PagerDuty NYSE: PD reported fiscal first-quarter results that exceeded its revenue and non-GAAP operating margin guidance, while the company highlighted early traction from its shift toward usage-based pricing and announced a leadership transition.
Jennifer, who has served as CEO for 10 years, said she has transitioned to executive chair and introduced John DiLullo as PagerDuty’s new CEO. She said DiLullo’s appointment followed a “deliberate and comprehensive succession process” conducted with the board. DiLullo previously served as CEO of Deepwatch, LiveVox and Lastline, and said his near-term priority is to “listen, learn, and engage” with employees, customers and partners.
“What stands out to me is the strength of the foundation, a trusted brand, an enviable customer base, and a platform that sits at the core of real-time, mission-critical operations,” DiLullo said.
First-Quarter Revenue Edges Higher as Margins Expand
PagerDuty reported quarterly revenue of $121 million, up 1% year-over-year. Annual recurring revenue was $496 million, flat compared with the prior-year period. The company said non-GAAP operating margin reached 25%, compared with 20% in the same quarter last year, reflecting efficiency initiatives and operating discipline.
Howard said GAAP net income was $10.2 million, marking the company’s fourth consecutive quarter of GAAP profitability. First-quarter gross margin was 86%, at the high end of the company’s target range of 84% to 86%.
Cash from operations totaled $44 million, or 37% of revenue, while free cash flow was $41 million, or 34% of revenue. PagerDuty ended the quarter with $444 million in cash equivalents and investments. Howard said the strong cash generation gives the company flexibility to invest in go-to-market changes and AI product development while continuing shareholder returns.
The company repurchased 8.5 million shares for $63 million during the quarter and completed its previously authorized $200 million share repurchase program. It also announced a new $100 million share repurchase authorization.
Usage-Based Pricing Model Shows Early Traction
Management emphasized the company’s transition from seat-based licensing toward usage-based pricing through its Operations Cloud offering. Jennifer said PagerDuty historically sold products including Enterprise Incident Management, Customer Service Operations and Runbook Automation through seat-based licenses, while Event Intelligence and AI products were sold on a usage basis. The full suite is now available through an integrated platform with usage-based pricing.
Usage-based products, including AIOps, PagerDuty Advance and Operations Cloud, now represent nearly 10% of total ARR, Jennifer said. Howard added that the ARR of customers on the Operations Cloud pricing model nearly doubled from the fourth quarter to the first quarter. More than 15 customers spending over $100,000 annually have transitioned to the model.
Jennifer said early Operations Cloud customers are using more capabilities across incident management, incident workflows, Event Intelligence and agents. She said the model reduces friction tied to adding users across departments and can help customers expand usage through events, AI actions and automated workflows.
“Customers who deploy the Operations Cloud with our new professional services model see an over 80% improvement in time to value and 50% higher product engagement compared to those who self-implement,” Jennifer said.
Customer Metrics and Retention Remain in Focus
PagerDuty said dollar-based net retention was 97%. Howard said customer success and renewal initiatives contributed to an improvement in gross retention from the fourth quarter to the first quarter, and the company expects gradual improvement through the year.
Customers spending more than $100,000 in annual recurring revenue totaled 860, up 1% year-over-year. Total paid customers reached 15,380 in the first quarter, while free and paid customers on the platform grew to more than 36,000, an increase of approximately 14% from the prior-year quarter.
Jennifer said PagerDuty acquired more than 600 new customers for the fifth consecutive quarter. She cited demand from large enterprises and AI-native companies, including CoreWeave and Anduril, as well as new customers such as Lightsfund, Dropzone AI and Simile.
The company also highlighted several enterprise wins and expansions, including a Fortune 500 automotive manufacturer that migrated from a seat-based plan to Operations Cloud, a Fortune 100 financial institution that expanded to support a site reliability engineering model, and a North American retailer that signed a multi-year, seven-figure agreement involving Operations Cloud and Runbook Automation.
AI Strategy Central to Growth Outlook
Management framed AI as a driver of both operational complexity and demand for PagerDuty’s platform. Jennifer said AI is creating a “new operational risk layer” by accelerating software development and deployment, increasing volume and complexity in production environments, and making failures less predictable.
PagerDuty’s platform strategy is built around AI and automation, full lifecycle incident management, and platform and ecosystem extensibility, Jennifer said. She pointed to the company’s SRE Agent, launched in October, as an example of its AI focus. The agent acts as a virtual responder that gathers signals, performs approved remediations and uses operational memory from past incidents.
Jennifer also cited chat-native incident management in Slack and Microsoft Teams and partnerships involving Anthropic, Claude, Cursor and LangChain as part of the company’s AI ecosystem.
Guidance Calls for Flat Revenue Growth
For the second quarter of fiscal 2027, PagerDuty expects revenue of $122 million to $124 million, with the midpoint approximately flat year-over-year. The company projected net income per diluted share attributable to PagerDuty Inc. of $0.29 to $0.31 and an operating margin of 22% to 23%.
For the full fiscal year 2027, PagerDuty maintained its revenue outlook of $488.5 million to $496.5 million, with the midpoint essentially flat year-over-year. The company raised its net income per diluted share outlook to $1.27 to $1.32, citing a reduced share count from the completed buyback program. The full-year outlook implies an operating margin of 24% to 25%.
Howard said first-quarter free cash flow was elevated due to better-than-expected collections, which the company expects to normalize in the second quarter. He also said some first-quarter operating margin outperformance reflected marketing program spending that is expected to be deployed in the second quarter.
In her closing remarks, Jennifer said PagerDuty has “a durable balance sheet, expanding operating margins, and a clear strategy to navigate and win in the AI-first world,” while expressing confidence in DiLullo’s leadership as the company begins its next phase.
About PagerDuty NYSE: PD
PagerDuty, Inc engages in the operation of a digital operations management platform in the United States and internationally. The company's digital operations management platform collects data and digital signals from virtually any software-enabled system or device and leverage machine learning to correlate, process, and predict opportunities and issues. Its platform includes PagerDuty Incident Management that provides a real-time view across the status of a digital service while incorporating noise reduction to remove false positives; AIOps that applies machine learning to correlate and automate the identification of incidents from billions of events; Process Automation offers centralized design time and run time environment for orchestrating automated workflows that span across departments, technologies, and networks; Customer Service Operations, which is offered to orchestrate, automate, and scale responses to customer impacting issues.
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