PEGA Q3 2026 earnings call transcript, October 21, 2026

Hello, everyone. Thank you for joining us and welcome to the PEGA Systems Third Quarter 2026 earnings call and webcast. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Peter Welburn, Vice President of Corporate Development and Investor Relations. Please. Go ahead. Thank you, Ellen. Good morning, everyone, and welcome to Peg Systems Q3 2026 earnings call. Before we begin, I'd like to read our safe harbor statement. Certain statements made during this call and the accompanying materials may be construed as forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may forecast, and similar expressions are intended to identify forward-looking statements. These statements speak only as of the date this statement was made and are based on current expectations and assumptions. Because these statements relate to future events, they are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations for fiscal year 2026 and beyond. Important factors that could cause actual results to differ materially are described in the company's press release, announcing our Q3 2026 results, and in our filings with the Securities and Exchange Commission, including our annual report on

the Form 10K for the year ended December 31st, 2025, as well as other recent SEC filings. Investors are cautioned not to place undue reliance on these forward-looking statements. Except as required by law, we undertake no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. In addition, non-GAAP financial measures discussed on this call should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP. Constant currency measures are calculated by a applying the September 30th, 2025 foreign exchange rates to all periods presented. Reconciliations of GAAP to non-GAAP measures can be found in our earnings press release. With that, I'll turn the call over to Alan Treffler, founder and CEO of PEGA Systems.

Thank you, Peter, and thank you to everyone joining us today. Before Ken covers our results, I want to just touch on the AI market context and why it's a major long-term opportunity for PEGA. Our technology is differentiated and very relevant to the times we're in. However, candidly, our execution this year has not kept up. We are making real changes to better capture the opportunity and Ken will be providing more detail. I would say the market status is confusion and a search for value. Enterprise leaders are facing tsunamis of AI hype. This is the most chaotic and confused technology market. I've seen in my career. It makes the internet bubble of 2000 look like it unfolded in slow motion. There is real promise in AI and occasionally real delusion. This quarter, Salesforce announced Cloudforce essentially tying its future to Anthropic, a company that has said publicly it is going after all of Salesforce's TAM, their target addressable market. And then in September, Anthropic called for a pause. And leaders at OpenAI and other frontier labs chimed in to support the idea. But in the month since, Anthropic has released three major cloud model changes. OpenAI has also released three major GPT models. Google has released a new Gemini model. That's not counting the new models from Mistral, Quan, DeepSeq, or model labs that are using things internally they haven't released yet. So I guess this is what a pause looks like these days. No wonder everyone is confused.

The leaders I spoke to at businesses have actually stopped chasing the latest model. They want AI connected to business operations in ways that deliver measurable value while maintaining governance and controlling costs. The market is full of ingredients and enterprises need a recipe. That's what PEGA delivers. And the changes that Ken will talk about are focused on getting that recipe directly to the customers and senior leaders who need it. Now, much of the AI industry is selling models and tokens. PEGA is offering something different, a structure for AI that delivers predictable outcomes and predictable costs built on how enterprises really operate. Our architecture harnesses the power of LLMs and our own statistics. To transform how enterprises design, build, and run the workflows and decisions that power their businesses. Now models are an important agreement, but the recipe for AI demands structure you can put around the model to provide operational context that tells it what to do. Our workflows wrap AI in a control and governance structure that feeds exactly the knowledge and context it needs at the right time. As Forrest have put it in his very recent report on enterprise AI platforms, workflows, not insights, are the value driver for agentic AI. We apply that structure at every stage of AI transformation. At Design, we help clients reimagine their workflows and decisions for an AI world.

We built to help create and maintain the applications in a way that's understandable and accessible. And we run them. to create agentic workflows that behave predictably. So leaders I speak to know they shouldn't just bolt AI onto legacy systems and outdated processes. They want to be designed the way they work. And Blueprint harnesses AI to solve a problem that no one else has, giving business and IT teams a way to reimagine their operating model together at AI speed. Thank you very much. It's the raw power and gives it a structure built on decades and industry best blueprint combines the raw power of models like cloud GPT and Gemini with the decade of our knowledge from the work we've done with leaders in various industries. It helps establish the rules, workflows, policies, and operating model upfront before an application goes into production. The result is. The repeatable recipe should run translated directly. And here is processes themselves will be transformed by AI. But once you figure out how to process or best onboard a new customer, you want to do it the same way at scale. Letting AI reasoning run roughshod over that repeatable work is risky and expensive. Blueprint uses AI to capture those repeatable processes. We design them to be far more efficient and then run them consistently at massive scale without a massive token bill. Not only is this far more cost-effective, it is exactly the right approach for AI governance. By creating the workflows you plug directly into it, it is exactly the right approach for AI governance.

