PagerDuty, Inc.

What they do

Founded in 2009, PagerDuty began as an on-call management tool for developers and now sells a multi-product operations cloud spanning incident management, AI-powered automation, and agentic workflows. It ingests signals from monitoring, observability, security, customer service, and development tools across more than 750 direct integrations, including support for the Model Context Protocol for AI agents. Revenue comes primarily from cloud-hosted software subscriptions, with additional revenue from term-license arrangements, sold under a land-and-expand model.

Revenue drivers

• Cloud-hosted software subscriptions — The primary revenue source; sold as subscriptions that expand as teams add users, use cases, and products under a land-and-expand model.
• Term-license arrangements — A secondary, additional revenue stream alongside the core subscription business.
• Enterprise customers with ARR over $100 thousand — 884 customers as of July 31, 2026; the company says it strategically targets larger organizations, though it serves all sizes.
• Usage-based and multiyear platform agreements — Newly introduced flexible pricing that lets customers scale between human responders, agents, and automated solutions, supporting a transition away from single-year seat-based licensing.

Recent performance

Second quarter fiscal 2027 revenue was $124.4 million, up 0.8% year over year, above the high end of guidance. ARR reached $501 million, operating income was $10.2 million (8.2% margin), non-GAAP operating income was $29.5 million (23.7% margin), and net income was $4.7 million, the fifth consecutive quarter of GAAP profitability. Operating cash flow was $36.9 million and free cash flow was $32.8 million. Dollar-based net retention was 98% and total paid customers were 15,506. Cash, cash equivalents, and investments were $470.0 million as of July 31, 2026.

Strategy

PagerDuty is positioning itself as an AI-first operations platform, investing in generative AI, agentic workflows, and intelligent orchestration to automate incident detection and resolution. It is adding flexibility to pricing through usage-based models and multiyear platform usage agreements, shifting away from traditional single-year seat-based licensing. The company also continues to expand its integration ecosystem and partner distribution, including a new agreement in Australia with Ingram Micro. Management highlights AI-driven complexity in customer environments as a demand driver for its platform.

Risks

• Slowing revenue growth — The company has disclosed slowing growth rates in recent periods and says revenue growth may continue to decelerate, fluctuate, or decline.
• Single-product revenue concentration — PagerDuty states it derives a majority of revenue from a single product, leaving results exposed to that product's competitive position.
• Competitive market — The markets PagerDuty participates in are competitive, and failure to compete effectively could harm operating results.
• Customer acquisition and retention — Inability to attract new customers or retain and expand existing ones would adversely affect revenue growth.

Outlook

For the third quarter of fiscal 2027, management guides to total revenue of $123.0 million to $125.0 million and non-GAAP operating margin of 26.5% to 27.5%. For the full fiscal year 2027, the company expects revenue of $491.5 million to $496.5 million and non-GAAP operating margin of 25.0% to 26.0%. Non-GAAP net income per diluted share is guided to $0.34 to $0.36 for the third quarter and $1.33 to $1.37 for the full year, assuming approximately 80 million diluted shares and a 20% non-GAAP tax rate.