US ▾
PD
Earnings call · Jul 2026 (Q2 FY27)

PagerDuty Q2 FY27 earnings call PD

Aug 27, 2026 Source

Executive summary

PagerDuty Q2 FY27 — ARR Crosses $500M, Operating Margin Exceeds Guidance

PagerDuty delivered a strong Q2 FY27, surpassing ARR and profitability targets, driven by new customer wins and expansion. The company is pivoting to a "build, sell, optimize" strategy, focusing on product innovation, go-to-market motions, and fiscal discipline, including a recent workforce restructuring. Management is confident in the PD Reliability Platform and AI-driven operations to stabilize retention and accelerate growth, aiming for long-term margin expansion.

Highlights

5

  • Annual Recurring Revenue (ARR) crossed $500 million, ending at $501 million, an increase of $6 million in the quarter.

  • Non-GAAP operating margin was 24%, exceeding the high end of guidance.

  • Non-GAAP EPS exceeded guidance.

  • Customers spending over $100,000 annually grew to 884, an increase of 24 since Q1 FY27.

  • Cash from operations was $37 million and free cash flow was $33 million, representing a 26% free cash flow margin.

Concerns

3

  • Workforce restructuring impacted approximately 15% of the workforce, resulting in $5.5 million to $7.5 million in restructuring charges.

  • Revenue growth was 1% year-over-year, with the midpoint of Q3 FY27 guidance approximately flat year-over-year.

  • Total RPO was $426 million, only $1 million higher year-over-year.

Guidance & targets

CategoryTargetConfidence
Revenue
$123 million to $125 million
high materiality
High
Net income per diluted share
$0.34 to $0.36
medium materiality
High
Operating margin
26.5% to 27.5%
medium materiality
High
Revenue
$491.5 million to $496.5 million
high materiality
High
Net income per diluted share
$1.33 to $1.37
medium materiality
High
Operating margin
25% to 26%
high materiality
High
Free cash flow margin
In line with FY '26 free cash flow margin
medium materiality
High

PD operating KPIs by quarter

PD operating KPIs stated on its earnings calls, by fiscal quarter
KPI Apr 2026 Q1 FY27This call Jul 2026 Q2 FY27Change vs prior quarter
Annual recurring revenue (ARR)
$496M Quarterly revenue was $121 million, up 1% year-over-year and annual recurring revenue was $496 million, flat year-over-year. Source transcript
$501M Our confidence stems from the positive signs in the business with annual recurring revenue crossing the $500 million milestone, ending at $501 million, an increase of $6 million in the quarter. Source transcript
+1%
Net revenue retention rate
97% Dollar-based net retention was 97%, we expect our continued customer success and renewal initiatives, along with our operations cloud pricing to result in stabilization of DBNR and for it to gradually increase throughout the year. Source transcript
98% Dollar-based net retention was 98%, up sequentially and annualized gross retention also improved sequentially. Source transcript
+1 pt
Customers Paid
15.38K Total paid customers grew to 15,380 in Q1, adding 133 net new customers since the year ago period. Source transcript
15K+ With more than 15,000 paying customers relying on the PagerDuty platform, including nearly 2/3 of the Fortune 100, we see firsthand the massive volume of AI-generated enterprise software now being deployed and exactly how it's evolving. Source transcript
—
Remaining performance obligation (RPO)
~$441M At the end of Q1, total RPO was approximately $441 million increasing 3% year-over-year. Source transcript
$426M Total RPO was $426 million, $1 million higher than year-over-year. Source transcript
—
Remaining performance obligation (RPO) Current
~$316M Of this amount, approximately $316 million or 72% is expected to be recognized over the next 12 months. Source transcript
~$309M Of this amount, approximately $309 million is expected to be recognized over the next 12 months, which represents a 5% year-over-year increase versus Q2 FY '26. Source transcript
—

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Total RPO $426 million Q2 FY27

$1 million higher year-over-year

Current RPO $309 million Q2 FY27

5% year-over-year increase versus Q2 FY '26

Expected to be recognized over the next 12 months.

Product announcements

ProductTypeDetails
PD Reliability Platformlaunch
Autonomous SRE agentupdate
Incident management life cycle integrationupdate
Agentic solution for simplifying on-call shift managementupdate

Deals & partnerships

Leading diversified financial services firm Usage-based Ops Cloud agreement $850,000 3-year

New customer win, significant for reliability, compliance, and uptime requirements.

Leading bank in Japan Multiproduct win spanning incident management, AIOps, automation, and analytics

Undergoing major digital transformation, chose PagerDuty based on SRE automation capabilities and operational resilience.

One of the world's largest enterprise software platforms for workflow automation Incident management and resilience platform nearly $3 million 36-month

One of the largest new logo wins this year, reflecting recognition that PagerDuty is a trusted source for incident management rather than building in-house.

