PagerDuty, Inc. Q3 FY2026 earnings call

Key Points

• Revenue of $125 million, up 5% YOY; non-GAAP operating margin 29% exceeded guidance.
• Achieved GAAP profitability for the second consecutive quarter.
• Annual recurring revenue at $497 million, 3% YOY growth.
• Accelerated product innovation in AI operations, with over 150 platform enhancements in Q3.
• Go-to-market transformation underway, transitioning to multiyear platform usage model.
• Welcome Todd McNabb as Chief Revenue Officer; Howard Wilson to retire next financial year.
• Recognition as Fortune's Best Workplaces Top 50 in technology.

Revenue for the third quarter was $125 million, up 5% year-over-year. Non-GAAP operating margin was 29%, exceeding guidance and expanding 750 basis points year-over-year. Annual recurring revenue (ARR) was $497 million, representing 3% year-on-year growth. International revenue increased 7% year-over-year, contributing 29% of total revenue. Q3 GAAP net income was $160 million, including a one-time income tax benefit. Total paid customers grew to 15,398 in Q3, up 2% year-over-year, and paid and free customers on the platform grew to over 34,000, a 13% increase from Q3 of the prior year.

Q4 Fiscal 2026

• Revenue expected in the range of $122 million to $124 million (0% to 2% growth).
• Net income per diluted share attributable to PagerDuty, Inc. in the range of $0.24 to $0.25.

Full Fiscal Year 2026

• Revenue expected in the range of $490 million to $492 million (5% growth).
• Net income per diluted share attributable to PagerDuty, Inc. in the range of $1.11 to $1.12.
• Increased full year net income and operating margin guidance.

• Seat license compression in large enterprises due to budget caution and rightsizing.
• Macro-economic uncertainties impacting customer budgets.
• Transition to new pricing models (usage-based) may take time to fully offset seat pressure.

Q: Jeff Van Rhee asked about DBNR trend and sales indicators.

A: Jennifer Tejada responded that while logo retention improved, larger downgrades tied to reorganizations were an issue; focus on multi-quarter renewal planning and flexible pricing. On sales, focused on customer feedback and land, realize, expand motion.

Q: Michael Steven Richards asked about renewals and usage-based pricing.

A: Jennifer Tejada said longer-term agreements allow proactive engagement; usage-based products like AIOps growing over 50% YOY.

Q: Andrew Sherman asked about reorgs and consumption.

A: Jennifer Tejada noted usage up across metrics; Howard Wilson emphasized customers staying and setting up for growth with flexible licensing.

Q: William Miller Jump asked about seat count headwinds and bottom line.

A: Jennifer Tejada said reorgs are temporal; Howard Wilson noted steady operating margin improvement and commitment to GAAP profitability next year.

Q: Oscar Saavedra asked about Q4 guidance and usage-based model.

A: Howard Wilson said Q4 guidance factors in renewal visibility; progress in moving customers to new model but not major impact in Q4.

Q: George McGreehan asked about agentic suite and competition.

A: Jennifer Tejada said agentic suite has unique advantages with 700+ integrations; positive response and competitive differentiation.

Q: Jacob Zerbib asked about new logo adds and stock-based comp.

A: Jennifer Tejada said balanced mix of new logos; Howard Wilson said stock-based comp expected to decline.