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Image source: The Motley Fool. Thursday, Aug. 27, 2026 at 5:00 p.m. ET Investor Relations Manager - Christine Cloonan Chief Executive Officer - John DiLullo Chief Financial Officer - Eric Prengel Operator: Hello, everyone. Thank you for joining us, and welcome to PagerDuty Second Quarter Fiscal Year 2027 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Christine Cloonan, Investor Relations Manager. Christine, please go ahead. Christine Cloonan: Good afternoon, and thank you for joining us to discuss PagerDuty's Second Quarter Fiscal Year 2027 results. With me on today's call are John DiLullo, PagerDuty's Chief Executive Officer; and Eric Prengel, our Chief Financial Officer. Before we begin, let me remind everyone that statements made on this call include forward-looking statements based on the environment as we currently see it, which involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. These forward-looking statements include our growth prospects, future revenue, operating margins, net income, cash balance and total addressable market, among others, and represent our management's belief and assumptions only as of the date such statements are made, and we undertake no obligation to update these. During today's call, we will discuss non-GAAP financial measures, which are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures is available in our earnings release, which can be found on our Investor Relations website. Further information on these and other factors that could cause the company's financial results to differ materially are included in filings we make with the Securities and Exchange Commission, including our most recently filed Form 10-K and our subsequent filings made with the SEC. With that, I will turn the call over to John. John DiLullo: Thank you, Christine. Good afternoon, everyone, and thanks for joining us today. Before I turn to the results for the quarter and provide an update on our progress, I would like to extend my humble thanks to PagerDuty's customers, our investors, our employees and our Board of Directors. I recently celebrated my first 100 days at PagerDuty, and I'm grateful every day for the warm welcome I've received and the amazing opportunity with which I've been entrusted. Eric will walk through the full financial details on Q2 and the remainder of FY '27 later in the call. But first, I wanted to open with a few highlights from the quarter. I was especially proud of several things in Q2, including our sales teams delivering incremental new customer wins and existing customer expansions. These exceeded guidance and powered our ARR over the $500 million milestone for the first time. We also saw brisk new customer acquisition through our online sales efforts, continued growth in our population of enterprise accounts with ARRs over $100,000 and expansion of our sales overseas. Retention rates improved sequentially. Event traffic on the platform grew nicely both quarter-over-quarter and year-over-year and adoption of our Operations Cloud usage-based platform continued to gain traction, growing meaningfully quarter-over-quarter. I was also proud of how fiscally disciplined the team remained all quarter, exceeding guidance on operating margin and EPS. We see a clear path to our 30% long-term non-GAAP operating margin target, and we expect to accelerate progress toward it in Q3 and Q4 as we realize the impact of the restructuring we announced earlier today. In my short time here, one thing is clear. This is an extraordinary moment for technology, propelled by the speed, scale and impact of AI. We exist to keep mission-critical digital ecosystems resilient and running. And just as the Internet transformed commerce and the smartphone transformed communications, AI coding tools are now transforming how enterprise software gets built and run. That shift is a massive opportunity for PagerDuty. Today's digital workloads are significantly more complex than their predecessors. They fail differently. They fail at higher rates, and they are far more difficult to debug. As a result, production software disruptions and application outages have become incredibly costly board-level events. Over the next decade, organizations will move from managing hundreds of critical services to thousands and eventually tens of thousands of interconnected services, workflows and autonomous agents, each one creating more decisions, more automation and more operational risk. At that scale, a new risk layer emerges, autonomous agents making and executing decisions across systems at machine speed that multiply operational complexity and drastically magnify the consequences when something goes wrong. The stakes have never been higher, and today's leaders recognize what is at risk. 95% say reducing incidents and speeding recovery is now a source of competitive advantage and 77% plan to increase their investment in operational resilience over the next 12 months. The question is not whether this emerging complexity and these incident landscapes will need to be managed. The question is how. And we believe this is exactly where PagerDuty's opportunity is expanding the fastest. Our platform uniquely scales to address the changing dynamics of AI-fueled enterprise software operations. With more than 15,000 paying customers relying on the PagerDuty platform, including nearly 2/3 of the Fortune 100, we see firsthand the massive volume of AI-generated enterprise software now being deployed and exactly how it's evolving. Increasingly, code is not only being written by AI, it is being tested by AI. And in a growing number of cases, it is even being released to production with minimal human review. Enterprises are not simply running more software, they are running more dynamic software, software that generates actions, triggers workflows and increasingly leverages nondeterministic agentic processes in its execution. During the quarter, we sharpened PagerDuty's focus on our customers and specifically their emerging requirements. Namely, we have pivoted the company to focus relentlessly on just three things: first, building products that our customers love; second, activating go-to-market motions that convert and expand; and third, optimizing every expense that doesn't directly aid to the first two focus areas. Our mantra is build, sell, optimize and every road map bet, every go-to-market investment and every dollar of spend now gets tested against these three objectives. Regarding our first focus area, building, this quarter alone, we shipped major upgrades to our autonomous SRE agent, our incident management life cycle integration and our agentic solution for simplifying on-call shift management. The bigger story this quarter is the upcoming general availability of the PagerDuty Operations Cloud, our usage-based AI-powered platform that automates and orchestrates the entire incident management life cycle. Over the past few quarters, we've shared our progress on Operations Cloud, continuing to invest in innovation that moves PagerDuty from incident detection to incident prevention. As I mentioned earlier, Operations Cloud sales accelerated in Q2, and customers are telling us what makes the offering unique. Operations Cloud is one integrated platform architected around the two things reliability actually requires, resilience and prevention. To reflect that distinction, we're renaming Operations Cloud to the PD Reliability Platform when it is released to general availability later this quarter. The PD Reliability Platform is the next generation of Operations Cloud, an AI-first integrated platform where blended teams of agents and humans detect, investigate and remediate incidents together. It doesn't just help enterprises respond faster. It helps them prevent the next disruption before it happens, and dozens of customers are already realizing value from this approach. Our SRE agent prominently sits at the center of the platform. This is one of the hottest emerging categories in the industry, and PagerDuty's approach is powerfully differentiated. The PagerDuty SRE agent builds on an understanding of our customers' applications and infrastructure, learns from the existing knowledge base, reads production telemetry and builds operational memory from every past incident. Uniquely, it detects disruptions early using proprietary ML-based signal intelligence to mobilize agents and start investigating autonomously. Upon general availability scheduled for this fall, the PD Reliability Platform will be available to every customer for purchase, including our self-serve community. Our usage-based pricing democratizes access to critical agentic capabilities and now gives every customer the benefit of our most advanced features from day 1 rather than treating each as a separate upsell. In the long run, we believe this approach will drive higher adoption and foster greater customer loyalty. Periodically, we'll share details on the adoption and performance of the PD Reliability Platform. On our second focus area, selling, we're launching a vibrant new marketing campaign this quarter, continuing to prioritize hiring for sales capacity and adding more forward deployed engineers into the field. Our ecosystem keeps growing. Anthropic, Cursor and LangChain are integrating alongside us and AI native leaders like CoreWeave and Anduril are building on PagerDuty. At the same time, our team continues to hone their skills in developing use cases and sales plays for the native AI capabilities. Lastly, in our third focus area, optimizing, we're carefully examining every investment across PagerDuty and aligning it with our revenue and operating margin objectives. As part of that effort, this week, we completed a meaningful workforce restructuring. These are never easy decisions, but we believe they leave the company stronger, sharpening our focus and prioritizing investment on the sales and engineering work that matters most. Of note, we focused on maintaining our quota-bearing sellers and our product teams addressing the most robust growth opportunities. Affected roles were concentrated in support functions now being automated and in areas where process simplification and tool consolidation allowed us to reduce our resource footprint. With the help of AI, we are improving the quality of service we deliver to our customers, strengthening retention and in turn, yielding durable productivity gains. Autonomous support deflection, faster code creation and frontier model deployments have already driven a dramatic improvement in our internal case handling capabilities and a significant reduction in our own support backlog. When