into the cloud or GPT or AI tool of choice with MCP connectors, you're building workflows that tell agents exactly what they're allowed to do, what data they can access, and what rules they must follow. We believe the right way to govern AI is to design it into the processes from the starts. Now, this is exactly what Blueprint does and the PEGA technology does. And while others are selling control towers or kill switches to measure... problems after they happen, we consider that madness. It's addressing the problem too light and in the wrong place. Our clients can't afford to rely on a kill switch. With our approach, they never need one. So the key here is structure. Now, you know, by helping clients finish design their recipes in days and load Blueprint into infinity to build the application, they are able to be able to run with agents like your co-pilot. We also let clients bring their own model if for some reason they have something, either an activity or they have a preference. And we have added into our development environment more than 50 agent skills. So the developer's environment and the PEGA environment operate in a collaborative and comprehensive fashion. So developers can get the speed of agentic development, but we provide the structure that makes it understand. Reusable, and scalable. Now, we understand that one of the pitches AI companies are making is, you know, code it yourself. And the reality we've competed against code it yourself for decades. And of course, AI coding tools are powerful. We use them ourselves. And we've built them into the AI assistants in Infinity Studio. But this doesn't change the underlying question. AI agents generate lots of

code. Lots and lots of code. Millions of lines. More code than we've ever seen before. And much of that code becomes very hard to understand and even harder to change six or 12 months later. That is at the heart of the PEGA difference. In PEGA, the logic stays visual and transparent, not buried in code so dense that only agents can read it. Business and IT users can look at the workflows, the rules, and the configurations.

This is now at runtime PEGA applications run agentic workflow and run. They don't need to re-read. Eason through every step. Blueprint has already done that for them at design time and we've put the human in the loop blessing the design as opposed to sticking them in every time a transaction runs PEGA agentic workflows call for agents to perform specific tasks like reading a document or or researching a case or client history and the workflow sets the task constraints so each agent is controlled in what it can do and what it can see. This small focused agent approach obviates hallucination risk and uses far fewer tokens. That's how we can offer a fixed case price with no token charge and I'm getting a lot of enthusiasm from clients. Now at PEGA World I compared this approach to a chef using a pet's kitchen to perfect the recipes before opening a restaurant rather than reinventing every dish for every customer. Blueprint is that test kitchen. At design time clients create a collection of business recipes that work for the decision.

Maybe thousands of times more efficient than running a continuous reasoning session on graphical processing units. Clients reimagine the process and then run a successful recipe thousands or millions of times. Design once reused many. AI gets the workflow right at design time and is invoked discreetly at runtime with structure and governance built in. I think the industry is recognizing. Just in the last several weeks, Forrester was named a leader in the Forrester wave. PEGA was named the leader of the Forrester wave for AI platforms. Sitting next to companies like Amazon and Google, as I mentioned in that report, they wrote that workflows not insights are the value driver in agentic AI. And we strongly agree. And last month, Gartner again, the, the, the, the, the. and PEGA a leader in the magic quadrant.

In terms of these two, you can find both rooms.

But the most important record

turns unstructured information into structured work, automatically processing documents and surfacing only the exceptions that require human judgment, helping people work more effectively while maintaining enterprise-grade governance and control. At a major U.S. bank, PEGA's governed workflows and specialized AI agents has cut complaint resolution times from 10 days to 10 minutes in a custom- critical and highly regulated process, PEGA-agentic workflows orchestrate our agents and three-party agents to intake documents, classify requests, summarize histories, perform research, and determine next best action recommendations. Employees have embraced this new workflow right away. They report higher productivity and enthusiasm for capabilities to give them more time for judgment and customer outcomes. So these- These results confirm to us that enterprises want AI and that having AI that delivers predictable outcomes and predictable costs with governance built in is absolutely the right way to go. And you know, it's interesting because the market is chaotic and there's more hype, more tokens, more models being discussed and feared by organizations. But with PEGA Blueprint, with PEGA Infinity, we can deliver outcomes. And we think that's incredible. I've also learned something from the dozens of successful clients I've spoken to in the last quarter. We have the right technology, but in a market this noisy and fast, we need to do a better job at directly helping our clients find clarity and keep up. Success happens when we have deep executive and technical engagement, a clear message that cuts through the market noise, and technical experts on the ground.

