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PagerDuty, Inc. (PD)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY2026 delivered first-ever GAAP profitability, with non-GAAP operating margin expanding to 25.4% and international revenue up 12% YoY; revenue was in line and EPS materially beat consensus, catalyzed by disciplined OpEx, improved execution, and strong platform usage trends .
  • Revenue was $123.4M (+6.4% YoY) versus S&P Global consensus of $123.45M (in line), and non-GAAP diluted EPS was $0.30 versus $0.20 consensus, a significant beat; GAAP diluted EPS was $0.10 .
  • FY2026 guidance: revenue tightened to $493–$497M (lowered top end) and non-GAAP EPS raised to $1.00–$1.04; Q3 FY2026 guidance implies continued margin discipline (non-GAAP EPS $0.24–$0.25) .
  • Strategic catalysts: appointment of CRO Todd McNabb to accelerate enterprise GTM, usage-based pricing transition, Amazon Q integration, and expanded $200M buyback authorization, positioning PD for improved ARR and durable cash generation .

What Went Well and What Went Wrong

What Went Well

  • GAAP profitability achieved for the first time; non-GAAP operating margin reached 25.4% (up ~800 bps YoY), reflecting strong execution and cost discipline: “we achieved GAAP profitability…non GAAP operating margin reached 25% exceeding both guidance” — Jennifer Tejada .
  • International momentum: international revenue grew 12% YoY and reached 29% of total, supported by maturing enterprise motion and stronger execution outside North America .
  • Customer and product traction: total paid customers rose to 15,322; $100k+ ARR customers increased to 868; usage-based AIOps growing above 60% with agents (Shift, Scribe, Insights, SRE) GA’ing and Amazon Q integration advancing AI ecosystem positioning .

What Went Wrong

  • DBNR declined to 102% (from 104% in Q1 and 106% prior year), driven by seat downgrades/optimization rather than churn; gross retention pressure persisted, particularly in North America .
  • Growth tempered versus earlier expectations; FY revenue guidance top end lowered to $497M (from $499M), reflecting conservative stance amid pricing transition and renewal dynamics .
  • Free cash flow margin compressed to 24.5% from 28.7% YoY in the quarter as investing/financing flows shifted (including debt retirement), though operating cash generation remained strong .

Financial Results

Revenue, EPS, Margins (Quarterly)

MetricQ4 FY2025Q1 FY2026Q2 FY2026
Revenue ($USD Millions)$121.446 $119.805 $123.411
Gross Margin (GAAP, %)83.6% 84.0% 84.6%
Gross Margin (Non-GAAP, %)86.5% 86.0% 86.1%
Operating Margin (GAAP, %)(9.6)% (8.6)% 2.9%
Operating Margin (Non-GAAP, %)18.3% 20.3% 25.4%
Diluted EPS (GAAP, $)$(0.12) $(0.07) $0.10
Diluted EPS (Non-GAAP, $)$0.22 $0.24 $0.30

Actual vs Estimates (Q2 FY2026)

MetricActualS&P Global ConsensusSurprise
Revenue ($USD Millions)$123.411 $123.449*(~$0.038)M near in-line
Non-GAAP Diluted EPS ($)$0.30 $0.202*+$0.098 — bold beat

Values retrieved from S&P Global.*

KPIs and Cash Flow (Quarterly)

KPIQ4 FY2025Q1 FY2026Q2 FY2026
ARR ($USD Millions)$494 $496 $499
Dollar-Based Net Retention (%)106% 104% 102%
Customers with ARR >$100k849 848 868
Total Paid Customers15,114 15,247 15,322
RPO ($USD Millions)$440; ~69% next 12m ($302) $430; ~70% next 12m ($302) $425; ~69% next 12m ($295)
Cash, Cash Equivalents & Investments ($USD Millions)$570.8 $597.1 $567.9
Cash from Operations ($USD Millions)$31.4 $30.7 $34.0
Free Cash Flow ($USD Millions)$28.6 $29.0 $30.2

Geographic Mix (Q2 FY2026)

