Financial Analysis

"20. COMMITMENTS AND CONTINGENCIES Commitments For additional information, see ""Note 10. Leases"". Legal proceedings In addition to the matters below, the Company is or may become involved in a variety of claims, demands, suits, investigations, and proceedings that arise from time to time relating to matters incidental to the ordinary course of the Companys business, including actions concerning contracts, intellectual property, employment, benefits, and securities matters. Regardless of the outcome, legal disputes can have a material effect on the Company because of defense and settlement costs, diversion of management resources, and other factors. In addition, as the Company is a party to ongoing litigation, it is at least reasonably possible that the Companys estimates will change in the near term, and the effect may be material. As of December 31, 2025, the Company recorded an estimated $9.75 million accrued loss related to an agreed in principle settlement of the In re Pegasystems Inc. Derivative Litigation matter, see additional discussion below. The Company had no accrued loss for litigation as of December 31, 2024. Appian Corp. v. Pegasystems Inc. & Youyong Zou The Company is a defendant in litigation brought by Appian in the Circuit Court of Fairfax County, Virginia titled Appian Corp. v. Pegasystems Inc. & Youyong Zou, No. 2020-07216 (Fairfax Cty. Ct.). On May 9, 2022, the jury rendered its verdict finding that the Company had misappropriated one or more of …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

17. EMPLOYEE BENEFIT PLANS The Company sponsors defined contribution plans for qualifying employees, including a 401(k) plan in the United States to which the Company makes discretionary matching contributions. Employee benefit plan expenses: (in thousands) 2025 2024 2023 U.S. 401(k) Plan $ 8,230 $ 7,937 $ 8,169 International plans 21,825 20,303 21,256 $ 30,055 $ 28,240 $ 29,425

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11. DEBT Convertible senior notes and capped calls Convertible senior notes In February 2020, the Company issued Notes with an aggregate principal of $600 million, due March 1, 2025, in a private placement. No principal payments were due before maturity. The Notes accrued interest at an annual rate of 0.75%, paid semi-annually in arrears on March 1 and September 1, beginning September 1, 2020. The remaining outstanding principal balance on the Notes and accrued interest totaling $469.6 million was repaid in its entirety at maturity during the three months ended March 31, 2025. Conversion rights The conversion rate was 14.809 shares of common stock per $1,000 principal amount of the Notes, representing a conversion price of $67.53 per share of common stock. Carrying value of the Notes: (in thousands) December 31, 2025 December 31, 2024 Principal $ $ 467,864 Unamortized issuance costs (394) Convertible senior notes, net $ $ 467,470 Interest expense related to the Notes: (in thousands) 2025 2024 Contractual interest expense (0.75% coupon) $ 595 $ 3,725 Amortization of issuance costs 394 2,451 $ 989 $ 6,176 The average interest rate on the Notes during the three months ended March 31, 2025 and year ended December 31, 2024 was 1.2%. Capped call transactions In February 2020, the Company entered into privately negotiated capped call transactions (the Capped Call Transactions) with certain financial institutions. The Capped Call Transactions expired upon maturity of the Notes during …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

Revenue streams (in thousands) 2025 2024 2023 Pega Cloud $ 695,902 $ 558,734 $ 461,328 Maintenance 314,593 323,304 331,856 Consulting 227,949 213,273 221,706 Revenue recognized over time 1,238,444 1,095,311 1,014,890 Subscription license 507,368 401,869 417,726 Revenue recognized at a point in time 507,368 401,869 417,726 $ 1,745,812 $ 1,497,180 $ 1,432,616 (in thousands) 2025 2024 2023 Pega Cloud $ 695,902 $ 558,734 $ 461,328 Maintenance 314,593 323,304 331,856 Subscription services 1,010,495 882,038 793,184 Subscription license 507,368 401,869 417,726 Subscription 1,517,863 1,283,907 1,210,910 Consulting 227,949 213,273 221,706 $ 1,745,812 $ 1,497,180 $ 1,432,616

