PagerDuty Inc (PD) Q1 2027 Earnings Call Highlights: Steady Revenue and Strategic Shifts Amidst ...

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Quarterly Revenue: $121 million, up 1% year over year. Annual Recurring Revenue (ARR): $496 million, flat year over year. Non-GAAP Operating Margin: 25%, with a long-term target of 30%. Gross Margin: 86%, at the high end of the 84% to 86% target range. GAAP Net Income: $10.2 million, marking the fourth consecutive quarter of GAAP profitability. Cash from Operations: $44 million, representing 37% of revenue. Free Cash Flow: $41 million, or 34% of revenue. Total Paid Customers: 15,380, with a net addition of 133 customers year over year. Dollar-Based Net Retention Rate: 97%. Cash, Cash Equivalents, and Investments: $444 million at the end of the quarter. Share Repurchase: 8.5 million shares repurchased for $63 million, completing a $200 million program. Q2 FY27 Revenue Guidance: $122 million to $124 million. Full FY27 Revenue Guidance: $488.5 million to $496.5 million. Q2 FY27 Operating Margin Guidance: 22% to 23%. Full FY27 Operating Margin Guidance: 24% to 25%.

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Release Date: May 28, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

PagerDuty Inc (NYSE:PD) exceeded the top end of guidance for both revenue and non-GAAP operating margin in Q1, with quarterly revenue reaching $121 million. The company has transitioned to a usage-based pricing model, which is expected to drive future revenue growth as platform usage increases. PagerDuty Inc (NYSE:PD) has a strong foundation with a trusted brand, an enviable customer base, and a platform central to real-time mission-critical operations. The introduction of the new Operations Cloud offering has led to larger, multi-year, more strategic commitments from customers. PagerDuty Inc (NYSE:PD) has been recognized for its workplace culture and industry leadership, being named a leader and outperformer in the 2026 GigaOm Radar for Incident Response Platforms.

Negative Points

The net retention rate took a step down from the previous quarter, indicating potential challenges in maintaining customer expansion. Annual recurring revenue was flat year over year, suggesting limited growth in this key metric. The transition to usage-based pricing is still in its early stages, which may lead to short-term uncertainties in revenue and customer retention. Some segments of the customer base, such as midsize SaaS companies, are under financial pressure, which could impact future growth. Despite the positive outlook, the company's revenue guidance for the full fiscal year 2027 remains essentially flat year over year.

Story Continues

Q & A Highlights

Q: What gives you confidence in the recovery and stabilization of net retention rates despite a recent decline? A: Jennifer Tejada, Executive Chairman of the Board, explained that the transition to usage-based pricing is progressing well, with early customer cohorts expanding rather than downgrading. Strong demand signals, including over 600 new customer logos for five consecutive quarters, indicate growth potential. The transition from seat-based to usage-based pricing is expected to be a long-term tailwind, especially as AI operations become more critical. Owen Wilson, CFO, added that platform usage growth supports the transition to the Operations Cloud pricing model, which has shown strong early results.

Q: What are your key learnings and priorities as the new CEO of PagerDuty? A: John Dilullo, CEO, emphasized the favorable market dynamics for PagerDuty, driven by AI and automation. He noted the company's strong integration into operations of leading companies and expressed excitement about unlocking value with the team. He aims to listen, learn, and engage with employees, customers, and partners to deepen his understanding of the market and business.

Q: How is PagerDuty balancing the need for product velocity with headcount growth and margin expansion? A: Jennifer Tejada highlighted that PagerDuty has been integrating AI into its platform for years, enhancing product development efficiency. The company uses AI internally to expedite development and maintain high standards for security and reliability. Owen Wilson added that the company's strong gross margins and efficient use of infrastructure allow for continued investment in R&D while maintaining profitability.

Q: What is the potential growth of ARR from usage-based products, and how are customers responding to this model? A: Owen Wilson stated that nearly 10% of ARR comes from usage-based products, with strong customer appeal due to the flexibility and access to all products. The focus is on customers spending over $100,000 annually, but the model benefits a broader customer base. The transition is expected to mitigate retention pressure and accelerate growth.

Q: How are AI-native customers impacting PagerDuty's growth, and what is their usage of the platform? A: Jennifer Tejada noted that AI-native companies are scaling rapidly and require resilience at scale, leading to faster expansion. The product-led growth (PLG) motion attracts demanding developers early, and the Operations Cloud allows for new use cases without departmental friction. This has led to significant growth in new logos and expansion opportunities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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