Q3 2025 Earnings Summary
- PagerDuty is experiencing strong growth in the Enterprise segment, with customers spending over $500,000 increasing by 20%, and overall stabilization across all segments including Commercial, indicating potential for overall growth reacceleration.
- The company has improved pipeline visibility and quality, with the pipeline for Q1 next year being almost 50% higher than at the start of Q1 last year, which shows strong future growth prospects.
- PagerDuty is balancing growth with profitability, aiming to increase growth rate above 10% into next year while continuing to expand operating margins, indicating potential for increased profitability without sacrificing growth. ,
- Delay in large deal conversions leading to deferred ARR acceleration into fiscal 2026: The company acknowledged that an unusual number of large Q3 opportunities were deferred, which will delay ARR acceleration into FY '26.
- Uncertainty around timing of ARR growth acceleration: Management indicated that the timing of ARR growth acceleration is variable and they haven't provided a fixed timeline for it, raising concerns about future growth prospects.
- Increasing competition and potential threats to win rates: When asked about competitive dynamics, particularly with Datadog's solution entering the market, the CEO emphasized the need to maintain strengths and acknowledged the competitive landscape, suggesting potential risks from competitors.
Metric | YoY Change | Reason |
---|---|---|
Total Revenue | +2.6% increase (from $115.9M in Q2 2025 to $118.95M in Q3 2025) | Revenue growth was modest but steady, driven by strong performance in the United States ($85.53M) and sustained international contributions ($33.42M), reflecting ongoing enterprise deals and market expansion compared to the previous quarter. |
Operating Income | Improvement to –$10.29M in Q3 2025 (GAAP figures) | Although still negative, operating income improved from worse results in Q2 2025 as a result of enhanced cost management and optimized expense allocation, which helped mitigate operating losses relative to prior periods. |
Net Income | Narrowed loss to –$5.92M in Q3 2025 | The net loss shrank compared to Q2 2025 due to a combination of reduced operating expenses, better management of non-operating items (such as interest income increases), and a modest uptick in revenue, all contributing to a smaller overall loss. |
EPS | Improved from –$0.14 in Q2 2025 to –$0.07 in Q3 2025 (50% reduction in losses) | The almost 50% improvement in EPS reflects the positive impact of better operating margins and expense control, as the company moved from higher per-share losses in Q2 2025 to a less severe loss in Q3 2025. |
Net Change in Cash | Shifted from +$3.12M in Q2 2025 to –$59.23M in Q3 2025 (a decrease of $62.35M) | The net cash change turned markedly negative in Q3 2025 as increased outflows in investing and financing activities (including significant common stock repurchases) offset robust operating cash generation, a stark contrast to the modest positive cash flow of the prior quarter. |
Current Assets | Totaled $654.13M in Q3 2025 (consistent with a robust liquidity profile) | While there was modest movement compared to prior periods, current assets remained strong at $654.13M, indicating that the company maintained a healthy asset base through steady cash, investment, and receivables management despite pressures elsewhere on the balance sheet. |
Cash and Cash Equivalents | Increased to $326.44M in Q3 2025 | Despite the negative net cash change in Q3 2025, the balance of cash and cash equivalents rose to $326.44M, suggesting that prior accumulation and operating cash generation provided a buffer—even though significant outflows occurred during the current period. |
Shareholders’ Equity | Declined to $111.60M in Q3 2025 | The reduction in shareholders’ equity reflects the impact of accumulated operating losses, lower net income, and cash used for stock repurchases, which together strained the equity base relative to earlier periods. |
Long‑Term Debt | Increased to $392.70M in Q3 2025 (exhibiting higher leverage) | A higher long‑term debt balance indicates that the company is relying more on external financing to support growth and operations, intensifying leverage pressures compared to previous periods. |
Metric | Period | Previous Guidance | Current Guidance | Change |
---|---|---|---|---|
Revenue (Quarterly) | Q4 2025 | $115.5 million to $117.5 million, 6% to 8% | $118.5 million to $120.5 million, 7% to 8% | raised |
Net Income per Diluted Share (Quarterly) | Q4 2025 | $0.16 to $0.17 | $0.15 to $0.16 | lowered |
Operating Margin (Quarterly) | Q4 2025 | 13% | 13% | no change |
Revenue (Annual) | FY 2025 | $463 million to $467 million, 7% to 8% | $464.5 million to $466.5 million, 8% | raised |
Net Income per Diluted Share (Annual) | FY 2025 | $0.67 to $0.72 | $0.78 to $0.79 | raised |
Operating Margin (Annual) | FY 2025 | 14% | 16% | raised |
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Growth Outlook
Q: What are your expectations for future growth and margins?
A: We aim to increase our growth rate above 10% next year while continuing to expand operating margins. We're seeing strong market opportunities and will invest prudently to drive growth without sacrificing profitability. ( , ) -
Large Deal Delays
Q: Why are large deals being deferred, and will they close soon?
A: A few large deals were deferred but not lost; we've already closed some of them. We're confident they'll close soon, supported by stabilization across all segments and a pipeline that's 50% higher than last year. ( , , ) -
Competition with Datadog
Q: How is Datadog's entry affecting your win rates?
A: We're confident in our position and are not hearing much about it from customers. Our neutral, independent platform is valued by enterprises, and we continue to demonstrate resilience at scale. ( ) -
Commercial Segment Growth
Q: How will you accelerate growth in the Commercial segment?
A: We're seeing better retention and a return to growth in SMB, reducing headwinds. Strength in areas like AI startups and e-commerce is promising, and we're leveraging consumption-based products to drive growth. ( , ) -
New Product Adoption
Q: What's driving the 40% net new ARR from new products?
A: Increasing attach rates of products like AIOps, Automation, and Customer Service Ops are helping deals get bigger. Our solution selling addresses funded customer initiatives, driving expansion. ( , ) -
EMEA Improvement
Q: Why is EMEA performing better?
A: A new leader in EMEA has brought rigor and focus on pipeline generation. Combined with an easing macro environment, we're seeing positive results across all segments. ( ) -
Contract Terms Impact
Q: How are contract terms affecting billings growth?
A: Multiyear deals and co-terming expansions can cause billings fluctuations despite ARR growth. We focus on ARR to reflect true performance and manage these variations. ( ) -
Balancing Growth and Margins
Q: When would you invest more to drive growth?
A: We're monitoring indicators like sales productivity and ramp times. With stabilization across segments, we're ready to invest in improving productivity while using capital wisely. ( ) -
Q4 Deal Timing
Q: Any concerns about large deals pushing into next year?
A: We're not expecting unusual linearity in Q4, though holidays can impact timing. Our aim is to balance deal flow, and most business typically happens at quarter-end. ( ) -
ACV Expansion
Q: How do large deals impact ACV expansion?
A: As customers adopt more of the Operations Cloud, their value increases significantly. Some products can exceed their spend on Incident Management, leading to higher retention and transformational value. ( )
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