Revenue and Customer Growth - Annual Recurring Revenue (ARR) increased to $497.1 million as of October 31, 2025, up from $483.0 million in 2024, representing a growth of 2.3%[134] - The total number of customers reached 15,398 as of October 31, 2025, compared to 15,050 in 2024, indicating an increase of 2.3%[135] - Customers with greater than $100,000 in ARR grew to 867 in 2025 from 825 in 2024, reflecting a growth of 5.1%[135] - Revenue for the three months ended October 31, 2025, was $124.5 million, a 4.7% increase from $118.9 million in the same period of 2024[141] - Revenue for the nine months ended October 31, 2025, was $367,761, an increase of $21,708, or 6.3%, compared to $346,053 in 2024[161] Profitability and Income - Gross profit for the three months ended October 31, 2025, was $106.2 million, with a gross margin of 85.3%, up from 83.0% in 2024[138] - Net income attributable to PagerDuty, Inc. common stockholders was $159.6 million for the three months ended October 31, 2025, compared to a net loss of $6.6 million in 2024[138] - Gross profit margin improved from 82.8% in 2024 to 84.6% in 2025, with gross profit increasing to $311,219[160] - Net income attributable to PagerDuty, Inc. increased to $163,999 in 2025, compared to a net loss of $33,975 in 2024[160] - For the three months ended October 31, 2025, non-GAAP net income attributable to PagerDuty, Inc. common stockholders was $31,217,000, compared to $23,721,000 for the same period in 2024, representing a 31.5% increase[186] Operating Expenses - Operating expenses decreased to $98.1 million for the three months ended October 31, 2025, from $109.0 million in 2024, a reduction of 10.5%[138] - Total operating expenses decreased by $10,862, or 10.0%, from $108,971 in 2024 to $98,109 in 2025[146] - Research and development expenses decreased by $4,849, or 14.2%, from $34,267 in 2024 to $29,418 in 2025[146] - Sales and marketing expenses decreased by $4,950, or 10.0%, from $49,272 in 2024 to $44,322 in 2025[146] - General and administrative expenses decreased by $1,063, or 4.2%, from $25,432 in 2024 to $24,369 in 2025[146] Cash Flow and Financial Position - Free cash flow for the three months ended October 31, 2025, was $20,929,000, up from $19,443,000 in the same period of 2024, indicating a 7.6% increase[188] - As of October 31, 2025, the company had cash and cash equivalents totaling $547.8 million, which is expected to support working capital and capital expenditure requirements for at least the next 12 months[189] - Net cash provided by operating activities for the nine months ended October 31, 2025, was $89,447,000, an increase of $2,958,000 from $86,489,000 in 2024[196] - Net cash used in financing activities decreased to $105,386,000 for the nine months ended October 31, 2025, compared to $113,323,000 in 2024, reflecting a reduction in stock repurchases[199] Debt and Obligations - Total debt obligations as of October 31, 2025, amounted to $395.1 million, all of which is long-term[194] - The company had $1.0 million of irrevocable standby letters of credit outstanding as of October 31, 2025, primarily used as security deposits for leased spaces[201] Tax and Valuation - The company released $154.2 million of its valuation allowance as a discrete tax benefit during the three months ended October 31, 2025[159] - The company maintains a valuation allowance of $0.8 million against certain deferred tax assets due to realizability uncertainty[170] - The projected non-GAAP tax rate for fiscal 2026 is set at 22% to provide consistency across interim reporting periods[180] Retention and Customer Focus - The dollar-based net retention rate was 100% for the last 12 months ended October 31, 2025, down from 107% in 2024[137] - The company continues to focus on expanding its enterprise customer base, which constitutes the majority of its revenue[127]

Financial Data and Key Metrics Changes - PagerDuty reported revenue of $125 million for Q3, representing a 5% year-over-year increase [3][20] - Non-GAAP operating margin was 29%, exceeding guidance and expanding 750 basis points year-over-year [3][22] - GAAP net income for Q3 was $160 million, including a one-time tax benefit of $154 million [20] - Annual recurring revenue (ARR) reached $497 million, reflecting a 3% year-over-year growth [3][20] - Gross margin was 87%, above the target range of 84%-86% [21][22] Business Line Data and Key Metrics Changes - New and expansion bookings were consistent with the first half of the year, but impacted by customers rightsizing seat licenses [3][5] - Customer retention