This article first appeared on GuruFocus.

Release Date: November 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

PagerDuty Inc (NYSE:PD) delivered revenue of $125 million, marking a 5% year-over-year increase.

The company achieved a non-GAAP operating margin of 29%, exceeding guidance and expanding by 750 basis points over the previous year.

PagerDuty Inc (NYSE:PD) achieved GAAP profitability for the second consecutive quarter, demonstrating disciplined execution and a durable growth model.

The company reported double-digit year-over-year growth in new customer acquisition and total paid and free customers.

PagerDuty Inc (NYSE:PD) is expanding its product advantage in AI operations and incident management, positioning itself as a leader in the digital and AI operations space.

Annual recurring revenue grew only 3% year-over-year, indicating slower growth compared to previous periods.

The company faced challenges with seat license compression, particularly in large enterprises due to budget caution and right-sizing.

Dollar-based net retention decreased to 100% from 102% in the previous quarter, impacted by lower gross retention.

PagerDuty Inc (NYSE:PD) lowered its top-line guidance due to underestimated headwinds to retention and larger-than-expected dollar value contractions.

The company anticipates continued pressure on seat-based reductions and customer budget caution in the upcoming quarters.

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Q: Jen, can you discuss the trend of deceleration in DBNR and how it compares to past periods of buyer caution? A: Jennifer Tejada, CEO: The current situation is different from past periods. While logo retention improved, the downgrades were larger due to significant reorganizations. We've implemented multi-quarter renewal planning and flexible pricing to address these challenges. Despite fewer seats, platform usage is increasing, and we're focusing on new customer acquisition and flexible pricing to support long-term growth.

Q: What indicators are you watching in the sales organization to ensure productivity and growth? A: Jennifer Tejada, CEO: We're focused on customer feedback regarding platform value and account coverage. Todd McNabb, our Chief Revenue Officer, is emphasizing the "land, realize, and expand" strategy, supporting reps in growth and expansion, and focusing on new product attachment and services to ensure faster time to value.

Q: Is there an opportunity to offer usage-based pricing to accounts before their next renewal to recover lost revenue? A: Jennifer Tejada, CEO: Longer-term agreements allow us to proactively offer new pricing and packaging, and we've seen success with our AI Ops product, which uses usage-based pricing. This proactive approach helps us engage with customers well before renewals, ensuring no surprises.

Q: How do you view the impact of layoffs and reorganizations on seat-based licensing, and what measures are you taking to mitigate this? A: Jennifer Tejada, CEO: Layoffs and reorganizations have led to seat-based licensing challenges, but we're addressing this by offering flexible pricing and multi-year agreements. We're also focusing on operational resilience, which remains a priority for our customers, and we're seeing growth opportunities following contract right-sizing.

Q: Can you provide more color on the new logo acquisitions and their size relative to prior years? A: Jennifer Tejada, CEO: We're seeing strong new logo acquisition across all segments, with a balanced mix of AI-native companies and traditional industries. New customers are landing through our digital-first environment and growing with support from our go-to-market organization. We've seen large lands in the enterprise segment, with some customers exceeding $100,000.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.