Zacks Investment Research (zacks.com).

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