PagerDuty — Second Quarter Fiscal 2027 Earnings Summary

Financial Performance

• Revenue was $124.4 million, an increase of 0.8% year over year.
• Operating income was $10.2 million with an operating margin of 8.2%.
• Non-GAAP operating income was $29.5 million with a non-GAAP operating margin of 23.7%.
• Net income attributable to common stockholders was $4.7 million ($0.06 per diluted share), marking the fifth consecutive quarter of GAAP profitability.
• Non-GAAP net income per diluted share 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 totaled $470.0 million as of July 31, 2026.
• Gross profit was $104.4 million; non-GAAP gross margin was 84.7% compared to 83.9% GAAP gross margin.
• Total operating expenses were $94.2 million, down from $100.8 million in the prior year period.

Guidance and Future Outlook

• For Q3 Fiscal 2027, total revenue is expected to be $123.0 million to $125.0 million.
• Q3 Non-GAAP operating margin is projected at 26.5% to 27.5%.
• Q3 Non-GAAP net income per diluted share is projected at $0.34 to $0.36.
• For full Fiscal 2027, total revenue is expected to be $491.5 million to $496.5 million.
• Full-year Non-GAAP operating margin is projected at 25.0% to 26.0%.
• Full-year Non-GAAP net income per diluted share is projected at $1.33 to $1.37.
• Guidance assumes approximately 80 million diluted shares and a non-GAAP tax rate of 20%.

Business Segments and Product Lines

• Annual Recurring Revenue (ARR) grew to $501 million.
• Dollar-based net retention rate was 98%.
• Total paid customers reached 15,506.
• Customers with ARR over $100 thousand numbered 884.
• Major lands and expands included Anthropic, PBC; Banco Pichincha, C.A.; Coreweave, Inc.; Delivery Hero SE; Kawasaki Heavy Industries, Ltd.; and Palo Alto Networks, Inc.
• Product upgrades included enhancements to the autonomous SRE agent, incident management lifecycle integration, and the agentic offering for simplifying on-call shift management.
• Announced a distribution agreement in Australia with Ingram Micro.

Management Commentary and Tone

• CEO John DiLullo stated revenue was above the high end of the guidance range and that the company crossed $500 million in ARR.
• Management highlighted that underlying fundamentals are strengthening and that AI is transforming software operations, positioning PagerDuty to benefit.
• The CEO noted that non-GAAP operating income came in ahead of expectations.

Risks and Challenges

• Forward-looking statements are subject to risks including the ability to maintain or increase profitability and growth.
• Risks include dependence on a majority of revenue from a single product and the ability to compete in an increasingly competitive market.
• Potential impacts from unfavorable global economic conditions, IT spending reductions, and international trade policies are noted.
• Risks related to data security, service interruptions, and platform compatibility with third-party applications are identified.
• The accuracy of ARR and other operational data estimates may not provide an accurate indication of actual performance.

Other Key Points

• John DiLullo was appointed Chief Executive Officer.
• Eric Prengel was named Chief Financial Officer, and Howard Wilson announced his retirement.
• Alex Shootman was appointed to the Board of Directors.
• The company repurchased $7.5 million of common stock in the quarter and $72.9 million in the first half of the fiscal year.
• The company paid $808,000 in excise tax related to stock repurchases.
• The company recorded $3.3 million in executive transition costs excluded from non-GAAP measures.
• The company recorded $1.4 million in restructuring costs in the first half of the fiscal year, excluded from non-GAAP measures.