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16. STOCK-BASED COMPENSATION (in thousands) 2025 2024 2023 Cost of revenue $ 26,646 $ 27,353 $ 28,994 Selling and marketing 60,721 55,084 57,675 Research and development 31,684 29,838 31,039 General and administrative 36,188 30,443 25,644 $ 155,239 $ 142,718 $ 143,352 Income tax benefit $ (31,043) $ (1,799) $ (2,187) The Company periodically grants employees stock options and restricted stock units (RSUs) and non-employee Directors common stock and stock options. Prior to 2023, most of the Companys stock based compensation arrangements vest over five years, with 20% vesting after one year and the remaining 80% vesting quarterly over the remaining four years. Beginning in 2023, most of the Companys stock based compensation arrangements vest over four years, with 25% vesting after one year and the remaining 75% vesting quarterly over the remaining three years. The Company also granted performance stock options which vest based on the Companys achievement of specific performance conditions. The Companys stock options have a term of ten years. The Company recognizes stock-based compensation using the accelerated attribution method, treating each vesting tranche as an individual grant. The stock-based compensation expense recognized during a period is based on the value of the awards that are expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Ultimately, the Company re …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

13. FAIR VALUE MEASUREMENTS Assets and liabilities measured at fair value on a recurring basis The Company records its cash equivalents, marketable securities, capped call transactions, and venture investments at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants based on assumptions that market participants would use in pricing an asset or liability. As a basis for classifying the fair value measurements, a three-tier fair value hierarchy, which classifies the fair value measurements based on the inputs used in measuring fair value, was established as follows: Level 1 - observable inputs, such as quoted prices in active markets for identical assets or liabilities; Level 2 - significant other inputs that are observable either directly or indirectly; and Level 3 - significant unobservable inputs with little or no market data, which require the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data when available and minimize unobservable inputs when determining fair value. The fair value of the Capped Call Transactions at the end of each reporting period is determined using a Black-Scholes option-pricing model. The valuation model uses various market-based inputs, including stock price, remaining contractual term, expected volatility, risk-free interest rate, …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

7. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill (in thousands) 2025 2024 January 1, $ 81,113 $ 81,611 Currency translation adjustments 393 (498) December 31, $ 81,506 $ 81,113 Intangibles Intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives: December 31, 2025 (in thousands) Useful Lives Cost Accumulated Amortization Net Book Value (1) Client-related 4-10 years $ 63,164 $ (62,822) $ 342 Technology 2-10 years 68,115 (67,255) 860 Other 1-5 years 5,361 (5,361) $ 136,640 $ (135,438) $ 1,202 (1) Included in other long-term assets. December 31, 2024 (in thousands) Useful Lives Cost Accumulated Amortization Net Book Value (1) Client-related 4-10 years $ 63,107 $ (61,395) $ 1,712 Technology 2-10 years 68,115 (65,995) 2,120 Other 1-5 years 5,361 (5,361) $ 136,583 $ (132,751) $ 3,832 (1) Included in other long-term assets. Future estimated intangible assets amortization: (in thousands) December 31, 2025 2026 $ 874 2027 328 $ 1,202 Amortization of intangible assets: (in thousands) 2025 2024 2023 Cost of revenue $ 1,260 $ 1,783 $ 2,570 Selling and marketing 1,370 1,370 1,370 $ 2,630 $ 3,153 $ 3,940 …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

18. INCOME TAXES The components of income before (benefit from) provision for income taxes are: (in thousands) 2025 2024 2023 Domestic $ 160,307 $ 51,966 $ 14,016 Foreign 120,320 90,670 81,424 $ 280,627 $ 142,636 $ 95,440 The components of (benefit from) provision for income taxes are: (in thousands) 2025 2024 2023 Current: Federal $ 27,011 $ 22,941 $ 7,827 State 7,236 7,503 4,480 Foreign 23,756 14,547 14,962 Total current provision 58,003 44,991 27,269 Deferred: Federal (90,414) State (24,461) Foreign (55,938) (1,544) 363 Total deferred (benefit) provision (170,813) (1,544) 363 $ (112,810) $ 43,447 $ 27,632 Below is a reconciliation of the U.S federal statutory tax rate and the Companys effective tax rate for 2025: 2025 (in thousands, except percentages) Amount Percent U.S. federal statutory income tax $ 58,932 21 % State and local income taxes, net of federal benefit (1) (13,280) (5) % United States: Effect of cross-border tax laws: Other (2,216) (1) % Tax credits: Research and development credits (3,935) (1) % Changes in valuation allowances (97,682) (35) % Non-taxable or non-deductible items: Non deductible compensation 10,914 4 % Excess tax (benefits) related to share-based compensation (21,611) (8) % Other 65 % Other adjustments: Attribute write-off 4,870 2 % Other 1,816 1 % Foreign tax effects: United Kingdom: Statutory tax rate difference 3,215 1 % Changes in valuation allowances (60,624) (22) % Other (5,380) (2) % India 8,234 3 % Other foreign jurisdictions 6,014 2 % …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