RegionContribution
International Revenue (%)29%

Segment revenue breakdown not disclosed.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q3 FY2026N/A$124.0–$126.0 N/A
Non-GAAP Diluted EPS ($)Q3 FY2026N/A$0.24–$0.25; assumes ~94M diluted shares, 22% non-GAAP tax N/A
Revenue ($USD Millions)FY2026$493.0–$499.0 $493.0–$497.0 Lowered (top end)
Non-GAAP Diluted EPS ($)FY2026$0.95–$1.00 $1.00–$1.04 Raised
Share Repurchase Authorization ($USD Millions)Program$150 $200 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY2025, Q1 FY2026)Current Period (Q2 FY2026)Trend
AI/Technology InitiativesIntroduced agentic AI offerings; AWS collaboration; platform AI roadmap Agents (Shift, Scribe, Insights, SRE) GA; Amazon Q integration; AIOps usage-based growth >60% Accelerating productization and ecosystem partnerships
Pricing Model ShiftEnterprise transformation highlighted; preparing for AI-led monetization Transition to usage-based pricing for core IM over time; customers receptive; flexible licensing Structural monetization shift underway
GTM & LeadershipBuilding enterprise motion; CCO appointment; board additions New CRO Todd McNabb; flattened org; improved international execution; focus on NA recovery Execution discipline; leadership upgrades
Retention/Seat OptimizationDBNR 106% (Q4); 104% (Q1) DBNR 102%; downgrades tied to seat optimization; pipeline quality improving Retention pressure stabilizing near ~102%
Regional TrendsGlobal tour/customer engagement International revenue +12% YoY; 29% mix; above-target performance International strengthening
Capital Return$150M buyback authorized Authorization increased to $200M Expanded capital return capacity

Management Commentary

  • “PagerDuty delivered revenue of $123,000,000… we achieved GAAP profitability…non GAAP operating margin reached 25%…demonstrate our focus on driving profitable growth” — Jennifer Tejada (CEO) .
  • “We are becoming the central nervous system for the AI native ecosystem… native AI leaders now contribute 2% of total ARR and is growing rapidly” — Jennifer Tejada .
  • “International revenue increased 12% annually, contributing 29% of total revenue…We delivered 102% dollar based net retention…negatively impacted by lower gross retention largely as a result of downgrades” — Howard Wilson (CFO) .
  • “The Board has expanded our current share repurchase program to $200,000,000” — Howard Wilson ; 8-K confirms $200M authorization .
  • “Amazon Q reached general availability as our first AgenTeq AI partnership…integration offers over 40 data connectors” — Jennifer Tejada .

Q&A Highlights

  • Usage-based pricing transition: “it looks like [incident management] will be some form of platform based and usage based…we want to give our customers predictability” — CEO on model design and credits .
  • CRO mandate and NA sales: “job one will be…enterprise transformation and drive more consistency…we reduced some layers…alignment of AEs and CSMs” — CEO on sales leadership and org changes .
  • ARR quality and enterprise mix: “more than 75% [of ARR] is coming from enterprise…more than 65% of ARR is coming from customers with two or more products” — CFO .
  • Pipeline/seasonality: “Q4 is a large billings quarter due to renewals…strong build of pipeline for the fourth quarter” — CFO .
  • Retention mitigation: “flexible licensing…give them access to more product…mitigate some of the impacts of potentially less users” — CFO .

Estimates Context

  • Revenue: $123.411M actual vs $123.449M consensus* (near in-line).
  • Non-GAAP diluted EPS: $0.30 actual vs $0.202* consensus — bold beat.
  • Implication: Street may raise FY EPS estimates given stronger-than-expected margin execution and FY EPS guidance raise; revenue trajectory remains consistent with mid-single-digit growth amid pricing transition .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Margin-led upside: Strong non-GAAP margin expansion (25.4%) and first GAAP-profitable quarter suggest durable operating leverage and potential estimate revisions higher on EPS/FCF .
  • Growth reacceleration setup: New CRO, improved international execution, and rising enterprise rep tenure underpin higher 2H incremental ARR and Q4 renewal seasonality leverage .
  • Monetization transition: Usage-based pricing and flexible licensing align revenue with rising platform utilization, mitigating seat-optimization headwinds over time .
  • AI ecosystem positioning: Agent GA releases and Amazon Q integration broaden PD’s role as the operations backbone for AI-native workloads — a medium-term growth vector .
  • Capital return: Buyback authorization lifted to $200M, supported by consistent cash flow generation; debt retired ($58M) further strengthens balance sheet .
  • Risk watch: DBNR at 102% and North America retention/downgrade pressure warrant monitoring through Q3–Q4; guidance top-end revenue trim reflects prudence .
  • Trading lens: Expect positive reaction to EPS beat and GAAP profitability; stock likely sensitive to signals on usage-based adoption, NA sales execution, and Q4 renewal outcomes .