efforts have stabilized, but seat license compression remains a significant challenge in large enterprises [5][6] - The number of customers spending over $100,000 annually increased by 5% year-over-year to 867 [21][12] - Total paid customers grew to 15,398, a 2% year-over-year increase [21] Market Data and Key Metrics Changes - International revenue increased by 7% year-over-year, contributing 29% of total revenue [20] - The company added 284 net new customers year-to-date, nearly four times the total in FY 2025 [10][11] - Total paid and free customers on the platform grew to over 34,000, an increase of approximately 13% compared to Q3 of last year [21] Company Strategy and Development Direction - The company is focused on three objectives: expanding operating and free cash flow margins, extending product advantage in AI operations, and scaling go-to-market transformation [3][4] - PagerDuty aims to transition from a single-year seat-based license model to a multi-year platform usage model [10] - The company is investing in operational efficiency and product innovation to maintain leadership in digital and AI operations [4][7] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in customer retention due to budget caution and organizational changes [30][34] - The company is confident in long-term growth prospects, citing strong demand for its platform and improvements in customer usage metrics [34][56] - Management expects continued pressure on dollar-based net retention but is implementing changes to improve customer engagement and retention [24][45] Other Important Information - Howard Wilson, CFO, announced plans to retire in the next financial year after nine years with the company [16][17] - The company repurchased 2.4 million shares under its $200 million repurchase plan, with $162 million remaining available [22] Q&A Session Summary Question: Trends in dollar-based net retention and customer spending - Management noted that while logo retention improved, larger downgrades were tied to significant reorganizations, making it difficult to anticipate changes [32][33] Question: Sales maturity indicators and productivity - Management emphasized the importance of customer feedback and engagement, focusing on proactive support and understanding customer needs [37][39] Question: Opportunities to offer usage-based pricing to existing accounts - Management confirmed that longer-term agreements allow for proactive engagement with customers regarding new pricing and services [42][43] Question: Guidance assumptions regarding dollar-based churn - Management indicated that guidance reflects current visibility around renewals, expecting some seat-based pressure to continue [45] Question: Impact of reorganizations on customer spending - Management acknowledged that while some customers are downsizing, they are also seeking to improve operational resilience, leading to potential growth opportunities [65][66] Question: Momentum with new logo acquisitions - Management reported good new logo acquisition across all segments, with promising growth in both digital-first and go-to-market environments [96][97]

Financial Data and Key Metrics Changes - PagerDuty reported revenue of $125 million for Q3, representing a 5% year-over-year increase [3][20] - Non-GAAP operating margin was 29%, exceeding guidance and expanding by 750 basis points compared to the previous year [3][22] - GAAP net income for Q3 was $160 million, which included a one-time income tax benefit of $154 million [20] - Annual recurring revenue (ARR) reached $497 million, reflecting a 3% year-over-year growth [3][20] - Gross margin was 87%, above the target range of 84%-86% [21][22] Business Line Data and Key Metrics Changes - New and expansion bookings were consistent with the first half of the year, but were offset by customers rightsizing seat licenses due to budget caution [3][5] - The number of customers spending over $100,000 annually increased by 5% year-over-year, totaling 867 customers [21][12] - Total paid customers grew to 15,398, a 2% increase year-over-year [21] Market Data and Key Metrics Changes - International revenue increased by 7% year-over-year, contributing 29% of total revenue [20] - Total paid and free customers on the platform grew to over 34,000, an increase of approximately 13% compared to Q3 of the previous year [21] Company Strategy and Development Direction - The company is focused on three objectives: expanding operating and free cash flow margins, extending product advantage in AI operations, and scaling go-to-market transformation [3][4] - PagerDuty is transitioning from a traditional single-year seat-based license model to a multi-year platform usage model [10] - The company aims to build long-term shareholder value by enhancing operational efficiency and product innovation [3][4] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges with seat license compression in large enterprises due to budget caution and rightsizing [5][21] - The company is optimistic about long-term growth, citing strong demand for its platform and improvements in customer usage metrics [34][56] - Management expects continued pressure on dollar-based net retention but is implementing changes to improve customer engagement and retention [24][45] Other Important Information - Howard Wilson, the CFO, announced plans to retire in the next financial year after nine years with the company [16][17] - The company repurchased 2.4 million shares under its $200 million repurchase plan, with $162 million remaining available for repurchase [22] Q&A Session Summary Question: Trends in dollar-based net retention and customer spending - Management noted that while logo retention improved, larger downgrades were tied to significant reorganizations within customer companies [32][33] Question: Sales organization maturity and productivity indicators - Management emphasized the importance of customer feedback and engagement in assessing sales productivity and effectiveness [37][39] Question: Opportunities to re-engage accounts before renewals - Management confirmed that longer-term agreements allow for proactive engagement with customers regarding new pricing and services [42][43] Question: Guidance assumptions for Q4 and dollar-based churn - Management indicated that guidance for Q4 reflects current visibility around renewals and expects some seat-based pressure to continue [45][76] Question: Impact of reorganizations on customer spending - Management acknowledged that while some customers are downsizing, they are also seeking to improve operational resilience, leading to potential growth opportunities [65][66] Question: Performance of the agentic suite and competitive differentiation - Management reported positive responses to the agentic suite, highlighting its unique integration capabilities and the potential for increased usage [88][90]

Financial Data and Key Metrics Changes - PagerDuty reported Q3 revenue of $125 million, a 5% year-over-year increase [3][19] - Non-GAAP operating margin reached 29%, expanding 750 basis points from the previous year [3] - GAAP net income for Q3 was $160 million, including a one-time tax benefit of $154 million [19] - Annual recurring revenue (ARR) grew 3% year-over-year to $497 million [3][19] - Gross margin was 87%, exceeding the target range of 84%-86% [20][21] - Cash from operations was $25 million, representing 20% of revenue [21] Business Line Data and Key Metrics Changes - New and expansion bookings were consistent with the first half of the year, but impacted by customers rightsizing seat licenses [3][5] - Customer retention and growth remain a top priority, with efforts to increase average transaction size through new usage-based products [5][6] - The number of customers spending over $100,000 annually increased by 5% year-over-year to 867 [20] Market Data and Key Metrics Changes - International revenue increased by 7% year-over-year, contributing 29% of total revenue [19] - Total paid customers grew to 15,398, a 2% year-over-year increase [20] - Paid and free customers on the platform grew to over 34,000, an increase of approximately 13% compared to the previous year [20] Company Strategy and Development Direction - The company is focused on three objectives: expanding operating and free cash flow margins, extending product advantage in AI operations, and scaling go-to-market transformation [3][4] - PagerDuty aims to transition from a single-year seat-based license model to a multi-year platform usage model [11] - The company is investing in operational efficiency and product innovation to maintain leadership in digital and AI operations [4][8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges with seat license compression due to budget caution among large enterprises [5][20] - There is confidence in long-term growth despite current pressures, with a focus on proactive customer engagement and flexible pricing [29][40] - The company expects to be GAAP profitable for the full fiscal year [19][24] Other Important Information - Howard Wilson, CFO, announced plans to retire in the next financial year after nine years with the company [17][18] - The company has made significant investments in AI and operational resilience, positioning itself as a leader in the market [10][14] Q&A Session Summary Question: Trends in dollar-based net retention (DBNR) and gross churn - Management noted that while DBNR was 100%, it was negatively impacted by lower gross retention and expects pressure to continue in Q4 [20][28] Question: Evaluation of current customer spending and organizational changes - Management indicated that improvements in logo retention were observed, but larger downgrades were tied to significant reorganizations [28][30] Question: Proactive measures for customer renewals - The company is taking a multi-quarter view on renewal planning and offering flexible pricing to mitigate risks [29][39] Question: Impact of AI on customer investments and headcount - Management observed a focus on improving operating margins and reducing costs, with automation becoming more integrated into the platform [44] Question: Guidance for Q4 and renewal expectations - The guidance for Q4 reflects visibility around renewals, with expectations for stabilization in customer downgrades [48][49] Question: Performance of the agentic suite and competitive differentiation - Positive responses to the agentic suite were noted, with expectations for increased usage and adoption as customers engage with the new offerings [52][55]

Financial Performance - PagerDuty's Q3 FY26 ARR reached $497 million[10] - The company's revenue for Q3 FY26 was $125 million, representing a 5% year-over-year growth[10, 60] - PagerDuty achieved a Non-GAAP Operating Margin of 29% in Q3 FY26[10, 60] - Free Cash Flow Margin for Q3 FY26 stood at 17%[10] Customer Metrics - PagerDuty has a total of 15,398 paid customers[10, 60] - The number of customers with ARR greater than $100K is 867[10] - Dollar-Based Net Retention (DBNR) was 100%[10, 61] Product and Market - PagerDuty estimates a $50 billion market opportunity[50] - The company highlights that 88% of executives expect a major IT incident within the next year[19] - Forrester's Total Economic Impact study indicates a 249% ROI over three years for PagerDuty's Operations Cloud[53, 56]

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Revenue and Growth - Third quarter revenue increased 5% year over year to $125 million[1] - Annual Recurring Revenue (ARR) grew 3% year over year to $497 million[1] - Revenue for the three months ended October 31, 2025, was $124.545 million, representing a 4.5% increase from $118.946 million in the same period of 2024[20] - Total paid customers increased to 15,398, up from 15,050 year over year[8] - Customers with ARR over $100 thousand grew 5% to 867 as of October 31, 2025[8] - Remaining performance obligations were $415 million, with an expected revenue recognition of approximately $287 million over the next 12 months[8] - For the fourth quarter of fiscal 2026, total revenue is expected to be between $122 million and $124 million[13] Profitability - Operating income was $8 million, with a non-GAAP operating income of $36 million[1] - Net income per diluted share attributable to common stockholders was $1.69, with a non-GAAP net income per diluted share of $0.33[5] - Net income attributable to PagerDuty, Inc. common stockholders for the three months ended October 31, 2025, was $159.555 million, compared to a net loss of $6.558 million in the same period of 2024[20] - Non-GAAP net income attributable to common stockholders for the three months ended October 31, 2025, was $31.217 million, compared to $23.721 million in the same period of 2024, a growth of 31.5%[49] - Non-GAAP net income per share attributable to PagerDuty, Inc. common stockholders for the three months ended October 31, 2025, was $0.34, compared to $0.26 in the same period of 2024[49] Expenses and Liabilities - Operating expenses for the three months ended October 31, 2025, totaled $98.109 million, a decrease of 10.0% from $108.971 million in the prior year[20] - Research and development expenses for the three months ended October 31, 2025, were $29.418 million, down from $34.267 million in the prior year, a decrease of 14.0%[20] - Total liabilities decreased to $688.446 million as of October 31, 2025, from $779.221 million on January 31, 2025[22] Cash Flow and Assets - Cash and cash equivalents as of October 31, 2025, were $324.260 million, down from $346.460 million at the beginning of the year[22] - Net cash provided by operating activities for the three months ended October 31, 2025, was $24.803 million, compared to $22.073 million in the