10. LEASES On January 1, 2025, the Company relocated its corporate headquarters to 225 Wyman Street, Waltham, Massachusetts. Expense (in thousands) 2025 2024 2023 Fixed lease costs $ 14,700 $ 21,422 $ 19,718 Short-term lease costs 1,715 1,746 2,884 Variable lease costs 7,465 6,901 8,148 $ 23,880 $ 30,069 $ 30,750 Right of use assets and lease liabilities (in thousands) December 31, 2025 December 31, 2024 Right of use assets (1) $ 60,574 $ 62,429 Operating lease liabilities (2) $ 15,142 $ 14,551 Long-term operating lease liabilities $ 60,825 $ 67,647 (1) Included in other long-term assets. (2) Included in other current liabilities. The weighted-average remaining lease term and discount rate for the Companys leases were: December 31, 2025 December 31, 2024 Weighted-average remaining lease term 5.4 years 6.2 years Weighted-average discount rate (1) 5.2 % 4.8 % (1) The rates implicit in the Companys leases are not readily determinable. Therefore, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur to borrow an amount equal to the lease payments on a collateralized basis over the lease term in a similar economic environment. Maturities of lease liabilities: (in thousands) December 31, 2025 2026 $ 18,275 2027 16,635 2028 14,879 2029 12,046 2030 10,356 Thereafter 14,907 Total lease payments 87,098 Less: imputed interest (1) ( …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

"Newly adopted accounting pronouncements Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09 , Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 includes expanded income tax rate reconciliation disclosures, a disaggregation of income taxes paid, and other expanded disclosures. The Company adopted this standard on a prospective basis for the year ended December 31, 2025. For additional information, see ""Note 18. Income Taxes"". Accounting pronouncements not yet effective Disaggregation of Income Statement Expenses In November 2024, the FASB issued ASU 2024-03 , Income StatementReporting Comprehensive IncomeExpense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03). Among other items, the requirements include expanded disclosures around employee compensation and selling expenses. ASU 2024-03 will be effective for the Company for the year ending December 31, 2027. The Company is still evaluating the impact of this new guidance on its consolidated financial statements but expect the adoption to result in disclosure changes only. Targeted Improvements to the Accounting for Internal-Use Software In September 2025, the FASB issued ASU 2025-06, Intangibles Goodwill and Other Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (ASU 2025-06). ASU 2025-06 introduces a more principles-based framework to the …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

12. RESTRUCTURING During the fourth quarter of 2025, management committed to a restructuring plan, primarily within the Companys consulting organization, intended to better align roles and capacity to an AI-first delivery model. The plan resulted in a restructuring expense of approximately $13 million in 2025, associated with severance and benefits for impacted employees. Restructuring Expense (in thousands) 2025 2024 2023 Employee severance and related benefits $ 12,778 $ (614) $ 18,721 Office space reductions (1) (1,238) 5,142 3,026 $ 11,540 $ 4,528 $ 21,747 (1) These primarily relate to non-cash operating lease adjustments. Restructuring activity Accrued employee severance and related benefits: (in thousands) 2025 January 1, $ 2,000 Costs incurred 12,778 Cash disbursements (2,056) Currency translation adjustments 136 December 31, (1) $ 12,858 (1) Included in accrued compensation and related expenses. …

RestructuringAndRelatedActivitiesDisclosureTextBlock · excerpt; the full note is in the filing