So while the quarter showed improvement, from the first half, and we take responsibility for that. Find decisions more consistent in helping clients.

And we are creating a dedicated team to accelerate adoption of the latest AI capabilities. Bringing operations teams together to simplify and improve how we plan and operate. These are execution changes, not a change in strategy. We remain focused on helping enterprises apply AI to workflows and decisions, and helping them with governance, predictability, and economics that are required to scale. I'll hand it over to Ken to walk through the quarter's results.

and details of these operational changes. Thanks, Alan. While our annual contract value growth through the first three quarters of 2026 did not reflect the opportunity we see in the market, we're encouraged by the engagement we're seeing with our clients and prospects. Clients are increasingly looking to transform how work gets done through AI automation and intelligent workflows. And companies, especially in regulated industries have a big challenge in trying to keep up with the ever changing regulations. We continue to see growing interest in blueprint, agentic workflows, and automation initiatives that help organizations achieve predictable outcomes at predictable costs. While buying patterns have not fully normalized, we saw improved visibility and more consistent progression of opportunities through the third quarter. Our ACV ad was the strongest of the year, representing a step forward. More importantly, the underlying market opportunity remains significant. Our focus is on improving how we execute against that opportunity. The go-to-market changes I'll discuss shortly are designed to strengthen accountability, increase speed, and help us build on the progress we saw in the quarter. Looking back, our assessment is that the primary constraints have been execution, longer sales cycles, and customer deployment challenges rather than broad-based deterioration in market demand. Nothing we've seen in Q3 changes that view that the underlying opportunity remains significant. As we look ahead, we're applying the lessons we've learned so far this year to better capitalize on the demand we're seeing in the market.

We've already begun implementing a series of changes designed to increase accountability, improve speed of execution, and accelerate growth. First, in today's market environment, clients are best served when commercial leadership and day-to-day execution authority sit closer to the market within consistent company-wide pricing, contracting, and financial controls. Additionally, although the global demand has held up in spite of some of the European and Middle East conflicts, clients increasingly demand data sovereignty and governance. They want their systems, their data, their processes to be closer to their operations. They increasingly demand local control and support for their solutions. This fits perfectly into our PEGA cloud solution, but also with the option for cloud choice. As a result of all this, we're evolving our go-to-market leadership and coverage model. This change will bring leaders, resources, and expertise closer to in-region clients, enabling faster decisions, stronger engagement, and greater ownership of outcomes. It also returns us to an operating model where the senior leaders have more commercial-driven authority and more direct connection to our clients. As buying decisions increasingly move higher within client organizations, having our senior leaders in-region will help us engage more effectively and accelerate execution. We've seen this trend in the past, and we have successfully executed.

Under this operating model. Second, we're creating a more unified marketing organization. To tell one clear and differentiated PEGA story, we're bringing all marketing-related teams together under a single leader. In a market crowded with competing AI narratives, this structure will sharpen our positioning, strengthen execution across channels, and help us reach executive decision makers more consistently. Enterprises are looking for clarity, confidence, and a trusted path forward. A unified marketing organization will work. to improve our visibility and communicate more effectively how PEGA helps clients succeed in the AI era. Third, we're rallying a new organization focused on accelerating adoption of PEGA's AI capabilities while transforming our products to make it more dramatically easier for clients to access our latest innovation and stay current with PEGA. The pace of innovation in AI is unprecedented and the ability to successfully adopt and scale these capabilities is becoming the key differentiator between and the ability to use the technology. clients that experiment with AI and those who realize measurable business value from it. This new organization will bring together engineering, early adopter programs, and delivery excellence to quickly identify adoption barriers and turn those insights into improvements. It will also include a team of forward deployed engineers, known as our Lighthouse team, who will work directly with clients to accelerate successful deployments and help them realize value faster. By bringing product teams closer to our clients, we

