PagerDuty, Inc. Q1 FY2027 earnings

PagerDuty opened fiscal 2027 with $121.0 million of revenue, up 1.0% from $119.8 million a year earlier. Gross profit rose 1.3% to $101.9 million and gross margin was 84.3%, up 0.3 percentage points. The profit lines moved much further than the top line. Operating income was $9.2 million, a 7.6% operating margin, compared with an operating loss of $10.3 million and an operating margin of -8.6% in the prior-year quarter. Net income was $5.3 million against a net loss of $7.2 million a year ago, and diluted earnings per share were $0.13 versus a loss of $0.07.

The swing to operating profit came as much from cost control as from growth. Research and development, sales and marketing, and general and administrative spending all declined from a year earlier. The MD&A credits lower headcount and lower stock-based compensation, partly offset by higher hosting, software, and infrastructure costs. Restructuring charges also ran through the quarter. Management called the period the fourth consecutive quarter of GAAP profitability and announced a new $100 million share repurchase program. PagerDuty repurchased 8,532,838 shares during the quarter at an average price of $7.40, completing the 2025 program, which retired 18,606,569 shares at an average of $10.75 for a total repurchase price of $200.0 million.

Cash generation remains the strongest part of the story. Operating cash flow was $44.3 million, up 44.4% from $30.7 million. Free cash flow, which subtracts purchases of property and equipment and capitalized software costs from operating cash flow, was $41.2 million, a 34.1% margin. Capital expenditures were $1.0 million, up 118.8% from $0.4 million, though the base is small. Cash, cash equivalents, and investments totaled $444.0 million as of April 30, 2026. Deferred revenue was $243.4 million, up 1.5%, and most of that balance is expected to be recognized as revenue in the next 12 months. Total remaining performance obligations were $441 million, up 2.6%.

Growth metrics are the weak spot. Annual recurring revenue was flat year over year at $496 million, and the dollar-based net retention rate fell to 97% from 104%. A reading below 100% means the existing customer base produced less recurring revenue than a year earlier before new customers are counted. Customers with more than $100.0 thousand in ARR grew 1% to 860 from 848, and total paid customers were 15,380 versus 15,247. Paid and free customers together topped 36,000, approximately 14% growth since April 30, 2025. Of the $441 million in remaining performance obligations, about $316 million, or 72%, is expected to be recognized as revenue over the next 12 months, with $100 million over months 13 to 24.

Guidance points to steady, not accelerating, growth. For the second quarter of fiscal 2027, the company guided to non-GAAP net income per diluted share of $0.29 to $0.31, assuming approximately 78 million diluted shares and a 20% non-GAAP tax rate. For the full fiscal year 2027, non-GAAP net income per diluted share guidance is $1.27 to $1.32, up from $1.23 to $1.28, on approximately 79 million diluted shares. Full-year revenue guidance is consistent with previous guidance. Non-GAAP operating income in the quarter was $29.7 million, a 24.6% margin, and non-GAAP net income per diluted share was $0.32.

Named risks include dependence on a single product for the majority of revenue, competition, seasonality, and the ability to attract and retain executives, which carries extra weight after John DiLullo took over as chief executive officer and Jennifer Tejada moved to executive chair. The company also lists macroeconomic weakness, tariffs and trade barriers, geopolitical instability, cybersecurity compromises involving its own systems or third parties, and platform compatibility issues. Management points to AI partnerships with Anthropic, Cursor, and LangChain and a usage-based Operations Cloud package as offsets.