"15. REVENUE Geographic revenue Revenues by geography are determined based on client location: (Dollars in thousands) 2025 2024 2023 U.S. $ 956,296 54 % $ 828,332 55 % $ 785,029 55 % Other Americas 115,266 7 % 95,698 6 % 85,149 6 % United Kingdom (U.K.) 189,993 11 % 157,830 11 % 158,014 11 % Europe (excluding U.K.), Middle East, and Africa 270,627 16 % 249,325 17 % 242,303 17 % Asia-Pacific 213,630 12 % 165,995 11 % 162,121 11 % $ 1,745,812 100 % $ 1,497,180 100 % $ 1,432,616 100 % Revenue streams (in thousands) 2025 2024 2023 Pega Cloud $ 695,902 $ 558,734 $ 461,328 Maintenance 314,593 323,304 331,856 Consulting 227,949 213,273 221,706 Revenue recognized over time 1,238,444 1,095,311 1,014,890 Subscription license 507,368 401,869 417,726 Revenue recognized at a point in time 507,368 401,869 417,726 $ 1,745,812 $ 1,497,180 $ 1,432,616 (in thousands) 2025 2024 2023 Pega Cloud $ 695,902 $ 558,734 $ 461,328 Maintenance 314,593 323,304 331,856 Subscription services 1,010,495 882,038 793,184 Subscription license 507,368 401,869 417,726 Subscription 1,517,863 1,283,907 1,210,910 Consulting 227,949 213,273 221,706 $ 1,745,812 $ 1,497,180 $ 1,432,616 Remaining performance obligations (""Backlog"") Expected future revenue from existing non-cancellable contracts: As of December 31, 2025: (Dollars in thousands) Subscription services Subscription license Consulting Total Pega Cloud Maintenance 1 year or less $ 709,190 $ 235,152 $ 77,528 $ 53,353 $ 1,075,223 52 % 1-2 years 400,926 73,895 …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"9. SEGMENT INFORMATION Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker (CODM) in deciding how to allocate resources and assess performance. The Company derives substantially all of its revenue from the sale and support of one group of similar products and services software that provides case management, business process management, and real-time decisioning solutions to improve customer engagement and operational excellence in the enterprise applications market. To assess performance, the Companys CODM, the CEO, reviews financial information on a consolidated basis. Therefore, the Company determined it has one operating segment and one reportable segment. The accounting policies of the Companys operating segment are the same as those described in ""Note 2. Significant Accounting Policies"". The CODM uses consolidated net income to set financial performance targets, assess performance, and make expense allocation decisions. (in thousands) 2025 2024 2023 Total revenue $ 1,745,812 $ 1,497,180 $ 1,432,616 Total cost of revenue 421,382 390,665 378,483 Selling 484,736 450,527 474,405 Marketing 93,901 84,253 84,772 Research and development 312,681 298,074 295,512 General and administrative 148,722 112,848 96,743 Other segment items, net (1) 3,763 18,177 7,261 (Benefit from) provision for income taxes (112,810) 43,447 27,632 Net income $ 393,437 $ 9 …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

"2. SIGNIFICANT ACCOUNTING POLICIES Revenue The Companys revenue is derived from: Subscription services, composed of revenue from Pega Cloud and maintenance. Pega Cloud is the Companys hosted Pega Platform and software applications. Maintenance revenue is earned from providing client support, software upgrades, and bug fixes or patches. Subscription license, composed of revenue from term license arrangements for the Companys Pega Platform and software applications. Term licenses represent functional intellectual property and are delivered separately from maintenance and services. Perpetual license, composed of revenue from perpetual license arrangements for the Companys Pega Platform and software applications. Perpetual licenses represent functional intellectual property and are delivered separately from maintenance and services. Consulting, primarily related to new software license implementations, training, and reimbursable costs. Performance obligations The Companys software license and Pega Cloud arrangements often contain multiple performance obligations. If a contract contains multiple performance obligations, the Company accounts for each distinct performance obligation separately. The transaction price is allocated to the separate performance obligations on a relative stand-alone selling price basis. Any discounts or expected potential future price concessions are considered when determining the total transaction price. The Companys policy is to exclude sales and simi …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

