PagerDuty NYSE: PD reported second-quarter fiscal 2027 revenue of $124.4 million, up 1% from a year earlier and above the high end of its guidance range, while annual recurring revenue surpassed $500 million for the first time. The company also raised its full-year operating-margin outlook after completing a workforce restructuring affecting about 15% of employees.
Chief Executive Officer John DiLullo, who recently completed his first 100 days at the company, said the quarter reflected early progress under a new operating framework centered on “build, sell, optimize.” The strategy prioritizes product development, go-to-market execution and reducing spending that does not directly support those two areas.
“We saw brisk new customer acquisition through our online sales efforts, continued growth in our population of enterprise accounts with ARR over $100,000, and expansion of our sales overseas,” DiLullo said. He added that retention improved sequentially, platform event traffic increased, and adoption of the company’s usage-based Operations Cloud offering grew meaningfully from the prior quarter.
ARR Tops $500 Million as Retention Improves
Chief Financial Officer Eric Prengel said annual recurring revenue ended the quarter at $501 million, increasing by $6 million during the period. Dollar-based net retention was 98%, improving sequentially, while annualized gross retention also increased from the prior quarter.
PagerDuty added 24 customers spending more than $100,000 annually, bringing that customer count to 884. International revenue accounted for about 30% of total revenue.
- Revenue: $124.4 million, up 1% year over year.
- Non-GAAP gross margin: 85%.
- Non-GAAP operating income: $29.5 million, representing a 24% operating margin.
- GAAP net income: $4.7 million, marking the company’s fifth consecutive quarter of GAAP profitability.
- Cash from operations: $37 million.
- Free cash flow: $33 million, or a 26% free-cash-flow margin.
The company ended the quarter with $470 million in cash, cash equivalents and investments. On a trailing 12-month basis, billings totaled $501 million, up 1% from a year earlier. Total remaining performance obligations were $426 million, with approximately $309 million expected to be recognized over the following 12 months, up 5% year over year.
PagerDuty repurchased nearly 800,000 shares for $7.6 million during the quarter. It had $92.4 million remaining under its $100 million share-repurchase authorization at quarter-end.
Operations Cloud to Become PD Reliability Platform
DiLullo said PagerDuty plans to make its AI-powered, usage-based Operations Cloud generally available later this quarter, while renaming it the PD Reliability Platform. The platform is designed to automate and orchestrate the incident-management lifecycle, including detection, investigation and remediation.
The company said its SRE Agent sits at the center of the platform and uses knowledge of customer applications and infrastructure, production telemetry, and prior incident data to detect disruptions and begin investigations autonomously. The platform will be available for purchase by all customers, including the company’s self-service community, when it reaches general availability this fall.
DiLullo said the usage-based model lowers the barrier for customers to try PagerDuty’s AI and agentic capabilities while aligning value with consumption. He said customers using the offering have shown favorable usage trends over time. Prengel said the Operations Cloud business grew at a double-digit rate in total, though the company does not plan to regularly disclose a specific usage metric for the product.
Management also highlighted several customer agreements, including a roughly $850,000, three-year usage-based Operations Cloud agreement with a diversified financial services company; a nearly $3 million, 36-month deal with an enterprise workflow-automation software platform; and a multiproduct win with a Japanese bank undergoing a digital transformation.
Restructuring Supports Margin Outlook
PagerDuty said its workforce reduction was concentrated in non-customer-facing roles, including support functions being automated and areas where process simplification and tool consolidation reduced staffing needs. The company said it preserved quota-bearing sales capacity and product-development expertise tied to its strongest growth opportunities.
The company expects to record restructuring charges of approximately $5.5 million to $7.5 million, primarily related to severance and associated costs. Most of the charges are expected in the third quarter, with the restructuring substantially complete by the end of the fourth quarter.
Prengel said the resulting savings will support investment in sales, engineering and AI-related product development while also accelerating the company’s path toward its long-term 30% non-GAAP operating-margin target.
Guidance Raised on Margin, Revenue Range Tightened
For the third quarter of fiscal 2027, PagerDuty forecast revenue of $123 million to $125 million, with the midpoint approximately flat from a year earlier. The company expects non-GAAP diluted earnings per share of $0.34 to $0.36 and a non-GAAP operating margin of 26.5% to 27.5%.
For the full fiscal year, PagerDuty projected revenue of $491.5 million to $496.5 million, raising the low end of its previous range. The midpoint is approximately flat year over year. It forecast diluted earnings per share of $1.33 to $1.37 and increased its non-GAAP operating-margin outlook to 25% to 26%, from a prior range of 24% to 25%.
The company also said it now expects full-year free-cash-flow margin to be in line with fiscal 2026, improving from its earlier expectation that the metric would decline by two to four percentage points.
While management described retention and new-business demand as stabilizing, DiLullo said the company still has work to do. “We do see the new products gaining traction, and we do feel like the business is stabilizing in the last two quarters in particular,” he said.
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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