can capture real-world best practices, identify what drives successful outcomes, and continuously, if clients can, over time, these learnings to benefit from agentic workflows. Additionally, we will create a tighter feedback loop between innovation and adoption. By connecting our product teams directly with our early adopters, we can shorten learning cycles, accelerate. product development, and turn client insights into repeatable success. Fourth, we're centralizing go-to-market and consulting operations under the finance organization, having a single leader to simplify planning, resource allocation, and performance management across the company. Commercial and delivery leaders will remain accountable for strategy and client outcomes, while the unified operations team drives greater consistency, scalability, and execution discipline. Over time, we expect these and other research. contribute to margin improvement and increased operating leverage. Taken together, these four actions are designed to improve execution in the near term while positioning PEGA to deliver long-term durable ACV and cash flow growth to our shareholders. During the first quarter of 2027, we expect our headcount will be approximately 5,000 employees, down a few hundred from where we sit today as we streamline the organization and improve execution. Moving to our financial results. Annual contract value grew 7% year over year in constant currency. In Q3, we added 32 million in net new ACV in constant currency, our strongest quarterly performance of the year and a step forward in rebuilding growth momentum. PEGA Cloud continued to drive that performance. PEGA Cloud ACV grew 20% year over year and represented 59% of our total ACV. PEGA Cloud backlog increased 25% in constant currency.

over year, demonstrating the continued strength of our cloud business. Total backlog now stands at over $2 billion with current backlog at just around $1 billion. Backlog reflects existing non-cancelable contracts expected to be recognized as revenue in future periods. Two factors shape the quarter. First, we enter Q3 with a larger and more diversified pipeline with strength across both new logos and workflow expansion within our existing install base. PEGA Clouds Second, purchasing behavior continues to evolve. We did see some movement to more normal buying patterns in the third quarter. However, enterprise clients, especially in the financial services sector, are applying greater scrutiny to large technology investments, particularly around business case validation, AI strategy, and implementation timing. Decision processes now involve more stakeholders and additional approval steps than we've seen in recent years. Decisions continue to go seniorly leaders in the organization and that's the importance of our go to market change is to connect our teams with the decision makers. Separately, organizational changes and workforce reductions within several client accounts can extend timelines further. Let me be clear about what we're not seeing. Win rates are remaining generally consistent with prior periods and we're not seeing a meaningful shift in competitive dynamics. The constraint is how long it takes for clients to reach a decision, not whether we win when

market change. We are addressing that directly by driving prospecting activity, leveraging blueprint, and increasing executive level engagement to compress sales cycles and also to build incremental pipeline. Below the headline number, several leading indicators improve. Pipeline volume strengthened during the quarter. Blueprint engagement continues to expand and more opportunities are progressing toward the decision process in the decision process. Turning to free cash flow, we generated $200. million of free cash flow in the first three quarters of 2026. There's two factors that impacted that result. First, free cash flow included an unusual level of cash expenditures that we do not expect to recur at the same level in normal operations. We've included those expenditures in our free cash flow and we're providing supplemental detail to investors so they can evaluate the nature and the timing of those. Second, ACV growth was lower than our original plan. Slower net new ACV translated translates into lower billings, lower collections, and lower free cash flow than we had modeled. As a reminder, our billings are seasonally weighted toward the fourth quarter, consistent with the renewal concentration that we discussed earlier in the year. As a result, free cash flow follows a similar seasonal pattern with the two largest net free cash flow production being in the first quarter and the fourth quarter of the year.

During the capital allocation, our capital allocation. strategy features several key elements. First, invest in organic growth. Our highest return use of capital remains product innovation and go to market capacity. That spending is largely built into our operating model. Second, repurchase shares opportunistically. We've leaned higher into buybacks in 2026, more than in a prior year, and we did so deliberately. In the first nine months of 2026, we repurchased just under 11 million shares for around 430 three. million in the open market under prior board authorizations. Total common shares were reduced by 6.8 million shares in the first nine months of 2026. At current levels, repurchasing our shares can be an attractive use of excess capital after funding our organic growth priorities. Buybacks are creative to earnings, offset dilution from stock-based compensation, and compound value when executed at attractive valuations. We will continue to compare repurchases with other uses of capital strategically around our buyback program. The third element of our capital allocation strategy is to pay a consistent and increasing dividend. We view the dividend as a long-term commitment and we intend to grow it over time. Fourth, we maintain balance sheet strength and flexibility. We remain debt-free and we will evaluate any future use of debt against our strategic priorities, expected returns, commitment.

to financial flexibility. We ended the third quarter with approximately $300 million in cash and marketable securities. Looking ahead, we will continue to return capital to shareholders opportunistically while preserving strategic flexibility. We're disciplined buyers, not automatic ones. Following our July earnings call, many of you asked for some additional perspective on how we're thinking about the remainder of the year. As a reminder, we provide annual guidance at the beginning of the year and do not typically update our outlook into a year, nor do we guide quarterly. Given the many calls for more color, we've decided to share a few more thoughts on ACB and free cash flow as it's late in the 2026 cycle. On ACB, we added $52 million of net new ACB in constant currency through the first three quarters of the year. We expect we will deliver an acceleration of growth in Q4, but we don't believe that we'll achieve our full plan for the second half. On free cash flow, given the unusual level of cash expenditures incurred this year, we also believe it's useful to consider supplemental cash information to determine the cash generating capability of our business. Please see our earnings release for more detail on these supplemental items. We're not changing our long term ambition. We continue to target 700 million or more of free cash flow in 2028. Although ACV growth has slowed this year, the underlying economics of our business remain intact. That new

ACV creates future billings growth. Those billings ultimately convert into achieving our 2028 target will require stronger ACV growth and continued cost discipline. We are aligning our cost, stepping back organizations worldwide. Are we thinking how work gets done in an AI driven economy? That shift plays directly to capabilities we have spent years building workflows and decisioning that apply AI to mission critical business operations with governance, predictability, and scale enterprises require. While execution remains our top priority for the balance of Q4 and beyond, our long-term conviction has only strengthened. We remain confident in our market opportunity, confident in our ability to deliver substantial and growing and growing.

Free cash flow and confident in our disciplined approach to balancing growth and profitability to sustain a strong Rule 40 performance and create significant long-term value for shareholders. And with that, operator, please open the line for questions.

Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. And to withdraw

your question, press star one again. We ask that you pick up your handset when asking a question for optimum sound quality. And if muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Raymo Lenschao with Barclays. Your line is open. Please go ahead. Perfect. Thank you. One, Ken, it was really interesting to hear you.

Okay, perfect. That's very helpful. Thank you.

Your next question comes from...

...from the line of Steve Enders with Citi. Your line is open. Please go ahead.

Okay, great. Thanks for taking the questions this morning. Maybe just to start, I guess we're kind of good to kind of get your perspective on how long you think that the changes you're making will kind of take to play out and drive the better execution and I guess ultimately what that means for, you know, sales. and new ACV moving forward, and I guess also would like to clarify the comment you made about ACV and not achieving the second half plan that you were expecting. Can you just maybe get a little bit more clarity on, I guess, what exactly that means? Sure, Steve. So we're moving fast on the changes and these, you know, many of these changes are already in work. Some of them, as Alan mentioned a second ago, have already been done. Yeah. So I don't believe this is going to be a long drawn out changes. And now the second part of that question is, when do you think you'll see some of the improvements from that? I would, I would expect that to this change to not take a significant amount, you know, of quarters. I would say there's, you know, there's always a, you know, there's always a quarter or two of change management that we need to manage, you know, going in or starting a new year. So I wouldn't expect this change to drag out over a long period of time. I would expect that we would hope to see, you know, improvements from this model, you know, in the early to mid part of 2027. The second question that you asked about ACV, and really what I'm saying is I believe our ACV growth is going to be up from here. But, you know, I don't see a path where our ACV growth would be, you know, above 10% for the 2026 year. So I would say we're seeing our ACV growth be somewhere between where we are now and 10%.