"14. STOCKHOLDERS EQUITY Preferred stock The Company has 1 million authorized shares of preferred stock, $0.01 par value per share, of which none were issued and outstanding as of December 31, 2025. The Board of Directors has the authority to issue the shares of preferred stock in one or more series, to establish the number of shares to be included in each series, and to determine the designation, powers, preferences, and rights of the shares of each series and the qualifications, limitations, or restrictions thereof, without any further vote or action by the stockholders. The issuance of preferred stock could decrease the earnings and assets available for distribution to holders of common stock and may have the effect of delaying, deferring, or defeating a change in control of the Company. Common stock The Company has 400 million authorized shares of common stock, $0.01 par value per share, of which 170.3 million were issued and outstanding as of December 31, 2025. Stock split On June 20, 2025, the Company effected the Stock Split of the Companys Common Stock described above in ""Note 1. Basis Of Presentation"". All share and per share amounts in the Companys consolidated financial statements and in the accompanying notes for all prior periods presented have been recast to reflect the effect of the Stock Split. Dividends declared 2025 2024 2023 Dividends declared (per share) $ 0.105 $ 0.06 $ 0.06 Dividend payments to stockholders (in thousands) $ 15,422 $ 10,199 $ 9,964 Foll …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 16. COMMITMENTS AND CONTINGENCIES Legal proceedings In addition to the matters below, the Company is or may become involved in a variety of claims, demands, suits, investigations, and proceedings that arise from time to time relating to matters incidental to the ordinary course of the Companys business, including actions concerning contracts, intellectual property, employment, benefits, and securities matters. Regardless of the outcome, legal disputes can have a material effect on the Company because of defense and settlement costs, diversion of management resources, and other factors. In addition, as the Company is a party to ongoing litigation, it is at least reasonably possible that the Companys estimates will change in the near term, and the effect may be material. As of June 30, 2026 and December 31, 2025, the Company recorded an estimated $9.75 million accrued loss related to the agreed in principle settlement of the In re Pegasystems Inc. Derivative Litigation matter, see additional discussion below. Appian Corp. v. Pegasystems Inc. & Youyong Zou The Company is a defendant in litigation brought by Appian in the Circuit Court of Fairfax County, Virginia titled Appian Corp. v. Pegasystems Inc. & Youyong Zou, No. 2020-07216 (Fairfax Cty. Ct.). On May 9, 2022, the jury rendered its verdict finding that the Company had misappropriated one or more of Appians trade secrets, that the Company had violated the Virginia Computer Crimes Act, and that the trade secret …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 9. DEBT Credit facility In November 2019, and as since amended, the Company entered into a five-year $100 million senior secured revolving credit agreement (the Credit Facility) with PNC Bank, National Association. Effective as of February 4, 2025, the Credit Facility was amended to extend the expiration date to February 4, 2027. The Company may use borrowings for general corporate purposes and to finance working capital needs. Subject to specific conditions and the agreement of the financial institutions lending the additional amount, the aggregate commitment may be increased to $200 million. The Credit Facility, as amended, contains customary covenants, including, but not limited to, those relating to additional indebtedness, liens, asset divestitures, and affiliate transactions. Beginning with the fiscal quarter ended March 31, 2024, the Company must maintain a maximum net consolidated leverage ratio of 3.5 to 1.0 (with a step-up for certain acquisitions) and a minimum consolidated interest coverage ratio of 3.5 to 1.0. As of June 30, 2026, the Company is compliant with all Credit Facility covenants. As of June 30, 2026 and December 31, 2025, the Company had letters of credit of $1.7 million and $26.7 million, respectively, under the Credit Facility, however we had no cash borrowings. …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

Revenue streams Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2026 2025 2026 2025 Pega Cloud $ 213,934 $ 166,743 $ 418,965 $ 317,866 Maintenance 74,528 79,271 149,845 155,639 Consulting 50,226 57,824 104,999 118,245 Revenue recognized over time 338,688 303,838 673,809 591,750 Subscription license 82,028 80,674 176,880 268,395 Revenue recognized at a point in time 82,028 80,674 176,880 268,395 Total revenue $ 420,716 $ 384,512 $ 850,689 $ 860,145 Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2026 2025 2026 2025 Pega Cloud $ 213,934 $ 166,743 $ 418,965 $ 317,866 Maintenance 74,528 79,271 149,845 155,639 Subscription services 288,462 246,014 568,810 473,505 Subscription license 82,028 80,674 176,880 268,395 Subscription 370,490 326,688 745,690 741,900 Consulting 50,226 57,824 104,999 118,245 Total revenue $ 420,716 $ 384,512 $ 850,689 $ 860,145