combined with a broad reevaluation of our software estate and other fixed and variable service costs, these gains free up real capacity. Capacity we're reinvesting directly into our fastest-growing products and the go-to-market opportunities with the greatest yield. It's early days, but we do believe that our Q2 results provide a meaningful signal that our strategy is already gaining traction. I want to provide our investors a clear way to pace and measure our progress. First, we will strengthen retention rates by delighting customers with great products and excellent support. Second, we will scale platform adoption to drive revenue and additional customer value with a reinvigorated PLG motion and a step function improvement in our demand generation efforts. And third, as one and two take hold, we will drive ARR acceleration. We are focused on driving platform adoption and customer satisfaction as well as improving critical metrics such as net new ARR, DBNR, large customer growth and non-GAAP operating margin. Earlier, I mentioned that this quarter, we saw brisk new paying customer acquisition, growth in our customer population with ARRs over $100,000 and growth in our sales overseas. Before Eric shares more detailed financials, I wanted to provide a few concrete examples. A leading diversified financial services firm signed a roughly $850,000 3-year usage-based Ops Cloud agreement, automating its incident management strategy with our ML-based signal detection and autonomous SRE capabilities. In an industry where reliability, compliance and uptime are nonnegotiables, this is another example of a sophisticated buyer choosing PagerDuty as its reliability platform. In Japan, a leading bank undergoing a major digital transformation chose PagerDuty on the strength of our SRE automation capabilities. In a business where operational resilience is the product itself. This was a multiproduct win spanning incident management, AIOps, automation and analytics, all anchoring a customer-owned efficiency thesis of reducing operating expense by 40%, a direct validation of our AI narrative. One of the world's largest enterprise software platforms for workflow automation signed a 36-month agreement worth nearly $3 million, one of our largest new logo wins so far this year. Its significance goes beyond size. It reflects growing recognition among the largest platform companies that resilience and incident management are hard to replicate in-house and that PagerDuty is the trusted source when companies decide to buy rather than build. We also won a fast-growing U.K. AI infrastructure provider that had previously bet on a start-up competitor to reduce costs. This customer was quite outspoken. They shared that PagerDuty earned this business back handily based on our reliability, superior integration and our SRE agent and AI-assisted operations capabilities. Beyond the numbers, we continue to receive strong external validation this quarter. We won two SaaS awards, Best enterprise-level SaaS product and Best SaaS solution for IT and DevOps. Forrester named us as one of the notable vendors in their AIOps platform landscape for Q2. IDC featured us in their latest market overview of cloud-native software engineering solution, and we also earned spots in the 2026 Inspiring Workplaces list across multiple geographies. In closing, I want to thank all of our employees for their incredible contributions this quarter. Their work is what helped us to delight our customers and is further proof that reliability isn't just a feature we sell, it's who we are. I also want to thank our customers for trusting us with their most critical operations, our partners for growing alongside us and our shareholders for their continued confidence as we invest in the next phase of PagerDuty's growth. We are proud of this quarter and even more excited about what's ahead. And with that, now I'll turn it over to you, Eric. Eric Prengel: Thank you, John, and good day, everyone. I'm excited to be here at PagerDuty. I've been close to PagerDuty for over 7 years going back to the IPO process where I supported the company from the banking side. It has always been clear to me that this is an outstanding company with a fantastic culture. I watched from the outside as the products evolved and PagerDuty maintained its market leadership position. And over that same period, the opportunity in front of the company has only grown. Today, as the market shifts towards AI-driven operations, PagerDuty is positioned at the center of that transformation with a massive opportunity in front of us. I'm excited to be working alongside this team to build long-term value for our customers, shareholders and employees. Now on to the details of the quarter and our outlook. Unless otherwise stated, all references in my remarks to our operating margins, gross margins, net income and net income per diluted share are on a non-GAAP basis and are reconciled to our GAAP results in the earnings release that was posted on our Investor Relations website before the call. Revenue was $124.4 million, up 1% year-over-year, exceeding the top end of our guidance, with international revenue contributing about 30% of the total. Gross margin was 85%, which is within our target range, and non-GAAP operating margin was $29.5 million, a 24% operating margin, above the high end of our guidance. On a GAAP basis, net income was $4.7 million, our fifth consecutive quarter of GAAP profitability. Our confidence stems from the positive signs in the business with annual recurring revenue crossing the $500 million milestone, ending at $501 million, an increase of $6 million in the quarter. Dollar-based net retention was 98%, up sequentially and annualized gross retention also improved sequentially. As we implement the new build, sell optimize approach that John highlighted, we were pleased to see positive results across a number of key metrics in the business in Q2. Customers spending over $100,000 annually grew to 884, an increase of 24 since Q1 '27. In terms of cash flow for the quarter, cash from operations was $37 million and free cash flow was $33 million, representing a 26% free cash flow margin. Turning to the balance sheet. We ended the quarter with $470 million in cash, cash equivalents and investments. On a trailing 12-month basis, billings was $501 million, an increase of 1% compared to a year ago. Total RPO was $426 million, $1 million higher than year-over-year. Of this amount, approximately $309 million is expected to be recognized over the next 12 months, which represents a 5% year-over-year increase versus Q2 FY '26. During the quarter, we repurchased nearly 800,000 shares for $7.6 million. As of the end of Q2, we still have $92.4 million remaining of the $100 million share repurchase authorization. We remain committed to managing dilution. Accordingly, we are focused on both what we repurchase and what we issue. As John mentioned earlier, we underwent a workforce restructuring this week, which will allow us to prioritize key sales and engineering investments. I want to provide you with further financial details on the workforce restructuring John mentioned. The reduction impacted approximately 15% of our workforce concentrated in noncustomer-facing roles while focusing on maintaining our quota capacity and product development expertise. We expect to recognize approximately $5.5 million to $7.5 million in restructuring charges, primarily severance and related costs, with the majority recognized in Q3 and substantially complete by the end of Q4. On a run rate basis, we expect significant savings, which gives us room to reinvest in the areas of the business growing fastest while also supporting the margin guidance I'll walk through in a moment. And now turning to guidance. For the third fiscal quarter of 2027, we expect revenue in the range of $123 million to $125 million, with the midpoint approximately flat year-over-year and net income per diluted share attributable to PagerDuty, Inc. in the range of $0.34 to $0.36. This implies an operating margin of 26.5% to 27.5%. For the full fiscal year 2027, we expect revenue in the range of $491.5 million to $496.5 million, with the midpoint approximately flat year-over-year. We have raised the low end of our FY '27 revenue guidance to reflect the confidence we have in the business and the strength we have seen so far in the first half performance. We expect net income per diluted share attributable to PagerDuty, Inc. in the range of $1.33 to $1.37 for FY '27, an increase primarily based on cost reductions associated with the restructuring we undertook this week. This implies operating margin guidance of 25% to 26% for FY '27, an increase to our prior operating margin guidance of 24% to 25% and accelerating our trajectory to our target operating margin of 30%. Additionally, we wanted to provide an update on our outlook for operating cash flow. Going into FY '27, we provided some points to assist with modeling, suggesting that our free cash flow margin would be 2 to 4 points lower than it was in FY '26. With the restructuring and cost savings we undertook this week, we now expect our free cash flow margin to be in line with our FY '26 free cash flow margin. Let me leave you with what matters most. Retention is stabilizing, new business demand is strong, and we're optimizing for profitable growth while returning cash to investors through buybacks. AI increases the criticality of PagerDuty, making us more relevant, not less. We're early in this journey, but we're increasingly confident that the advent of the AI era will prove to be a powerful tailwind for PagerDuty. And with that, we'll open the call for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Kingsley Crane from Canaccord. William Kingsley Crane: Great. Great to see the results. John, you've talked about in the prepared remarks, blended teams of agents and humans in the PD Reliability Platform. I just want to get your take if having humans in the loop is a core tenet you want to keep over time? Or how much is that dictated by customer readiness? And then in terms of PagerDuty being a control plane for AI, like to what extent do you think there's an opportunity to govern or orchestrate third-party agent execution? John DiLullo: Thanks for the question. As far as the first part of having humans in the loop, especially in the handling of cases, that feels like a very natural motion for us right now that seems to be received and embraced a little bit better by customers as they're leaning into autonomous agents and autonomous workload protection. And so that feels like the right motion for us now as we move to more and more autonomy