All right. Very clear. That's helpful there. And then maybe just on the technology side and, you know, we keep hearing about things like decisioning models and things like JEV that, you know, out there in the market and we keep getting the question from investors about, you know, maybe what that means for PEGA and, you know, I guess your decisioning capabilities and if you viewed that as a, I guess it would kind of be good to get your perspective on how you're seeing that maybe competitively or or what that means from tech adoption moving forward with some of these decisioning models starting to starting to come out. Sure. We, as you would expect, pay close attention to all of this. And we actually think things like JAV may be things we find opportunities to use, you know, a product line. The big deal about PEGA is that we make the way the business runs processes and makes decisions. Transparent. And at the end of the day, the folks who are trying to go down the alternate paths, one which is, hey, let's write it all in code. Candidly, massive amounts of code are not very transparent. Or, hey, let's just try to program prompts that the AI will figure out how to do things. That's candidly the exact opposite. Talking with a customer who complained to me that he had a thousand. It's a prompt that they were trying to edit to figure out how to get small behavior changes. That's exactly the sort of thing that happens. So, you know, these new models, the interesting thing is the AI models that are out there and evolving, which, by the way, we can harness. I mean, part of what we do is we want to use the frontier and other models. They don't fix the core lack of transparency and lack of governance that you have by doing this stuff at runtime.

Okay. Perfect. All right. Well, appreciate your thoughts and thanks for taking the questions.

Your next question comes from the line of Devenau with KeyBank Capital Markets. Your line is open. Please go ahead.

But in terms of the maturity. I would tell you that the stage of our opportunities as we enter Q4 and think about next year is meaningfully more mature than it was at any other time this year. So the pipeline, I would say, is looking very promising and we're really putting a lot of focus, particularly with some of these new changes, on maturing opportunities and getting them

Understood. Thanks for the details there. And then just a quick follow-up, maybe just give an update on how your public sector business has performed in third quarter, just given that's usually a pretty big quarter for that end market. I don't know if you've seen any sort of delays in that sector with the upcoming election here in the U.S. Thank you.

What I would say is the

less predictable than what we've seen in past years because of a lot of the changes and the changes in how they procure the system integrator changes that moved everything moved a lot of buying onto GSA schedule. So I don't think I don't we don't expect that to get more clear in the fourth quarter, but also, you know, buying activity is happening and it's not like that. Government is not moving forward. It's just that it is it is less predictable. So Q4, the Q4 quarter is not a particularly massive quarter like we are government. This is pretty, our US government business is pretty steady across the quarters. So it's not that there's anything unique in terms of size and Q4 around the public sector, but it is it definitely is a less predictable space right now just because of a lot of the changes that they've made to process. But I don't, I don't. Got it. Got it. Thank you. Thanks for taking my questions. Your next question comes from the line of Patrick Walravens with citizens. Your line is open. Please go ahead. Oh, great. Thank you. Um, I mean, Alan, given the news yesterday of, um, Salesforce acquiring, uh, Braze and

you know, paying a multiple is pretty much twice where you guys are trading. I just love to hear your thoughts on, on what this means for the industry and what it means for you. Well, you know, we, we really, I can't actually think of a time when we've ever competed against Braze. So I don't think, uh, it's, um, very meaningful to us. I think when I look at this industry confused, I think companies are. doing whatever they can to try to generate revenue and attention and, and stand out. It feels to me like buying Braze was an expensive way to do it, but I don't think it, um, affects people. One thing, one, one, one thing I would say, Pat, that is not really a break. One thing I would say is not really a Braze comment, but something we've seen. I do think you've seen, uh, M&A activity around technology companies start to spin up a little bit in the last few months. And I do. That highlights, you know, what I believe to be is the significant value that maybe was, was, uh, was questioned maybe six to nine months ago around software. And I, and I do, I definitely think you're seeing, you know, the, you know, Snyder electrics purchase the PTC, for example, I think, I think there's a, there's a lot of value attributed to the, the, the knowledge base that software has, the, the engagement we have with users and also the data that we actually have within our, within our. Within our system. So I definitely think that there is a little bit of like that angle to the embrace might be in that same, you know, in that bucket. So that's just something that we've been watching. Not, not, not particularly because we're a buyer or seller, more just to like learn what's happening in the software space.

Yeah, I think your point, you know, this does sort of put the question to the, the dying cesspocket commentary.