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NOTE 13. STOCKHOLDERS' EQUITY Stock-based Compensation Expense Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2026 2025 2026 2025 Cost of revenue $ 6,752 $ 7,288 $ 14,628 $ 15,111 Selling and marketing 14,555 14,378 33,009 30,159 Research and development 7,943 7,490 17,962 15,875 General and administrative 6,976 7,574 16,442 17,010 $ 36,226 $ 36,730 $ 82,041 $ 78,155 Income tax benefit $ (7,091) $ (566) $ (16,255) $ (1,153) As of June 30, 2026, the Company had $166.8 million of unrecognized stock-based compensation expense, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 1.8 years. Grants Six Months Ended June 30, 2026 (in thousands) Quantity Total Fair Value Restricted stock units (1) 2,080 $ 92,716 Non-qualified stock options 3,159 $ 55,302 Performance stock options (2) 1,497 $ 25,804 (1) Includes units issued when employees elect to receive 50% of the employees target incentive compensation under the Companys Corporate Incentive Compensation Plan (the CICP) in the form of RSUs instead of cash. (2) Performance stock options allow the holder to purchase a specified number of Common Stock shares at an exercise price equal to or greater than the shares' fair market value at the grant date. Performance stock options granted in the six months ended June 30, 2026 vest on the second anniversary of the grant date, up to 200%, subject to the achievement of specified performance metrics over fiscal years 2026 an …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

NOTE 11. FAIR VALUE MEASUREMENTS Assets and liabilities measured at fair value on a recurring basis The Company records its cash equivalents, marketable securities, and venture investments at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants based on assumptions that market participants would use in pricing an asset or liability. As a basis for classifying the fair value measurements, a three-tier fair value hierarchy, which classifies the fair value measurements based on the inputs used in measuring fair value, was established as follows: Level 1 - observable inputs, such as quoted prices in active markets for identical assets or liabilities; Level 2 - significant other inputs that are observable either directly or indirectly; and Level 3 - significant unobservable inputs with little or no market data, which require the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data when available and minimize unobservable inputs when determining fair value. The Companys venture investments are recorded at fair value based on multiple valuation methods, including observable public companies and transaction prices and unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds. Assets and liabilities measured at fair val …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

NOTE 6. GOODWILL Six Months Ended June 30, (in thousands) 2026 2025 January 1, $ 81,506 $ 81,113 Currency translation adjustments (241) 425 June 30, $ 81,265 $ 81,538

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NOTE 14. INCOME TAXES Effective income tax rate Six Months Ended June 30, (Dollars in thousands) 2026 2025 Provision for (benefit from) income taxes $ 12,120 $ 36,058 Effective income tax rate 21 % 24 % The Companys effective income tax rate decreased in the six months ended June 30, 2026 as compared to the prior period, primarily due to excess tax benefits from stock-based compensation recognized in the current period and the absence of a valuation allowance on substantially all of the Companys U.S. and U.K. deferred tax assets. …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Disaggregation of Income Statement Expenses In November 2024, the FASB issued ASU 2024-03, Income StatementReporting Comprehensive IncomeExpense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03). Among other items, the requirements include expanded disclosures around employee compensation and selling expenses. ASU 2024-03 will be effective for the Company for the year ending December 31, 2027. The Company is still evaluating the impact of this new guidance on its consolidated financial statements but expects the adoption to result in disclosure changes only. Targeted Improvements to the Accounting for Internal-Use Software In September 2025, the FASB issued ASU 2025-06, Intangibles Goodwill and Other Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (ASU 2025-06). ASU 2025-06 introduces a more principles-based framework to the capitalization of software intended for internal use focused on managements authorization and commitment to fund a development project and the probability of whether the project will be completed and used for its intended function. ASU 2025-06 will be effective for the Company beginning January 1, 2028. The Company is currently evaluating the impact ASU 2025-06 will have on its consolidated financial statements. …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

NOTE 10. RESTRUCTURING The Company has undertaken the following restructuring activities intended to better align roles and capacity to an AI-first delivery model: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2026 2025 2026 2025 Employee severance and related costs $ 2,735 $ (54) $ 2,582 $ (57) Office space reductions (1) 10 24 Restructuring $ 2,735 $ (44) $ 2,582 $ (33) (1) These primarily relate to non-cash operating lease adjustments. Restructuring activity: Accrued employee severance and related costs: Six Months Ended June 30, (in thousands) 2026 2025 January 1, $ 12,858 $ 2,000 Costs incurred 2,582 (57) Cash disbursements (11,449) (1,354) Currency translation adjustments (15) 117 June 30, (1) $ 3,976 $ 706 (1) Included in accrued compensation and related expenses. …

