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PagerDuty, Inc. (PD)·Q1 2026 Earnings Summary

Executive Summary

  • Revenue of $119.8M (+7.8% YoY) and non-GAAP diluted EPS of $0.24 were at the top-end or above guidance; non-GAAP operating margin hit 20.3% (+500 bps vs guide), reflecting disciplined cost control .
  • Annual Recurring Revenue grew 7% to $496M; DBNR eased to 104% as enterprise downgrades and SMB churn weighed on retention, indicating transitional go-to-market execution challenges .
  • FY26 guidance was lowered for revenue to $493–$499M but raised for non-GAAP EPS to $0.95–$1.00; Q2 FY26 guide is $122.5–$124.5M revenue and $0.19–$0.20 non-GAAP EPS . CFO said implied FY26 non-GAAP operating margin is 20–21% (prior 19–20%) .
  • Stock-relevant narrative: margin outperformance and AI product momentum vs. softer top-line trajectory and DBNR trend; management flagged a back-half bookings/ARR improvement as enterprise reps ramp and CRO selection progresses .

What Went Well and What Went Wrong

What Went Well

  • Non-GAAP operating margin of 20.3% beat guidance by 500 bps, driven by lower payroll/other personnel costs; free cash flow margin was 24.2% .
  • Strong customer acquisition: 127 net new paid customers (largest increase in eight quarters) amid new digital acquisition in commercial; >32,000 free+paid customers (+~9% YoY) .
  • AI/product momentum and AWS partnership: integrations with Amazon Q Business, Amazon Bedrock, and AWS Incident Manager; three new AI agents planned; FedRAMP Low achieved for public sector entry .

Quotes:

  • “We have a clear path to GAAP profitability.” — Jennifer Tejada .
  • “Operating margin…20%…outperformance…due to lower payroll and other personnel costs.” — Howard Wilson .
  • “Our platform now seamlessly integrates with Amazon Q Business, Amazon Bedrock, and AWS Incident Manager…” — Jennifer Tejada .

What Went Wrong

  • DBNR fell to 104% (vs. 106% prior), reflecting enterprise downgrades and SMB churn; management cited transitional coverage gaps, rep changes, and macro caution in seats at some merged customers .
  • FY26 revenue guide lowered to 5–7% growth ($493–$499M) vs. prior $500–$507M, with back-half improvement mainly affecting bookings/ARR rather than in-year revenue recognition .
  • Customers >$100k ARR dipped sequentially to 848 (from 849); retention issues require enhanced post-sales engagement under new Chief Customer Officer to stabilize and expand strategic accounts .

Financial Results

MetricQ3 FY2025Q4 FY2025Q1 FY2026
Revenue ($USD Millions)$118.946 $121.446 $119.805
Gross Margin (%)83.0% 83.6% 84.0%
GAAP Operating Margin (%)(8.7)% (9.6)% (8.6)%
Non-GAAP Operating Margin (%)21.0% 18.3% 20.3%
GAAP Net Loss per Share ($)$(0.07) $(0.12) $(0.07)
Non-GAAP Diluted EPS ($)$0.25 $0.22 $0.24
Cash from Operations ($USD Millions)$22.073 $31.402 $30.670
Free Cash Flow ($USD Millions)$19.443 $28.590 $28.986
Cash, Cash Equivalents & Investments ($USD Millions)$542.2 $570.8 $597.1

Estimates comparison (S&P Global):

MetricConsensus (Q1 FY2026)Actual (Q1 FY2026)Surprise
Revenue ($USD Millions)$118.977*$119.805 +$0.828
Primary EPS ($)$0.187*$0.24 +$0.053
EBITDA ($USD Millions)$22.000*$(6.365)*$(28.365)

Values retrieved from S&P Global.

Segment breakdown: Not disclosed in company materials .

KPIs

KPIQ3 FY2025Q4 FY2025Q1 FY2026
ARR ($USD Millions)$483 $494 $496
DBNR (%)107% 106% 104%
Customers >$100k ARR (#)825 849 848
Total Paid Customers (#)15,050 15,114 15,247
Total Free+Paid Customers (#)>30,000 >31,000 >32,000
RPO ($USD Millions)$405 $440 $430
RPO Next 12 Months (%)69% 69% 70%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q2 FY2026N/A$122.5–$124.5 New
Non-GAAP Diluted EPS ($)Q2 FY2026N/A$0.19–$0.20 New
Revenue ($USD Millions)FY2026$500.0–$507.0 $493.0–$499.0 Lowered
Non-GAAP Diluted EPS ($)FY2026$0.90–$0.95 $0.95–$1.00 Raised
Implied Non-GAAP Operating Margin (%)FY202619–20 20–21 Raised
Shares (diluted) & Non-GAAP tax rateFY2026/Q2 FY2026~93–94M; 22% ~93–94M; 22% Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 FY2025)Current Period (Q1 FY2026)Trend
AI/technology initiativesIntroduced enterprise-grade AI innovations; TEI study; preparing agentic AI; collaboration with AWS Integrations with Amazon Q, Bedrock; AI scribe agent; three new AI agents this quarter; seeding AI features in plans Strengthening
Enterprise sales/executionStabilization across segments; focus on accelerating enterprise momentum in 2H FY26 Coverage gaps from sales transformation; downgrades; new CCO leading post-sale; CRO search; >60% reps 1yr+ by end Q2 Transitional, improving 2H
Retention/DBNRDBNR 107% in Q3; 106% in Q4 DBNR 104%; expected 103–105% FY26 Softening, stabilizing
SMB demandNot highlighted Improving demand/new logos; native AI-funded SMBs driving adds Improving
Public sector/regulatoryNot highlighted Achieved FedRAMP Low; pursuing Moderate authorization; serving 700+ entities Expanding
PartnershipsAWS keynote in Q3; gen-AI features with AWS in Q4 Strategic Collaboration Agreement with AWS announced Strengthening
InternationalNot specified International revenue 28% of total; execution progress with EU/Japan wins Stable to improving
Billings/ARR visibilityGuide to TTM billings 7%; focus on ARR alignment TTM billings $492M (+7%); expect ~7% in Q2; bookings → ARR back-half Stable; back-half uplift