ultimately. There's another element there also, there's RLHF, right, reinforcement learning that we're able to derive as we go side-by-side with our customers and learn from the actions that they're actually taking and that potentially gives us the opportunity to provide higher fidelity down the road. As for ultimately including fully autonomous solutions, we certainly are seeing some of that now on some simple cases or on cases that are often repeated. That is some of the customers that are leveraging our SRE agent in autonomous mode are getting some of the best ROIs, I'd say, and seeing some of the most rapid acceleration. I think over time, the amount of autonomous will go up. But for right now, it doesn't really change our plan. This is -- the way we've introduced it feels very natural both to us and to our customers. William Kingsley Crane: Great. That's helpful. And then just to follow up for Eric, really great to be working with you again, first of all. But just -- so on the Ops Cloud or Reliability Cloud Platform conversions, we have a couple of quarters now of data. Just curious how you're thinking about ARR -- change in ARR at the point of conversion, like how wide that dispersion could be when a customer converts? Eric Prengel: Thanks, Kingsley. Really appreciate the question. And so as you think about Ops Cloud, we think about it as a big opportunity to not just have our customers use our product and use the products they're using, but for them to actually use more of our products and to try new products that they weren't able to use before. So they're getting a lot more value out of our capabilities than they were before. And one thing I'd call out, we didn't give an explicit metric around Ops Cloud or usage this quarter. It's not something that we're going to report regularly, but we did see strength in that business. We saw it to continue to do well and grow nicely. It actually grew double digits on a total basis. So it was very positive and something that we're happy to see. John DiLullo: Kingsley, I would add to that also as part of the PD Reliability Platform, what Eric said is 100% right. We're seeing an incredible amount of energy in that -- in the Ops Cloud space and now on the PD Reliability Platform. But it's also democratizing AI. And so it's giving all of our customers, including the customers that we work with in PagerDuty online, access to these AI capabilities. And we do think it's going to be a catalyst for even more adoption down the road. But it was a great question, Kingsley. Really appreciate it. Operator: Your next question comes from the line of Andrew Sherman from TD Cowen. Andrew Sherman: Eric, congrats on the new job and good to work with you again. John, it would be great to get an update on customer feedback on the usage-based model and how aggressively you think you could push this in the second half and really how much usage grows for the customers that are already on it? And then bigger picture, the pipeline of enterprise deals in the second half, how is that looking? John DiLullo: Thanks, Andrew. Thanks for joining the call. We -- first of all, since I've been here, I've been spending a lot of time with customers, as you would imagine, and met dozens of them and through them -- talking through with them their adoption plans. Certainly, the hurdle or the barrier for people to experience our product and to experience our AI and our Agentic solutions is much lower in the AI, the AI cloud model because they get the opportunity to experience it in a bite-size consumed way. It's also a very natural way to align value with usage. And so very powerful from that perspective. I would also say that the customers that we are seeing, in particular, the enterprises that are adopting it, we do see a nice trend, a nice usage trend as their time with the product continues. And I would also just say that -- as far as your question about the pipeline and the momentum that's building in the product, it is building. I mean we saw meaningful growth on a quarter-on-quarter basis. But also, you may have noticed that we had a significant increase in our number of 100,000 customers on a quarter-on-quarter basis. And a lot of those sales opportunities were initiated and encouraged by the -- by customers embracing the AIOps solution. So very, very comfortable with the progress that we're making there and the outlook. Andrew Sherman: That's great. And Eric, on the gross retention, good to see that moving in the right direction, especially net rev retention to 98%. Not asking you to guide for the second half, but do you think that can keep improving in the second half? And what gives you the confidence of that? Eric Prengel: Yes. Thanks for the question, and great to be working with you again. We were happy with what we saw on the net revenue, the dollar-based net retention that going up to 98%, which is a nice inflection and stabilization. And it's actually 2 quarters in a row that we've talked about the gross revenue retention being up. So that's a really nice trend that we've seen. As you think about that, I think about it as a sign, hopefully, for stabilization in the business. And we're really focused on continuing to improve both gross retention and dollar-based net retention over both the immediate term and long term, and it's something that's been a big focus for me and John as we start to -- as we're spending a lot of time on that part of the business. John DiLullo: Yes. I would add that the magic ingredient seems to be having -- we have a collection of solutions, AI solutions for PagerDuty, adding that together with this new consumption model, this new Ops Cloud consumption model, seems to be the magic elixir for -- also for better retention, and that's definitely helping us. Operator: Your next question comes from the line of Sanjit Singh from Morgan Stanley. Sanjit Singh: Congrats on the nice improvement quarter-over-quarter, especially on the net new ARR side. John, as you spent some time now with the business, just from a portfolio perspective and you look at the different areas where the Ops Cloud sort of plays in and the different capabilities, are there other areas that you sort of as potential adjacencies for PagerDuty to drive continued growth? Or are there areas where you guys may pull back on and sort of rationalize? I know you guys did the headcount reduction to invest more. And so I just want to get a sense of, one, where those investments are directed? And then two, where else does PagerDuty have a right to win? John DiLullo: That's a great question. So I'll break it out in a couple of ways. We're doing and adding a lot of capabilities to our core product. And some of those have AI capabilities as a component of them. And I'll break out our AI capabilities into two tranches. One would be AI for PagerDuty. That's using AI to make the PagerDuty experience more rich, more proactive, more preventative. And the second one is PD for AI or PagerDuty for AI solutions. And in particular, when you're talking about where do we have the right -- I think we really have the right in the PD4 AI category. And I'll point to a couple of things, but you think about the sheer volume of software that's being added and written and created right now and then also think through the fact that a lot of this is nondeterministic software. It tends to break more often. It's much more fragile. We think that's going to create an incredible opportunity for us as these workloads, these agentic nondeterministic workloads start to enter production. The other element that I would also say is as these workloads come into production, we know they're going to fail differently. They're going to -- people are going to worry about other things like drift, like hallucination, like token runaway, like PII leakage, all these areas. And so the tsunami hasn't maybe hit quite yet, but we know that these AI workloads are starting to enter production in a lot of our enterprise accounts. And so I think that's going to be one of the greatest areas for us to get further penetration. Sanjit Singh: Yes. No, that's super interesting. And my next question for Eric. First, congrats on the role. Excited to see you on PagerDuty. When I think about sort of the headwinds to the business over the last several years, some of that's obviously been on the seat side of the equation. And obviously, Ops Cloud with the consumption model can address a lot of that. But just in terms of like where we are on the headwind from seat trend, do you feel like we're kind of past the worst of it when it comes to that? How do you sort of see the rest of the year playing out from a seat perspective? Eric Prengel: Yes, it's a great question, Sanjit, and it's a pleasure to be working with you again. I think that Ops Cloud and that usage model is a great way for us to kind of take away some of the challenges that we've historically experienced around seat compression. This quarter, we saw a lot of positivity as you saw, dollar-based net retention sort of inflected upwards. Gross retention was positive. And so we were really happy to see that. I think we're doing a lot of work that John talked about with the product, and I think that's going to make us stickier and help us in terms of our traction with our customers. But I think ultimately, as you think about the way that the world is changing and that we're moving more towards AI, which is a place where we think we can be a massive beneficiary, we're going to be moving away from so much of that seat pressure and moving more towards a world in which people are getting benefit from us and using us on a usage basis and using our AI capabilities, and that's really what's going to drive our growth. John DiLullo: I would just add to that, that we had a rough couple of quarters. We still have a lot of work to do and not necessarily signaling that, that work is over at this point. But we do see the new products gaining traction, and we do feel like the business is stabilizing in the last 2 quarters in particular, I think, have alluded to that. But we know -- we -- like I said, we still have work to do, Sanjit, but I appreciate the question. Operator: Your next question comes from the line of Jonathan Ngo from Truist Securities. Jonathan Ngo: This is Jonathan Ngo, Truist Securities in for Miller Jump. Congrats on the great quarter, a lot of positive points. I wanted to ask maybe around some of those 100,000 customer adds in the quarter. And can you maybe walk us through like some of the specifics driving those adds maybe between product-led growth and go-to-market? John DiLullo: Yes, sure. I think -- thanks for the question, Jonathan. I appreciate it. We saw a mix, which I really liked seeing. It wasn't like -- all of them came through the PLG motion or from PD Online or they weren't all graduations. We saw a very good mix. We even saw -- I think the sales team is really starting to get their confidence. They're starting to understand the sales process. They're familiar with how to quote and characterize the usage-based products. And so I would say it was broad. There were some marquee names in there. There were -- we continue to see growth with our frontier with company -- frontier models, frontier model companies that have embraced the technology. And I would say that the diversity of the 24 new enterprise accounts that we added on a quarter-on-quarter basis was probably -- you alluded to it there was probably one of the most reassuring things. Jonathan Ngo: And then great. Just one more follow-up. So I know Anthropic was named again as an expand this quarter amongst many great others. Can you maybe walk us through like what products have expanded to you and how these larger enterprises are kind of expanding their platform breadth with PagerDuty? John DiLullo: Yes. No, it's a great question. And I want to be careful not to share anything proprietary or any intellectual property there. But what I will say -- what I would share with you is that I think this is evidence that we're doing a great job at the component that I mentioned, PD for AI or PagerDuty for AI. And so these are some pretty interesting new novel use cases that the frontier models are exploring. And I think we have most of the big ones as customers and are really enjoying learning right alongside of them, seeing the energy in the business is exciting. And like I mentioned, I think we're learning alongside of them things that we can -- tactics that we can help in our other customers. So the relationships are very strong and progressive. And I would say that mutually beneficial as well. Operator: Your next question comes from the line of Jeff Van Rhee from Craig-Hallum Capital Group. Jeff Van Rhee: Maybe just a few for me. On the sales front in terms of sales cycles, what are you seeing with respect to competition and really what customers are asking? I'm really just kind of curious, change in sales cycles, duration, competitive landscape and sort of the dialogue with the customers, concerns, things they are asking you about? John DiLullo: That's a great question, Jeff. Competition is always there. It's an interesting space to be in, but we're doing -- I think we're really enjoying this environment. And I actually think that competition helps you to hone your skills and focus the work that you're doing. What I would point to, in particular, is we are seeing underlying elements of our platform coming together in a very positive way. We see, for instance, we see continued utilization and event throughput on the platform growing very nicely. We also see customers with idle agents or agents -- excess agents that they bought, we see that population coming down and down. And so the number of idle agents in a customer's estate is getting smaller. I think those two things are actually helping us and helping our win ratios and our speed of deal closure pretty dramatically, and we saw some of that this quarter. If there's not excess usage and if there is some pent-up demand inside the accounts, the sales cycles move a little bit faster. And so it was definitely a feature, I think, of this quarter. Jeff Van Rhee: Yes. Got it. Maybe one last for me. Eric, on the reduction in force, what is the gross savings? Just trying to get a sense of the gross savings and then how much you're reinvesting? I think you referenced you're going to be doing that? Eric Prengel: Yes, great question. And we're not disclosing explicitly the gross savings, but what I will tell you is this. In Q2, we had a 23.7% non-GAAP operating margin. Our guidance for Q3 is between 26.5% to 27.5% for our non-GAAP operating margin. So think about that as a 3.5 point increase. So it's a nice increase on the year. Additionally, our full year guide before -- at Q2, we've been talking about a 24% to 25% non-GAAP operating margin. We went ahead and raised that by a full point because of what we're seeing in terms of savings. So now it's 25% to 26% and free cash flow is doing something similar, where we said at the beginning of the year that we thought we'd be 2 to 4 points behind where our free cash flow margin was in FY '26. Now we're saying that we're going to be in line. So a meaningful increase in terms of the bottom line. In addition to that, we're going to be taking some of those savings and reinvesting them so we're going to invest both on the product side as there's a lot that we're doing with the phrases that John very well coined, AI for PD and PD for AI, and we're also going to be putting money into the go-to-market motion. So we're going to see a nice uptick on operating margin, which is going to get us to hopefully accelerate that path to the 30% target margin that we talked about, and we're also going to see the ability to reinvest in the business. So a lot to be excited about. Operator: [Operator Instructions] There are no further questions at this time. I will now turn the call back to John DiLullo, Chief Executive Officer, for closing remarks. John, please go ahead. John DiLullo: All right. Thank you, and thanks for the great questions. We sincerely appreciate your participation today. If there's something to take away from this call, I think it should be that we are focused on building a great company, delighting our customers and rewarding our investors. Today, we gave you a glimpse of the green shoots emerging and early signs that our build, sell, optimize strategy are taking root. But we're even more excited about what's ahead, and we look forward to chatting more in the quarters that follow. Thank you so much for joining our Q2 call. We'll see you next quarter. Operator: This concludes today's call. Thank you for attending. You may now disconnect. 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In late August 2026, PagerDuty reported second-quarter 2026 results showing revenue of US$124.44 million and net income of US$4.73 million, alongside updated guidance for third-quarter and full fiscal year 2027 revenue. An interesting twist is that while quarterly net income declined year on year, net income for the first half of the fiscal year increased meaningfully compared to the prior period. With PagerDuty now guiding third-quarter revenue to US$123.0–US$125.0 million, we’ll consider how this shapes its existing investment narrative. We've uncovered the 12 dividend fortresses yielding 5%+ that don't just survive market storms, but thrive in them. To own PagerDuty, you need to believe its Operations Cloud can stay essential even as customers automate more of their incident response. The latest results keep that debate open: revenue guidance for the third quarter looks steady, but the year on year drop in quarterly net income highlights how fragile profitability still is. For now, this print does not dramatically change the near term catalyst around stabilizing growth, or the key risk of margin pressure in a competitive market. Among recent updates, the most relevant here is PagerDuty’s new revenue guidance of US$491.5 million to US$496.5 million for full fiscal 2027, which frames how much room there is for upside or downside relative to current expectations. When you set this against modest year to date revenue growth and a sharp improvement in first half net income, the guidance becomes an important reference point for judging how sustainable earnings and cash generation might be. Yet beneath the improved first half profit, investors should be aware of how rising automation and usage based pricing could still compress PagerDuty’s long term revenue base... Read the full narrative on PagerDuty (it's free!) PagerDuty’s narrative projects $507.5 million in revenue and $3.5 million in earnings by 2029. Uncover how PagerDuty's forecasts yield a $9.14 fair value, a 34% downside to its current price. Some of the lowest ranked analysts took a much harsher view, assuming revenue near US$503 million and earnings of only about US$8 million by 2029, which contrasts sharply with the current guidance and shows just how far opinions can differ before this latest report is fully reflected. Explore 4 other fair value estimates on PagerDuty - why the stock might be worth 42% less than the current price! Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so go with your instincts. A great starting point for your PagerDuty research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision. Our free PagerDuty research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate PagerDuty's overall financial health at a glance. Our top stock finds are flying under the radar-for now. Get in early: Uncover the next big thing with 22 elite penny stocks that balance risk and reward. AI is about to change healthcare. These 39 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10b in market cap - there's still time to get in early. The future of work is here. Discover the 38 top robotics and automation stocks leading the charge in AI-driven automation and industrial transformation. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include PD. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved the $500 million ARR milestone driven by incremental new customer wins and existing customer expansions that exceeded internal guidance. Pivoted the corporate strategy to a 'build, sell, optimize' mantra, focusing investments exclusively on product innovation, go-to-market conversion, and expense rationalization. Attributed performance improvements to the stabilization of retention rates and brisk new customer acquisition through online sales and overseas expansion. Identified a massive opportunity in AI-generated software, noting that AI-written code fails at higher rates and creates complex, nondeterministic operational risks that require PagerDuty's resilience layer. Transitioned the Operations Cloud to the 'PD Reliability Platform,' an AI-first integrated system where autonomous agents and humans collaborate to detect and remediate incidents. Reported that 95% of leaders now view incident recovery as a competitive advantage, supporting the company's shift from incident detection to proactive prevention. Leveraged internal AI tools to automate support functions, which allowed for a reduction in support backlog and provided the capacity for workforce restructuring. Raised full-year non-GAAP operating margin guidance to 25%-26%, accelerating the trajectory toward a long-term 30% target following a 15% workforce reduction. Anticipates the general availability of the PD Reliability Platform in late Q3 will democratize AI capabilities across the entire customer base, including self-serve users. Expects the shift toward usage-based pricing to drive higher long-term adoption and foster customer loyalty by removing traditional seat-based friction. Projects full-year free cash flow margins to be in line with fiscal 2026 levels, reversing a previous forecast of a 2 to 4 point decline. Focusing future investments on 'PD for AI' use cases, specifically addressing emerging risks like model drift, hallucinations, and token runaway in production environments. Executed a meaningful workforce restructuring this week, impacting approximately 15% of the workforce, primarily in non-customer-facing and support roles. Expects to recognize restructuring charges between $5.5 million and $7.5 million, mostly in Q3, related to severance and related costs. Noted that while business is stabilizing, management cautioned that they 'still have work to do' and are not signaling that all headwinds are fully resolved. Authorized a $100 million share repurchase program, with $92.4 million remaining, to manage dilution and return cash to investors. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management views 'humans in the loop' as a natural current motion that customers embrace while leaning into autonomous agents. Human interaction provides reinforcement learning (RLHF) that allows PagerDuty to improve the fidelity of its autonomous solutions over time. Fully autonomous remediation is already delivering the highest ROI for customers on simple or frequently repeated cases. The usage-based model lowers the barrier for customers to experience AI and agentic solutions in 'bite-size' consumed ways. Management reported that the usage-based business grew double digits on a total basis during the quarter. The model aligns value with usage and acts as a catalyst for adoption by giving customers access to advanced features without separate upsells. Management believes the shift to usage-based models helps mitigate historical challenges related to seat compression. Observed a decrease in the population of 'idle agents' within customer estates, suggesting higher utilization and pent-up demand. Win ratios and deal closure speeds have improved as customers exhaust excess capacity and require new capabilities for AI workloads.

This article first appeared on GuruFocus. Revenue: $124.4 million, up 1% year over year, exceeding the top end of guidance. Gross Margin: 85%, within the company's target range. Operating Margin: Non-GAAP operating margin of 24%, above the high end of guidance. Net Income: GAAP net income of $4.7 million, marking the fifth consecutive quarter of GAAP profitability. Annual Recurring Revenue (ARR): Crossed the $500 million milestone, ending at $501 million, an increase of $6 million in the quarter. Dollar-Based Net Retention: 98%, up sequentially. Large Customer Growth: Customers spending over $100,000 annually grew to 884, an increase of 24 since Q1 '27. Cash Flow: Cash from operations was $37 million and free cash flow was $33 million, representing a 26% free cash flow margin. Billings: Trailing 12-month billings were $501 million, an increase of 1% compared to a year ago. Remaining Performance Obligations (RPO): Total RPO was $426 million, $1 million higher year over year, with approximately $309 million expected to be recognized over the next 12 months. Share Repurchases: Repurchased nearly 800,000 shares for $7.6 million during the quarter. Restructuring: Workforce reduction of approximately 15%, with expected restructuring charges of $5.5 million to $7.5 million. Q3 FY27 Guidance: Revenue expected in the range of $123 million to $125 million, with net income per diluted share of $0.34 to $0.36. Full Year FY27 Guidance: Revenue expected in the range of $491.5 million to $496.5 million, with net income per diluted share of $1.33 to $1.37. Warning! GuruFocus has detected 6 Warning Sign with PD. Is PD fairly valued? Test your thesis with our free DCF calculator. Release Date: August 27, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. PagerDuty Inc (NYSE:PD) exceeded revenue guidance and surpassed the $500 million ARR milestone, indicating strong business momentum. The company saw sequential improvements in retention rates, including dollar-based net retention rising to 98% and improved annualized gross retention. Adoption of the Operations Cloud usage-based platform grew meaningfully quarter-over-quarter, with double-digit growth, signaling strong customer traction. PagerDuty Inc (NYSE:PD) achieved its fifth consecutive quarter of GAAP profitability and exceeded operating margin and EPS guidance, demonstrating fiscal discipline. The company is strategically positioned for AI-driven growth with the upcoming PD Reliability Platform, which democratizes access to advanced agentic capabilities and has already attracted major customers like CoreWeave and Anduril. PagerDuty Inc (NYSE:PD) completed a workforce restructuring impacting approximately 15% of employees, which may disrupt operations and morale. Revenue growth remains sluggish, with Q3 FY27 guidance indicating roughly flat year-over-year growth at the midpoint. The company faces ongoing headwinds from seat compression, which has historically pressured revenue and requires a shift to usage-based models to mitigate. Dollar-based net retention at 98% remains below 100%, indicating that existing customers are still not expanding their spend sufficiently to offset churn. The restructuring charges of $5.5 million to $7.5 million will impact near-term financials, and the company acknowledges there is still significant work to stabilize the business. Q: John, you've talked about blended teams of agents and humans in the PD Reliability Platform. Is having humans in the loop a core tenet you want to keep over time, or is that dictated by customer readiness? And to what extent do you think there's an opportunity to govern or orchestrate third-party agent execution?A: John DiLullo (CEO): Having humans in the loop feels like a very natural motion for us right now and is embraced better by customers as they lean into autonomous agents. It also allows us to derive reinforcement learning (RLHF) from customer actions for higher fidelity down the road. While we are seeing fully autonomous solutions on simple or repeated cases, the amount of autonomy will increase over time, but it doesn't change our current plan. Q: On the OpsCloud or Reliability Cloud Platform conversions, how are you thinking about ARR changing at the point of conversion, and how wide could the dispersion be when a customer converts?A: Eric Prengel (CFO): We view OpsCloud as a big opportunity for customers to use more of our products and try new ones they couldn't before, getting more value from our capabilities. While we didn't give an explicit metric this quarter, the business saw strength and grew double-digits on a total basis. John DiLullo (CEO) added that the PD Reliability Platform is democratizing AI, giving all customers, including those in PagerDuty Online, access to these capabilities, which should be a catalyst for more adoption. Q: Can you provide an update on customer feedback on the usage-based model and how aggressively you could push this in the second half? Also, how is the pipeline of enterprise deals looking?A: John DiLullo (CEO): The barrier for customers to experience our AI and agentic solutions is much lower with the usage-based model because they can experience it in a bite-sized, consumed way, which aligns value with usage. We see a nice usage trend as enterprises continue with the product. The momentum is building, with meaningful quarter-over-quarter growth and a significant increase in $100,000 customers, many of which were initiated by customers embracing the AI Ops solution. Q: On gross retention, it's good to see it moving in the right direction, especially with net revenue retention at 98%. Do you think this can keep improving in the second half, and what gives you confidence?A: Eric Prengel (CFO): We were happy with the dollar-based net retention inflecting up to 98%, and it's two quarters in a row of gross revenue retention being up. This is a sign of stabilization in the business. We're focused on continuing to improve both metrics over the immediate and long term. John DiLullo (CEO) added that the combination of AI solutions and the new OpsCloud consumption model seems to be the "magic elixir" for better retention. Q: From a portfolio perspective, are there other adjacencies for PagerDuty to drive growth, or areas where you might pull back and rationalize? Where else does PagerDuty have a right to win?A: John DiLullo (CEO): We break AI capabilities into two tranches: AI for PagerDuty (enhancing the core product) and PagerDuty for AI (PD for AI). We have the right to win in the PD for AI category. With the sheer volume of non-deterministic software being created, which is fragile and breaks more often, we see an incredible opportunity as these agentic workloads enter production. They will fail differently, with concerns like drift, hallucinations, token runaway, and PII leakage, creating a great area for further penetration. Q: Regarding the headwinds from seat compression, do you feel we're past the worst of it, and how do you see the rest of the year playing out from a seat perspective?A: Eric Prengel (CFO): OpsCloud and the usage model are a great way to take away challenges from seat compression. We saw positivity this quarter with dollar-based net retention inflecting upwards and positive gross retention. As the world moves toward AI, we'll move away from seat pressure and toward a world where people benefit from us on a usage basis. John DiLullo (CEO) added that while they had a rough couple of quarters and still have work to do, the new products are gaining traction and the business is stabilizing. Q: Can you walk us through the specifics driving the 24 new $100,000 customer adds, perhaps between product-led growth and go-to-market?A: John DiLullo (CEO): We saw a good mix of adds; they weren't all from the PLG motion or PD Online, nor were they all graduations. The sales team is gaining confidence and understanding how to quote usage-based products. There were some marquee names, continued growth with frontier model companies, and the diversity of the 24 new enterprise accounts was one of the most reassuring things. Q: Anthropic was named as an expand this quarter. Can you walk us through what products they expanded to and how larger enterprises are expanding platform breadth with PagerDuty?A: John DiLullo (CEO): Without sharing proprietary information, this is evidence that we're doing a great job with the "PD for AI" component. Frontier models are exploring novel use cases, and we have most of the big ones as customers. We're learning alongside them and can apply those tactics to help our other customers. The relationships are strong, progressive, and mutually beneficial. Q: On the sales front, what are you seeing with respect to competition, sales cycles, and what customers are asking for?A: John DiLullo (CEO): Competition is always there, but we're enjoying the environment as it helps hone our skills. We're seeing underlying platform elements come together positively, with continued utilization and event throughput growing nicely. The population of idle agents in customer estates is decreasing. These factors are helping our win ratios and speed of deal closure, as pent-up demand inside accounts moves sales cycles faster. Q: On the reduction in force, what is the gross savings and how much are you reinvesting?A: Eric Prengel (CFO): We're not disclosing gross savings explicitly, but in Q2 we had a 23.7% non-GAAP operating margin. Our Q3 guidance is 26.5% to 27.5%, a 3.5-point increase. We raised the full-year operating margin guidance by a full point to 25% to 26%. For free cash flow, we now expect to be in line For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Second quarter revenue increased 1% year over year to $124 millionAnnual Recurring Revenue ("ARR") grew year over year to $501 millionSecond quarter operating income was $10 million; non-GAAP operating income was $30 millionNet income was $5 million, representing the fifth consecutive quarter of GAAP profitability SAN FRANCISCO, August 27, 2026--(BUSINESS WIRE)--PagerDuty, Inc. (NYSE:PD), a leader in AI-first operations management, today announced financial results for the second quarter of fiscal 2027, ended July 31, 2026. "We delivered revenue above the high end of our guidance range, crossed $500 million in ARR, and generated $33 million in free cash flow this quarter, providing encouraging signals that our strategy is gaining traction," said John DiLullo, CEO. "Just as importantly, the underlying fundamentals are strengthening. Non-GAAP operating income also came in ahead of expectations and we enjoyed our fifth consecutive quarter of GAAP profitability. AI is transforming how software is built and operated, and PagerDuty is uniquely positioned to benefit from that shift." Second Quarter Fiscal 2027 Financial Highlights Revenue was $124.4 million, an increase of 0.8% year over year. Operating income was $10.2 million; operating margin was 8.2%. Non-GAAP operating income was $29.5 million; non-GAAP operating margin was 23.7%. Net income attributable to PagerDuty, Inc. common stockholders was $4.7 million, representing the Company's fifth consecutive quarter of GAAP profitability. Net income per diluted share attributable to PagerDuty, Inc. common stockholders was $0.06. Non-GAAP net income per diluted share attributable to PagerDuty, Inc. common stockholders was $0.32. Net cash provided by operating activities was $36.9 million; free cash flow was $32.8 million. Cash, cash equivalents, and investments were $470.0 million as of July 31, 2026. The section titled "Non-GAAP Financial Measures" below contains a description of the non-GAAP financial measures and reconciliations between GAAP and non-GAAP financial information. Second Quarter and Recent Highlights ARR as of July 31, 2026 was $501 million. Customers with ARR over $100 thousand was 884 as of July 31, 2026. Dollar-based net retention rate was 98% as of July 31, 2026. Total paid customers were 15,506 as of July 31, 2026,. Lands and expands include: Anthropic, PBC, Banco Pichincha, C.A., Coreweave, Inc., Delivery Hero SE, Kawasaki Heavy Industries, Ltd., and Palo Alto Networks, Inc. Appointed John DiLullo as Chief Executive Officer. Named Eric Prengel as Chief Financial Officer and announced the retirement of Howard Wilson. Appointed Alex Shootman to the Board of Directors. In Q2, major upgrades were made to PagerDuty's autonomous SRE agent, incident management lifecycle integration, and the Company's agentic offering for simplifying on-call shift management. Announced distribution agreement in Australia with Ingram Micro. Financial Outlook For the third quarter of fiscal 2027, PagerDuty currently expects: Total revenue of $123.0 million - $125.0 million. Non-GAAP operating margin of 26.5% to 27.5%. Non-GAAP net income per diluted share attributable to PagerDuty, Inc. common stockholders of $0.34 - $0.36, assuming approximately 80 million diluted shares and a non-GAAP tax rate of 20%. For the full fiscal year 2027, PagerDuty currently expects: Total revenue of $491.5 million - $496.5 million. Non-GAAP operating margin of 25.0% to 26.0%. Non-GAAP net income per diluted share attributable to PagerDuty, Inc. common stockholders of $1.33 - $1.37, assuming approximately 80 million diluted shares and a non-GAAP tax rate of 20%. These statements are forward-looking and actual results may differ materially. Please refer to the section titled "Forward-Looking Statements" below for information on the factors that could cause our actual results to differ materially from these forward-looking statements. PagerDuty has not provided the GAAP equivalent or reconciled its expectations as to non-GAAP net income per share attributable to PagerDuty, Inc. common stockholders or our outlook for non-GAAP operating margin to GAAP net income per share attributable to PagerDuty, Inc. common stockholders or GAAP operating margin, respectively, because certain reconciling items such as stock-based compensation expense, employer taxes related to employee stock transactions, acquisition-related expenses, restructuring costs, gains or losses on extinguishment of convertible senior notes, adjustment attributable to redeemable non-controlling interest, and income tax effects and adjustments are out of PagerDuty’s control or cannot be reasonably predicted. Accordingly, such reconciliation is not available without unreasonable effort. However, it is important to note that these reconciling items could have a significant effect on PagerDuty’s future GAAP results. Conference Call Information PagerDuty will host an audio call (meeting ID 817 056 145)) for analysts and investors at 2:00 p.m. Pacific Time on August 27, 2026. The North American dial-in number 1-833-461-5787 or the International dial-in number 1-585-542-9983 may be used. Both a news release with the financial results and the audio call will be available to the public on PagerDuty’s investor relations website at investor.pagerduty.com. A replay of the meeting will be available following the call. Supplemental Financial and Other Information Supplemental financial and other information can be accessed through PagerDuty’s investor relations website at investor.pagerduty.com. PagerDuty uses the investor relations section on its website as a means of complying with its disclosure obligations under Regulation FD. Accordingly, we recommend that investors monitor PagerDuty’s investor relations website in addition to following PagerDuty’s press releases, SEC filings, social media, including PagerDuty’s LinkedIn account (https://www.linkedin.com/company/482819), X account @pagerduty, and Facebook page (facebook.com/pagerduty), and public conference calls and webcasts. Forward-Looking Statements This press release and the related webcast contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our future financial and operational performance and outlook, and strategies, objectives, opportunity, expectations and market positioning. Words such as "expect," "extend," "anticipate," "should," "believe," "hope," "target," "project," "accelerate," "goals," "estimate," "potential," "predict," "may," "will," "might," "could," "intend," "shall," and variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond our control. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks and other factors detailed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 12, 2026 and our Quarterly Report on Form 10-Q for the quarter ended April 30, 2026 filed with the SEC on May 28, 2026. Additional information will be made available in our Quarterly Report on Form 10-Q for the quarter ended July 31, 2026 and other filings and reports that we may file from time to time with the SEC. In particular, the following risks and uncertainties, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: our ability to maintain or increase profitability; our ability to sustain or increase growth and effectively manage changes in our business and industry; our ability to attract new customers and retain and sell additional functionality and services to our existing customers; our ability to attract and retain executives and employees we need to support our operations and growth and the impact of our recent restructuring on that ability; our dependence on a majority of our revenue from a single product; our ability to compete effectively in an increasingly competitive market; the impact of seasonality on our business; our ability to adapt and respond effectively to rapidly developing technology; our ability to effectively develop and expand our marketing and sales capacities; our ability to enhance and improve our platform or develop new functionality or use cases; the effect of unfavorable conditions in our industry or the global economy, or reductions in information technology spending, on our business and results of operations; adverse consequences that could arise as a result of international trade policies, geopolitical developments, and macroeconomic conditions, including tariffs, sanctions, trade barriers and global instability; the accuracy of our estimates of market opportunity and forecasts of market growth; our assumptions and limitations to which ARR and certain other operational data are subject that may cause such metrics to not provide an accurate indication of actual performance or future results; adverse consequences that could result from any compromise of our information technology systems or those of third parties with whom we work or our data; adverse consequences that could result from any interruptions or delays in performance of our service; and our ability to maintain the compatibility of our platform with third party applications that our customers use in their businesses. Past performance is not necessarily indicative of future results. The forward-looking statements included in this press release and the related webcast represent our views as of the date of this press release and the related webcast . We anticipate that subsequent events and developments will cause our views to change. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release and the related webcast. About PagerDuty, Inc. PagerDuty, Inc. (NYSE: PD) is the global leader in AI-first digital operations. By automatically detecting, diagnosing, and remediating issues, the PagerDuty Platform orchestrates AI agents and automated workflows with context from over 750 integrations. Trusted by approximately two-thirds of the Fortune 100 and nearly half of the Fortune 500, PagerDuty is the industry standard for organizations scaling resilient, autonomous operations. Learn more and try it for free at www.pagerduty.com. Source: PagerDuty, Inc. Non-GAAP Financial Measures This press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP general and administrative, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income attributable to PagerDuty, Inc. common stockholders, non-GAAP net income per share attributable to PagerDuty, Inc. common stockholders, free cash flow, and free cash flow margin. PagerDuty believes that non-GAAP financial measures, when taken collectively, may be helpful to investors because they provide consistency and comparability with past financial performance and can assist in comparisons with other companies, some of which use similar non-GAAP financial measures to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in PagerDuty’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by PagerDuty’s management about which expenses and income are excluded or included in determining these non-GAAP financial measures. A reconciliation is provided below for each historical non-GAAP financial measure to the most directly comparable financial measure presented in accordance with GAAP. Specifically, PagerDuty excludes the following from its historical and prospective non-GAAP financial measures, as applicable: Stock-based compensation: PagerDuty utilizes stock-based compensation to attract and retain employees. It is principally aimed at aligning their interests with those of its stockholders and at long-term retention, rather than to address operational performance for any particular period. As a result, stock-based compensation expenses vary for reasons that are generally unrelated to financial and operational performance in any particular period. Employer taxes related to employee stock transactions: PagerDuty views the amount of employer taxes related to its employee stock transactions as an expense that is dependent on its stock price, employee exercise and other award disposition activity, and other factors that are beyond PagerDuty’s control. As a result, employer taxes related to employee stock transactions vary for reasons that are generally unrelated to financial and operational performance in any particular period. Amortization of acquired intangible assets: PagerDuty views amortization of acquired intangible assets as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are evaluated for impairment regularly, amortization of the cost of purchased intangibles is an expense that is not typically affected by operations during any particular period. Acquisition-related expenses: PagerDuty views acquisition-related expenses, such as transaction costs, acquisition-related retention payments, and acquisition-related asset impairment, as events that are not necessarily reflective of operational performance during a period. In particular, PagerDuty believes the consideration of measures that exclude such expenses can assist in the comparison of operational performance in different periods which may or may not include such expenses. Amortization of debt issuance costs: The imputed interest rates of the Company’s convertible senior notes (the "2025 Notes" and the "2028 Notes" or, collectively, the "Notes") was approximately 1.91% for the 2025 Notes and 2.13% for the 2028 Notes. This is a result of the debt issuance costs, which reduce the carrying value of the convertible debt instruments. The debt issuance costs are amortized as interest expense. The expense for the amortization of the debt issuance costs is a non-cash item, and we believe the exclusion of this interest expense will provide for a more useful comparison of our operational performance in different periods. Restructuring costs: PagerDuty views restructuring costs, such as employee severance-related costs, as events that are not necessarily reflective of operational performance during a period. In particular, PagerDuty believes the consideration of measures that exclude such expenses can assist in the comparison of operational performance in different periods which may or may not include such expenses. Shareholder matters: PagerDuty views certain charges, including third-party legal, consulting, and advisory fees, related to shareholder activity that are outside of the ordinary course of our business and expenses related to a cooperation agreement as events that are not necessarily reflective of operational performance during a period. PagerDuty believes that such charges do not have a direct correlation to the operations of the Company’s business and may vary in size depending on the timing, results, and resolution of such shareholder matters. The consideration of measures that exclude such expenses can assist in the comparison of operational performance in periods which may or may not include such expenses. Executive transition costs: We exclude amounts paid to the Company’s former executives upon departure under the terms of their transition agreements, including continued base salary payments made during their transition periods, acceleration of stock-based compensation, continued vesting of restricted stock units and performance stock units, and legal and consulting fees associated with the transition. Also excluded from our non-GAAP measures are recruiting costs related to the search for new executives. These costs represent expenses that are not indicative of our ongoing operating expenses. We further believe that excluding the executive transition costs from our non-GAAP results is useful to investors in that it allows for period-over-period comparability. Adjustment attributable to redeemable non-controlling interest: PagerDuty adjusts the value of redeemable non-controlling interest of its joint venture PagerDuty K.K. according to the operating agreement. PagerDuty believes this adjustment is not reflective of operational performance during a period and exclusion of such adjustments can assist in comparison of operational performance in different periods. Income tax effects and adjustments: Based on PagerDuty’s financial outlook for fiscal 2027, PagerDuty is utilizing a projected non-GAAP tax rate of 20%. For fiscal 2026, PagerDuty used a projected non-GAAP tax rate of 22%. PagerDuty uses a projected non-GAAP tax rate in order to provide better consistency across the interim reporting periods by eliminating the impact of non-recurring and period specific items, which can vary in size and frequency. PagerDuty’s estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that PagerDuty believes materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses and other significant events. Non-GAAP gross profit and non-GAAP gross margin We define non-GAAP gross profit as gross profit excluding the following expenses typically included in cost of revenue: stock-based compensation expense, employer taxes related to employee stock transactions, amortization of acquired intangible assets, and restructuring costs. We define non-GAAP gross margin as non-GAAP gross profit as a percentage of revenue. Non-GAAP operating expenses We define non-GAAP operating expenses as operating expenses excluding stock-based compensation expense, employer taxes related to employee stock transactions, acquisition-related expenses, amortization of acquired intangible assets, restructuring costs, shareholder matters, and executive transition costs, which are not necessarily reflective of operational performance during a given period. Non-GAAP operating income and non-GAAP operating margin We define non-GAAP operating income as income (loss) from operations excluding stock-based compensation expense, employer taxes related to employee stock transactions, amortization of acquired intangible assets, acquisition-related expenses, restructuring costs, shareholder matters, and executive transition costs, which are not necessarily reflective of operational performance during a given period. We define non-GAAP operating margin as non-GAAP operating income as a percentage of revenue. Non-GAAP net income attributable to PagerDuty, Inc. common stockholders We define non-GAAP net income attributable to PagerDuty, Inc. common stockholders as net income attributable to PagerDuty, Inc. common stockholders excluding stock-based compensation expense, employer taxes related to employee stock transactions, amortization of debt issuance costs, amortization of acquired intangible assets, acquisition-related expenses, restructuring costs, shareholder matters, executive transition costs, adjustment attributable to redeemable non-controlling interest, and income tax effects and adjustments, which are not necessarily reflective of operational performance during a given period. Non-GAAP net income per share, basic and diluted We define non-GAAP net income per share, basic as non-GAAP net income attributable to PagerDuty, Inc. common stockholders divided by weighted average shares outstanding at the end of the reporting period. We define non-GAAP net income per share, diluted as non-GAAP net income attributable to PagerDuty, Inc. common stockholders divided by weighted average diluted shares outstanding at the end of the reporting period. Free cash flow and free cash flow margin We define free cash flow as net cash provided by operating activities, less cash used for purchases of property and equipment and capitalization of software costs. We define free cash flow margin as free cash flow as a percentage of revenue. In addition to the reasons stated above, we believe that free cash flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash in excess of our capital investments in property and equipment in order to enhance the strength of our balance sheet and further invest in our business and potential strategic initiatives. A limitation of the utility of free cash flow as a measure of our liquidity is that it does not represent the total increase or decrease in our cash balance for the period. We use free cash flow in conjunction with traditional U.S. GAAP measures as part of our overall assessment of our liquidity, including the preparation of our annual operating budget and quarterly forecasts and to evaluate the effectiveness of our business strategies. There are a number of limitations related to the use of free cash flow as compared to net cash provided by operating activities, including that free cash flow includes capital expenditures, the benefits of which are realized in periods subsequent to those when expenditures are made. PagerDuty encourages investors to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate PagerDuty’s business. Please see the reconciliation tables at the end of this release for the reconciliation of non-GAAP financial measures to their most-comparable GAAP financial measures. View source version on businesswire.com: https://www.businesswire.com/news/home/20260827756539/en/ Contacts Investor Relations Contact: Paul [email protected] Media Contact: Debbie O’[email protected] SOURCE PagerDuty

Interested in PagerDuty? Here are five stocks we like better. PagerDuty’s Q2 fiscal 2027 revenue rose 1% to $124.4 million, exceeding guidance, while annual recurring revenue surpassed $500 million and dollar-based net retention improved to 98%. The company completed a workforce restructuring affecting about 15% of employees, primarily in non-customer-facing roles, and raised its full-year non-GAAP operating-margin outlook to 25%–26%. PagerDuty plans to broadly launch and rename its AI-powered Operations Cloud as the PD Reliability Platform, designed to automate incident detection, investigation and remediation through its SRE Agent. 2 Earnings Dumpers Worth a Second Look PagerDuty (NYSE:PD) reported second-quarter fiscal 2027 revenue of $124.4 million, up 1% from a year earlier and above the high end of its guidance range, while annual recurring revenue surpassed $500 million for the first time. The company also raised its full-year operating-margin outlook after completing a workforce restructuring affecting about 15% of employees. Chief Executive Officer John DiLullo, who recently completed his first 100 days at the company, said the quarter reflected early progress under a new operating framework centered on “build, sell, optimize.” The strategy prioritizes product development, go-to-market execution and reducing spending that does not directly support those two areas. → Quantum Computing Is Raising the Stakes for Cybersecurity: 5 Stocks to Watch This Small Tech With Big Growth Prospects Is Nearing A Buy Point “We saw brisk new customer acquisition through our online sales efforts, continued growth in our population of enterprise accounts with ARR over $100,000, and expansion of our sales overseas,” DiLullo said. He added that retention improved sequentially, platform event traffic increased, and adoption of the company’s usage-based Operations Cloud offering grew meaningfully from the prior quarter. Chief Financial Officer Eric Prengel said annual recurring revenue ended the quarter at $501 million, increasing by $6 million during the period. Dollar-based net retention was 98%, improving sequentially, while annualized gross retention also increased from the prior quarter. → NVIDIA Reveals $21 Billion SpaceX Stake: Signal of Confidence or Circular Financing? Helmerich & Payne Stock, A Lot More Upside Than Meets the Eye PagerDuty added 24 customers spending more than $100,000 annually, bringing that customer count to 884. International revenue accounted for about 30% of total revenue. Revenue: $124.4 million, up 1% year over year. Non-GAAP gross margin: 85%. Non-GAAP operating income: $29.5 million, representing a 24% operating margin. GAAP net income: $4.7 million, marking the company’s fifth consecutive quarter of GAAP profitability. Cash from operations: $37 million. Free cash flow: $33 million, or a 26% free-cash-flow margin. The company ended the quarter with $470 million in cash, cash equivalents and investments. On a trailing 12-month basis, billings totaled $501 million, up 1% from a year earlier. Total remaining performance obligations were $426 million, with approximately $309 million expected to be recognized over the following 12 months, up 5% year over year. → Berkshire Boosts Its Bet: This AI Hyperscaler Is Now a Top-3 Holding PagerDuty repurchased nearly 800,000 shares for $7.6 million during the quarter. It had $92.4 million remaining under its $100 million share-repurchase authorization at quarter-end. DiLullo said PagerDuty plans to make its AI-powered, usage-based Operations Cloud generally available later this quarter, while renaming it the PD Reliability Platform. The platform is designed to automate and orchestrate the incident-management lifecycle, including detection, investigation and remediation. The company said its SRE Agent sits at the center of the platform and uses knowledge of customer applications and infrastructure, production telemetry, and prior incident data to detect disruptions and begin investigations autonomously. The platform will be available for purchase by all customers, including the company’s self-service community, when it reaches general availability this fall. DiLullo said the usage-based model lowers the barrier for customers to try PagerDuty’s AI and agentic capabilities while aligning value with consumption. He said customers using the offering have shown favorable usage trends over time. Prengel said the Operations Cloud business grew at a double-digit rate in total, though the company does not plan to regularly disclose a specific usage metric for the product. Management also highlighted several customer agreements, including a roughly $850,000, three-year usage-based Operations Cloud agreement with a diversified financial services company; a nearly $3 million, 36-month deal with an enterprise workflow-automation software platform; and a multiproduct win with a Japanese bank undergoing a digital transformation. PagerDuty said its workforce reduction was concentrated in non-customer-facing roles, including support functions being automated and areas where process simplification and tool consolidation reduced staffing needs. The company said it preserved quota-bearing sales capacity and product-development expertise tied to its strongest growth opportunities. The company expects to record restructuring charges of approximately $5.5 million to $7.5 million, primarily related to severance and associated costs. Most of the charges are expected in the third quarter, with the restructuring substantially complete by the end of the fourth quarter. Prengel said the resulting savings will support investment in sales, engineering and AI-related product development while also accelerating the company’s path toward its long-term 30% non-GAAP operating-margin target. For the third quarter of fiscal 2027, PagerDuty forecast revenue of $123 million to $125 million, with the midpoint approximately flat from a year earlier. The company expects non-GAAP diluted earnings per share of $0.34 to $0.36 and a non-GAAP operating margin of 26.5% to 27.5%. For the full fiscal year, PagerDuty projected revenue of $491.5 million to $496.5 million, raising the low end of its previous range. The midpoint is approximately flat year over year. It forecast diluted earnings per share of $1.33 to $1.37 and increased its non-GAAP operating-margin outlook to 25% to 26%, from a prior range of 24% to 25%. The company also said it now expects full-year free-cash-flow margin to be in line with fiscal 2026, improving from its earlier expectation that the metric would decline by two to four percentage points. While management described retention and new-business demand as stabilizing, DiLullo said the company still has work to do. “We do see the new products gaining traction, and we do feel like the business is stabilizing in the last two quarters in particular,” he said. PagerDuty, Inc engages in the operation of a digital operations management platform in the United States and internationally. The company's digital operations management platform collects data and digital signals from virtually any software-enabled system or device and leverage machine learning to correlate, process, and predict opportunities and issues. Its platform includes PagerDuty Incident Management that provides a real-time view across the status of a digital service while incorporating noise reduction to remove false positives; AIOps that applies machine learning to correlate and automate the identification of incidents from billions of events; Process Automation offers centralized design time and run time environment for orchestrating automated workflows that span across departments, technologies, and networks; Customer Service Operations, which is offered to orchestrate, automate, and scale responses to customer impacting issues. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "PagerDuty Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

PagerDuty (PD) came out with quarterly earnings of $0.32 per share, beating the Zacks Consensus Estimate of $0.3 per share. This compares to earnings of $0.3 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +6.67%. A quarter ago, it was expected that this software developer would post earnings of $0.24 per share when it actually produced earnings of $0.32, delivering a surprise of +33.33%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. PagerDuty, which belongs to the Zacks Internet - Software industry, posted revenues of $124.44 million for the quarter ended July 2026, surpassing the Zacks Consensus Estimate by 1.25%. This compares to year-ago revenues of $123.41 million. The company has topped consensus revenue estimates three times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. PagerDuty shares have lost about 7% since the beginning of the year versus the S&P 500's gain of 12.1%. While PagerDuty has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for PagerDuty was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.34 on $124.19 million in revenues for the coming quarter and $1.30 on $493.04 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Internet - Software is currently in the top 35% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Cognyte Software Ltd. (CGNT), has yet to report results for the quarter ended July 2026. This company is expected to post quarterly earnings of $0.09 per share in its upcoming report, which represents a year-over-year change of +12.5%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Cognyte Software Ltd.'s revenues are expected to be $108.7 million, up 11.5% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report PagerDuty (PD) : Free Stock Analysis Report Cognyte Software Ltd. (CGNT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research