RestructuringAndRelatedActivitiesDisclosureTextBlock · excerpt; the full note is in the filing

"NOTE 12. REVENUE Geographic revenue Revenues by geography are determined based on client location: Three Months Ended June 30, Six Months Ended June 30, (Dollars in thousands) 2026 2025 2026 2025 U.S. $ 196,292 47 % $ 208,116 54 % $ 415,547 49 % $ 477,308 56 % Other Americas 27,148 6 % 19,632 5 % 66,407 8 % 53,373 6 % United Kingdom (U.K.) 65,400 16 % 40,634 11 % 116,910 14 % 81,376 9 % Europe (excluding U.K.), Middle East, and Africa 73,292 17 % 64,420 17 % 147,131 17 % 138,476 16 % Asia-Pacific 58,584 14 % 51,710 13 % 104,694 12 % 109,612 13 % $ 420,716 100 % $ 384,512 100 % $ 850,689 100 % $ 860,145 100 % Revenue streams Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2026 2025 2026 2025 Pega Cloud $ 213,934 $ 166,743 $ 418,965 $ 317,866 Maintenance 74,528 79,271 149,845 155,639 Consulting 50,226 57,824 104,999 118,245 Revenue recognized over time 338,688 303,838 673,809 591,750 Subscription license 82,028 80,674 176,880 268,395 Revenue recognized at a point in time 82,028 80,674 176,880 268,395 Total revenue $ 420,716 $ 384,512 $ 850,689 $ 860,145 Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2026 2025 2026 2025 Pega Cloud $ 213,934 $ 166,743 $ 418,965 $ 317,866 Maintenance 74,528 79,271 149,845 155,639 Subscription services 288,462 246,014 568,810 473,505 Subscription license 82,028 80,674 176,880 268,395 Subscription 370,490 326,688 745,690 741,900 Consulting 50,226 57,824 104,999 118,245 Total revenue $ 420,716 $ 384,512 $ 8 …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"NOTE 8. SEGMENT INFORMATION Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker (CODM) in deciding how to allocate resources and assess performance. The Company derives substantially all of its revenue from the sale and support of one group of similar products and services software that provides case management, business process management, and real-time decisioning solutions to improve customer engagement and operational excellence in the enterprise applications market. To assess performance, the Companys CODM, the Chief Executive Officer, reviews financial information on a consolidated basis. Therefore, the Company determined it has one operating segment and one reportable segment. The accounting policies of the Companys operating segment are the same as those described in ""Note 2. Significant Accounting Policies"" included in the Annual Report on Form 10-K for the year ended December 31, 2025. The CODM uses consolidated net income to set financial performance targets, assess performance, and make expense allocation decisions. Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2026 2025 2026 2025 Total revenue $ 420,716 $ 384,512 $ 850,689 $ 860,145 Total cost of revenue 108,029 109,574 214,783 212,024 Selling 132,154 116,050 265,298 235,168 Marketing 33,254 31,081 55,713 50,032 Research and development 84,168 78,784 166,215 …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS Disaggregation of Income Statement Expenses In November 2024, the FASB issued ASU 2024-03, Income StatementReporting Comprehensive IncomeExpense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03). Among other items, the requirements include expanded disclosures around employee compensation and selling expenses. ASU 2024-03 will be effective for the Company for the year ending December 31, 2027. The Company is still evaluating the impact of this new guidance on its consolidated financial statements but expects the adoption to result in disclosure changes only. Targeted Improvements to the Accounting for Internal-Use Software In September 2025, the FASB issued ASU 2025-06, Intangibles Goodwill and Other Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (ASU 2025-06). ASU 2025-06 introduces a more principles-based framework to the capitalization of software intended for internal use focused on managements authorization and commitment to fund a development project and the probability of whether the project will be completed and used for its intended function. ASU 2025-06 will be effective for the Company beginning January 1, 2028. The Company is currently evaluating the impact ASU 2025-06 will have on its consolidated financial statements. …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing