US Application Software – Automation Software Earnings Preview: APPN, PEGA

We remain constructive on both Appian (APPN) and Pegasystems (PEGA) into 3Q26 earnings, though our preference remains APPN given stronger execution momentum, improving federal demand, and a uniquely attractive opportunity to emerge as a leader in agentic process orchestration. Our channel work suggests the automation software backdrop is improving as enterprise transformation budgets stabilize and increasingly shift toward AI-led workflow modernization. For PEGA, the focus remains whether recent ACV softness reflects temporary execution/deal timing issues or the beginning of a more structural slowdown. Management reset full-year ACV growth to ~10% from an initial 15%. We lower CY26/CY27 ACV to $1,763M/$1,962M from $1,768M/$1,967M and adj FCF to $493M/$568M from $498M/$577M, and cut our TP to $52 (from $55). For APPN, we are favorable despite strong recent performance, supported by a strong post-DOGE federal surge, cloud acceleration (+22% y/y cc in Q2), and a $500M Army ELA;