Summary
PagerDuty closed fiscal 2026 with fourth quarter revenue of $124.8 million, up 2.7% year over year. Full year revenue reached $492.5 million, up 5.4%. Gross profit was $107.2 million for the quarter, up 5.6%, and $418.4 million for the year, up 7.9%. Gross margin expanded to 85.9% in the quarter, up 2.3 percentage points, and to 84.9% for the full year, up 2.0 percentage points. Lower operating expenses helped drive the profitability swing.
The headline story is the swing to GAAP profitability. Fourth quarter operating income was $4.5 million, compared with an operating loss in the prior-year quarter. Full year operating income was $5.8 million, also a swing to a profit. Net income was $9.4 million for the quarter, and $173.4 million for the full year. Diluted earnings per share for the full year was $1.87, a swing to a profit from a loss per share a year earlier. Operating margin was 3.6% in the quarter and 1.2% for the year, compared with negative margins in the prior periods. A large income tax benefit from releasing a valuation allowance against U.S. federal and certain state deferred tax assets boosted the full year net income. The company also reported its third consecutive quarter of GAAP profitability.
Operationally, annual recurring revenue was $498.7 million as of January 31, 2026, up 1% year over year. Customers with ARR over $100 thousand grew 1% to 861. Total paid customers were 15,351, up from 15,114. The dollar-based net retention rate fell to 98% from 106%. Free and paid customers totaled more than 35,000, roughly 14% growth. Remaining performance obligations were $449 million, up 2.0%, and the company expects to recognize about 70% over the next 12 months. Deferred revenue was $248.9 million, up 1.3%. Management highlighted new AI agent capabilities, a new AWS resilience competency, and customer wins including Anthropic, Equinix, Lambda, NVIDIA, and ZoomInfo.
Cash generation remained solid but slipped. Fourth quarter operating cash flow was $25.4 million, down 19.1% from the prior-year quarter. Full year operating cash flow was $114.9 million, down 2.6%. Free cash flow was $22.6 million in the quarter and $102.7 million for the year. Capital expenditures were $0.88 million in the quarter and $2.94 million for the year. The company repaid its 2025 Notes at maturity during the year. It also repurchased shares under its 2025 Share Repurchase Program, leaving $63.1 million available as of January 31, 2026. Non-GAAP operating income was $29.8 million in the quarter and $121.1 million for the year, with non-GAAP operating margin of 23.9% and 24.6%, respectively. Non-GAAP net income per diluted share was $0.29 for the quarter and $1.16 for the year.
PagerDuty's guidance for fiscal 2027 brackets the fiscal 2026 revenue result. For the first quarter of fiscal 2027, the company expects revenue of $118.0 million to $120.0 million and non-GAAP net income per diluted share of $0.23 to $0.25. For the full fiscal year 2027, the company expects revenue of $488.5 million to $496.5 million and non-GAAP net income per diluted share of $1.23 to $1.28. The full-year revenue guidance range surrounds the fiscal 2026 revenue figure, signaling limited growth as the company transitions to usage-based pricing and faces retention headwinds. Risks include the decline in dollar-based net retention to 98%, competition, dependence on a single product for a majority of revenue, macroeconomic uncertainty, tariffs and geopolitical instability, seasonality, and the challenge of adapting to rapidly developing AI technology.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2026 | Q3 FY2026 | QoQ | Q4 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $124.8M | $124.5M | +0.2% | $121.4M | +2.7% |
| Gross profit | $107.2M | $106.2M | +0.9% | $101.5M | +5.6% |
| Gross margin | 85.9% | 85.3% | +0.6 pp | 83.5% | +2.4 pp |
| Research & development | $32.6M | $29.4M | +10.7% | $34.6M | -5.9% |
| Sales & marketing | $45.2M | $44.3M | +2.0% | $53.1M | -14.8% |
| General & administrative | $24.9M | $24.4M | +2.1% | $25.5M | -2.4% |
| Total operating expenses | $102.7M | $98.1M | +4.6% | $113.2M | -9.3% |
| Operating income (loss) | $4.5M | $8.1M | -44.0% | -$11.7M | +138.6% |
| Operating margin | 3.6% | 6.5% | -2.9 pp | -9.7% | +13.3 pp |
| Net income (loss) | $9.3M | $161.4M | -94.3% | -$8.9M | +204.4% |
| Net margin | 7.4% | 129.6% | -122.2 pp | -7.3% | +14.7 pp |
| Diluted EPS | $0.12 | $1.69 | -$1.57 | -$0.12 | +$0.24 |
| Net retention rate | 98.0% | 100.0% | -2.0 pp | 106.0% | -8.0 pp |
Risks
PagerDuty's revenue growth has slowed significantly; revenue rose 5.4% in FY2026 year to date to $492.5M and 2.7% in FY2026 Q4, and management warns growth may continue to decelerate, fluctuate, or decline. The dollar-based net retention rate fell to 98% for FY2026 from 106% for FY2025, signaling weaker expansion within the existing customer base.
The competitive environment is intensifying with emerging AI technologies such as generative and agentic AI, hyperscale cloud providers bundling overlapping incident response, automation, and agentic capabilities, and open-source AI toolchains lowering barriers to entry. PagerDuty's AI features also depend on third-party model providers and AI infrastructure, exposing it to changes in pricing, service levels, rate limits, or compute access.
PagerDuty has recently experienced increased pressure from reductions in seats and licensed users at certain larger enterprise customers due to organizational restructurings, cost-reduction initiatives, and changes in operating models. While the number of customers reducing usage may be limited, the magnitude can be significant and disproportionately affect revenue, dollar-based net retention, and operating results.
As PagerDuty focuses on mid-market and enterprise customers, sales involve longer cycles, multiple management approvals, budget constraints, and less predictability; in recent periods large enterprise deals faced pronounced seat-based license compression and larger-than-expected deal size reductions. The shift to usage-based pricing and multiyear contracts may increase execution risk and affect timing and predictability of revenue and billings.
A majority of revenue comes from incident management subscriptions, so a decline in demand for that product or failure of newer AI-focused and agentic operations offerings to achieve market acceptance could disproportionately harm operating results.
Macroeconomic conditions, including global inflation, heightened interest rates, and economic uncertainty, have caused customers to scrutinize enterprise software spending and require additional sales support, making it more difficult to attract new customers and expand with existing customers.
PagerDuty announced the planned retirement of CFO Howard Wilson and is searching for a successor; any disruption during the transition, difficulty attracting a qualified replacement, or loss of institutional knowledge could adversely affect financial operations, internal controls, strategic planning, and investor confidence.
Increasing AI capabilities through offerings such as PagerDuty Advance and AIOps create risks that emerging AI technologies may be insufficient, biased, inaccurate, or controversial. Compliance with multiple AI regulations could increase costs or impede offering certain products in certain jurisdictions.
SaaS KPIs
All quarters →Free Cash Flow Margin
Non-GAAP Operating Margin
Free Cash Flow
Dollar-Based Net Retention Rate
Total Paid Customers
Non-GAAP Operating Income
Annual Recurring Revenue (ARR)
Customers > $100K ARR
Free and Paid Customers
Remaining Performance Obligations (RPO)
Summary, forecast, risks and KPIs are extracted from PagerDuty, Inc.'s SEC filings for Q4 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.