Management Commentary

  • Strategy: “We’re evolving our coverage model…from a tactical and transactional approach to building more strategic cross-company relationships…scaling our pre- and post-sale practices…leading with AI from a platform perspective.” — Jennifer Tejada .
  • Execution and profitability: “Non-GAAP operating margins of 20% this quarter…advance our steady progress toward GAAP profitability next fiscal year.” — Howard Wilson .
  • Demand and GTM: “New logo growth…largest increase in eight quarters…driven by our new commercial digital acquisition strategy.” — Jennifer Tejada .
  • Product roadmap: “We remain on track to launch three additional AI agents this quarter…agentic offering…taking work off the plate of responders.” — Jennifer Tejada .

Q&A Highlights

  • Enterprise downgrades vs. SMB churn: Elevated SMB churn and enterprise seat downgrades (merger-related, macro caution); management emphasizes proactive renewal management under new CCO to mitigate retention issues .
  • Guidance prudence and in-year revenue dynamics: FY26 revenue guide “prudent” given Q1 GTM transitions; back-half bookings/ARR improvements won’t fully translate into in-year revenue due to subscription recognition .
  • AI module adoption: Early days but strong feedback; seeding access removes friction; opt-out design to increase trials; AI scribe agent and upcoming agents highlighted .
  • Billings vs ARR: TTM billings aligns more closely with ARR than quarterly billings due to co-terming; expect ~7% TTM billings growth in Q2 .
  • DBNR outlook: Expect 103–105% for FY26; back-half ramping of reps to support expansion; only ~6% of customers spend >$100k, indicating white space .

Estimates Context

  • Q1 FY26 beat vs consensus: Revenue $119.805M vs $118.977M* (+$0.828M) and non-GAAP diluted EPS $0.24 vs $0.187* (+$0.053); EBITDA missed vs $22.0M* with SPGI actual $(6.365)M* . Values retrieved from S&P Global.
  • Forward estimates: Q2 FY26 consensus aligns near company guidance ($122.5–$124.5M revenue; $0.19–$0.20 EPS) ; management raised FY26 EPS guide to $0.95–$1.00 (implies margin uplift), suggesting potential upward EPS estimate revisions even as FY revenue guide was lowered .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Quality of earnings: Significant margin outperformance (non-GAAP operating margin 20.3%) and strong FCF (24.2% margin) indicate improving cost discipline despite softer top-line growth .
  • Top-line trajectory: FY26 revenue guidance lowered (5–7% YoY) while Q2 revenue guide implies 6–7% growth; watch for back-half bookings/ARR reacceleration rather than in-year revenue lift .
  • Retention watch: DBNR trending from 107% → 106% → 104%; stabilization efforts (post-sales overhaul, CCO hire) are critical to restoring enterprise expansion and reducing downgrades/churn .
  • AI/product catalysts: New AI agents, AWS integrations, and FedRAMP Low open incremental verticals (public sector, native AI) that can drive platform adoption and multi-product deals .
  • Salesforce ramp/CRO hire: >60% enterprise reps reaching 1-year tenure by end-Q2 and an expected CRO appointment are near-term execution levers; look for improved enterprise contribution in 2H FY26 .
  • Cash/Capital allocation: ~$597M cash/investments and active $150M buyback provide flexibility and shareholder return while funding AI innovation and enterprise-scale services .
  • Near-term trading lens: Balance EPS/margin beats and AI momentum against lowered revenue guide and DBNR softness; monitor Q2 execution, ARR/billings, and retention metrics for confirmation of back-half improvement .

Additional Relevant Q1 FY2026 Press Releases

  • AWS Strategic Collaboration Agreement; deepened integrations and joint GTM .
  • Pre-announcement of Q1 results reporting date .
  • Board appointments and leadership updates relevant to execution (April 28 Carty appointment; March 10 CCO appointment) .