There is software in the future and obviously Salesforce does too. Yeah. And investors too. I mean, if you look at my universe as a whole, four months ago, the median stock was down like 33%, the median, and now the median is up five year to date. So the follow-up question would just be, I mean, would you guys be open to being acquired? And, you know, the flip side of that, what would you want to acquire? If anything. Well, I think answering either of those questions would make this one hell of an earnings call, wouldn't it? It really would, yeah. So we're going to have to respect. You can do the, what would you like to acquire? You can do what's on your radar list, right? Yeah. Or how you think. We look at companies routinely. And, you know, we have. Purchase typically technology purchases that really sort of tuck in model. We convince more of the market. We're onto it. And that's what our mission is going to. That's what our mission is going to be. So we don't have shopping. But Peter here is constantly talking to firms. Thank you very much. Your next question comes from the line of Blair Abernethy with Rosenblatt. Your line is open. Please go ahead. Thank you. Just a couple of things for me. I wonder if any early signs of feedback from Infinity Studio with Blueprint.

In hindsight, I wish we had done it sooner. One thing we have seen, Blair, is that we've seen at this point in time when we released PEGA25, we have more than twice as many clients have moved to Infinity 26 as at this point in time when we released 25. So we are seeing a much more aggressive clients want it. So that's something we are seeing. Okay, great. And Ken, just on the environment, are you seeing any changes in the pricing environment this year and anything in terms of what you're seeing with the contract renewals or term lengths, just given the changes in the pipeline execution? No, term lengths, no. I think that always bounces around, but I haven't seen anything like clients trying to do longer or shorter terms. I think that's... That does move around. It's kind of client-specific. In terms of pricing, the one thing I would say is that with all the spend on AI, I definitely think IT budgets are under pressure this year, and so that does make for scrutiny that happens around price escalation, CPI, things of that nature. So we definitely see some of that, and I think that's just tied to clients that spend a lot of money on AI, like dabbling and trying to find some value. I do, based on what we see with our clients, I think that will settle. And I think clients know, have a better view now of where they may be controlling their AI spend better than they had earlier in the year when I think it was a little bit more out of control. But I think some of that does play into just enterprise buying pressures. So there's just some of that out there.

Yeah, and what you said about out of control, look, let's face it, a whole lot of companies. got caught overspending their budgets in the second and third quarters. I think that's normalizing. And candidly, our message about predictable cost is a great way for clients to. Great. Thanks, guys. Your next question comes from the line of Patrick McKilvey with William Blair.

We'll have your number in 28. Hopefully that's helpful. Okay. Yeah, helpful. Thanks, Ken. And following up, so regarding the customer deployment challenges and the constraints on growth and, you know, the FDE team, you're not ramping to address that. But my question is, what specifically do you feel is preventing customers from moving some of these projects into production today? Are those mostly implementation and or integration challenges or do you feel at all that there are some... aspects of the core product that could need to become easier to deploy and ultimately maintain? I don't think PEGA is alone in this challenge. Deploying things in an AI world is a different mindset of actually how you instrument and deploy and get value. And I think that just like many of the clients that are deploying AI have spent a tremendous amount of money trying to bring in consultants and system integrators to try to help them figure out where AI can add value. Some of that is adopting AI in a new paradigm around how you develop workflow and automation solutions on PEGA as well. So I think some of that is just us getting our engineering teams and our professional service teams and our solution consultants to really be like with the client and actually helping them drive that value. So that's the big change as opposed to letting clients do it more on their own, which is which is traditionally how software has been deployed. And look, I think historically we were pretty, and this goes back years, our customers and we were pretty slow at times to deploy the latest events. You know, the reality is we actually have had customers who have told us they never want to be on the most recent release. They want to be on N-1 or in one case have a customer who used to want to be on N-2.

So getting is not something that had been. Now we're in a much better position than the cloud and some of the changes we're making.

We ask that you please limit yourselves to one question so that we may accommodate all participants. Your next question comes from the line of Lucky Schreiner with DA Davidson.

Your next question comes from the line of Mark Chappelle with Loop Capital Markets. Your line is open. Please go ahead.

We have reached the end of today's Q&A. I will now turn the call back to Alan Treffler for closing remarks.

Thank you to everybody who joined this call.

And the important strategic direction that we took a couple of years ago when we decided to go after things with this design and runtime distinction, this highly differentiated approach, that we are more convinced than ever is exactly right. And candidly, when we see organizations struggle with rogue agents, boy, it makes us smile a little bit that we chose an approach that mitigates. And getting this to be turned into business, revenue, solid results is exactly what our mission is. And I'll tell you that we're very energized about it. So thank you very much and look forward to talking with you all again soon. This does conclude today's call. Thank you for attending. You may now disconnect.