Fast-growing U.K. AI infrastructure provider SRE agent and AI-assisted operations capabilities

Previously bet on a start-up competitor, but PagerDuty earned business back based on reliability, superior integration, and SRE agent/AI-assisted operations.

Anthropic, Cursor, LangChain Ecosystem integration

Growing ecosystem with AI native leaders.

CoreWeave and Anduril Building on PagerDuty

AI native leaders building on PagerDuty.

Risks & headwinds

Restructuring charges Q3 and Q4 FY27

$5.5 million to $7.5 million

Mitigation:Expected to yield significant run-rate savings, allowing reinvestment and supporting margin guidance.

Revenue growth deceleration Q3 FY27, FY27

Midpoint of Q3 FY27 revenue guidance approximately flat year-over-year; midpoint of FY27 revenue guidance approximately flat year-over-year.

Mitigation:Focus on 'build, sell, optimize' strategy, new product adoption (PD Reliability Platform), and AI-driven opportunities to strengthen retention and accelerate ARR.

Slow growth in Total RPO Q2 FY27

Total RPO was $426 million, $1 million higher year-over-year.

Mitigation:Focus on new product adoption, usage-based model, and AI capabilities to drive future demand and RPO conversion.

Historical seat compression Past quarters

Rough couple of quarters

Mitigation:Ops Cloud and usage-based model to mitigate challenges; focus on AI capabilities to drive growth away from seat pressure; new products gaining traction and business stabilizing.

What to watch in Q3 FY27

PD Reliability Platform adoption

Next quarter
Current Operations Cloud sales accelerated in Q2, grew double digits on a total basis.
Target Continued strong adoption and positive performance metrics.

Why it matters

This platform is central to PagerDuty's AI strategy and future growth, democratizing AI access and driving customer loyalty.

Periodically, we'll share details on the adoption and performance of the PD Reliability Platform.

Q&A highlights

Inquires about the role of humans in the loop for the PD Reliability Platform and PagerDuty's opportunity to govern/orchestrate third-party AI agent execution.

John DiLullo states that having humans in the loop is a natural motion for now, embraced by customers, and allows for reinforcement learning. He expects autonomous solutions to increase over time, especially for simple or repeated cases. He believes PagerDuty has a strong right to win in the "PD for AI" category, addressing the fragility and unique failure modes of nondeterministic AI workloads entering production.

“I think we really have the right in the PD4 AI category. And I'll point to a couple of things, but you think about the sheer volume of software that's being added and written and created right now and then also think through the fact that a lot of this is nondeterministic software. It tends to break more often. It's much more fragile.”

asked by William Kingsley Crane · answered by John DiLullo

2 min read 5 chapters

Detailed narrative

Strategic Pivot to "Build, Sell, Optimize"

PagerDuty has sharpened its focus on three core areas: building products customers love, activating effective go-to-market motions, and optimizing expenses. This strategy aims to strengthen retention, scale platform adoption, and drive ARR acceleration, with every investment now tested against these objectives. The company believes this approach will lead to higher adoption and customer loyalty, especially with the new PD Reliability Platform.

PD Reliability Platform Launch

The company is launching the PD Reliability Platform (formerly Operations Cloud) to general availability this fall. This AI-first, integrated platform automates and orchestrates the entire incident management lifecycle, moving PagerDuty from incident detection to prevention. It features a unique SRE agent that uses ML-based signal intelligence to autonomously detect and investigate disruptions, democratizing access to advanced AI capabilities through usage-based pricing.

AI-Fueled Enterprise Software Opportunity

Management highlights the massive opportunity presented by AI coding tools, which are transforming software development and operations. The increasing complexity, higher failure rates, and difficulty in debugging AI-generated software create a new risk layer, especially with autonomous agents. PagerDuty's platform is positioned to address these challenges, with 95% of leaders recognizing incident reduction as a competitive advantage and 77% planning increased investment in operational resilience.

Workforce Restructuring for Efficiency

PagerDuty completed a workforce restructuring, impacting approximately 15% of non-customer-facing roles, to prioritize key sales and engineering investments. This is expected to result in $5.5 million to $7.5 million in restructuring charges, primarily in Q3 and Q4, but will yield significant run-rate savings. These savings will be reinvested into fast-growing products and go-to-market opportunities, supporting accelerated progress towards the 30% long-term non-GAAP operating margin target.

Strong Customer Wins and Expansion

The company reported brisk new customer acquisition and expansion, including a leading diversified financial services firm signing an $850,000 3-year usage-based Ops Cloud agreement. A major Japanese bank chose PagerDuty for its SRE automation, aiming for 40% operating expense reduction. One of the world's largest enterprise software platforms signed a nearly $3 million 36-month agreement, highlighting the trend of large companies buying rather than building incident management solutions.

AI-generated summary of the company's earnings call. Not investment advice.