same period of 2024[24] - Free cash flow for the three months ended October 31, 2025, was $20.929 million, compared to $19.443 million in the same period of 2024, indicating an increase of 7.6%[52] - Free cash flow margin for the three months ended October 31, 2025, was 16.8%, compared to 16.3% in the same period of 2024[52] - Total assets increased to $1.027 billion as of October 31, 2025, compared to $927.266 million on January 31, 2025[22] Margins and Retention - Dollar-based net retention rate was 100% as of October 31, 2025, down from 107% a year earlier[8] - Non-GAAP gross margin for the three months ended October 31, 2025, was 86.7%, up from 86.0% in the same period of 2024[47] - Non-GAAP operating margin for the three months ended October 31, 2025, was 28.5%, up from 21.0% in the same period of 2024[49] - Operating cash flow margin for the three months ended October 31, 2025, was 19.9%, compared to 18.6% in the same period of 2024[52] Future Projections and Tax - Non-GAAP net income per diluted share for the full fiscal year 2026 is projected to be between $1.11 and $1.12[13] - PagerDuty's projected non-GAAP tax rate for fiscal 2026 is 22%, aimed at providing consistency across reporting periods[37] Non-GAAP Measures - PagerDuty emphasizes the importance of reviewing GAAP financial measures alongside non-GAAP measures for a comprehensive understanding of financial performance[44] - Non-GAAP operating income for the three months ended October 31, 2025, was $35.546 million, up from $24.991 million in the same period of 2024, reflecting a growth of 42.3%[49] - Non-GAAP gross profit for the three months ended October 31, 2025, was $107,993,000, compared to $102,339,000 for the same period in 2024, representing a 5.2% increase[47] - Non-GAAP operating expenses for the three months ended October 31, 2025, were $19,348,000 in research and development, down from $22,291,000 in 2024, a decrease of 8.7%[47] - Non-GAAP net income for the nine months ended October 31, 2025, was not explicitly stated but reflects adjustments for various non-operational items[41]

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Core Insights - PagerDuty, Inc. will report its financial results for the third quarter of fiscal year 2026 on November 25, 2025, after market close [1] - The company is a leader in digital operations management, providing an AI-powered platform that enhances business resilience and operational efficiency [2][3] Financial Reporting - The financial results will be released after market close on November 25, 2025, for the quarter ending October 31, 2025 [1] - A live Zoom video call for analysts and investors will take place at 2:00 p.m. Pacific Time on the same day [1] Company Overview - PagerDuty is recognized for its Operations Cloud, which automates the incident management lifecycle, enabling real-time issue detection and resolution [3] - The platform is essential for delivering uninterrupted digital experiences, trusted by nearly half of the Fortune 500 and two-thirds of the Fortune 100 [2] Recent Developments - The company has appointed Callum Eade as Vice President of Asia Pacific Sales to drive growth in that region [5] - PagerDuty launched the industry's first end-to-end AI agent suite, which has reportedly reduced incident response times by up to 50% [6] - A recent survey indicated that 81% of executives trust AI agents to act on behalf of their companies during crises, highlighting the increasing reliance on AI in business operations [7]

Core Insights - Investors in PagerDuty, Inc. (PD) should monitor stock movements due to high implied volatility in the options market, particularly for the Jan 16, 2026 $05.00 Call option [1] Company Analysis - PagerDuty currently holds a Zacks Rank 3 (Hold) in the Internet - Software Industry, which is in the top 30% of the Zacks Industry Rank [3] - Over the last 60 days, no analysts have increased their earnings estimates for the current quarter, while one analyst has revised their estimate downwards, resulting in a decrease in the Zacks Consensus Estimate from 25 cents per share to 24 cents per share [3] Options Market Insights - The high implied volatility suggests that options traders are anticipating a significant price movement for PagerDuty shares, which could indicate an upcoming event that may lead to a substantial rally or sell-off [2][4] - Seasoned options traders often seek out options with high implied volatility to sell premium, aiming to benefit from the decay of the option's value if the underlying stock does not move as much as expected [4]