Pegasystems, the artificial-intelligence-based enterprise software company, issued a warning for the current AI trade, echoing concerns from International Business Machines last week.

"Unprecedented changes in the AI market caused clients to delay their purchasing decisions," the company said in its second-quarter earnings release late Tuesday.

Pegasystems said this resulted in its cloud annual contract value growth rate significantly slowing through the past six months compared to last year.

Pegasystems stock declined 13% to $26.80 on Wednesday.

The company's warning comes a week after IBM CEO Arvind Krishna told investors that customers have abruptly shifted their quarterly budgets toward servers, storage, and memory products at the end of June to beat projected price increases for "supply-constrained infrastructure."

IBM stunned the market but Pegasystems' warning may be even more concerning for the software sector. It's not just an IBM problem, but potentially a broader sector trend.

Software and cybersecurity stocks were among the sharpest fallers in early trading. ServiceNow, Datadog, Workday and Palo Alto Networks were all down between 3% and 4%.

Write to Kit Norton at kit.norton@barrons.com

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July 22, 2026 10:16 ET (14:16 GMT)

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