PagerDuty (NYSE:PD) executives highlighted what they called a “transformational year” as the company reported fourth-quarter and full-year fiscal 2026 results, pointing to improved new and expansion activity, its shift toward flexible consumption-based pricing, and its first full year of GAAP profitability.
Quarterly results and profitability
For the fourth quarter, PagerDuty reported revenue of $125 million, up 3% year-over-year. CEO Jennifer Tejada said both revenue and 24% non-GAAP operating margin came in above the company’s guidance ranges. CFO Howard Wilson added that GAAP net income was $11 million, marking the company’s third consecutive quarter of GAAP profitability.
International revenue grew 6% year-over-year and represented 29% of total revenue. On cash generation, Wilson said Q4 cash from operations was $25 million and free cash flow was $23 million.
ARR, customer metrics, and retention trends
PagerDuty ended Q4 with annual recurring revenue (ARR) of approximately $499 million, up 1% year-over-year. Tejada said ARR stabilized in Q4, while the company saw an increasing contribution from enterprise customers.
Executives pointed to growth in the overall platform footprint and funnel. Total free and paid companies on the platform surpassed 35,000, up 14% year-over-year. Paid customers rose to 15,351, up 2% year-over-year. Tejada said improved top-of-funnel and free-to-paid conversion helped drive over 600 new customers in the quarter, up 17% year-over-year.
Retention, however, remained a focal point. Wilson said dollar-based net retention (DBNR) was 98%, impacted by lower gross retention that management said it had anticipated. He said the company has implemented “programmatic renewal initiatives” and strengthened customer management, with expectations for gross retention to improve in Q1 and for DBNR to stabilize in Q1 and “increase gradually throughout the year.”
Management also discussed customer segmentation dynamics. Customers spending over $100,000 in ARR totaled 861, up 1% year-over-year, and represented 72% of total ARR. Tejada said modest growth in the $100,000 cohort reflected churn in the mid-size spend range, while the cohort of customers spending $1 million or more in ARR increased to 79, up 10% year-over-year, which she described as progress with the company’s highest-value enterprise customers.
Go-to-market momentum and flexible pricing shift
Tejada said new and expansion performance in Q4 was the company’s strongest of fiscal 2026, up 6% from the prior year and up 37% sequentially. She cited a higher mix of large opportunities, including over 40 deals worth $100,000 or more in the quarter—nearly twice the average of prior quarters that year.
A major theme of the call was PagerDuty’s transition away from seat-based licensing toward what it calls flex pricing, a consumption-led model designed to scale across “human responders, agents, and automated solutions.” Tejada said the model has been received “very positively” by large enterprises because it reduces friction and expands access to new products and use cases beyond traditional incident response.
She cited several examples of larger agreements signed under the new model, including:
- A $4.5 million total contract value multi-year renewal with “one of the world’s largest toy makers,” which Tejada said sought resilience at scale after a manufacturing outage led to a $10 million loss in revenue and costs.
- A $2.7 million multi-year expansion with a large telecommunications provider in North America, which Tejada said more than doubled the customer’s ARR with PagerDuty.
When asked about timing, Tejada said the company would not provide specifics because readiness varies by customer, while Wilson said management anticipates that by the end of fiscal 2027 “a meaningful portion” of ARR will be under the new licensing model.
AI operations positioning and ecosystem partnerships
Tejada repeatedly described AI as “the new operational risk layer” for enterprises and positioned PagerDuty as a “control plane” for AI operations. She argued that resilience and automation requirements are increasing as customer environments grow more complex, and said “incident response, while powerful, is no longer sufficient.”
Executives pointed to customer activity among AI-native companies and large enterprises, naming expansions with AI-focused companies such as Anduril, CoreWeave, Snowflake, and Scale AI, and describing multiple expansions throughout the year among AI hyperscalers (without naming those specific companies). Tejada also referenced a seven-figure multiyear expansion with “the world’s largest digital infrastructure company,” deploying PagerDuty Process Automation as a central orchestration platform for a global automation architecture.
The company also announced an expansion of its AI ecosystem, saying its platform agents now engage with “over 30 new AI partners.” Tejada highlighted three marquee partnerships: Anthropic Claude, Cursor, and LangChain. Wilson added that these integrations are aimed at improving resilience and, in some cases, enabling earlier testing and risk assessment before code is deployed.
Full-year performance, capital return, and FY2027 outlook
For full-year fiscal 2026, PagerDuty reported revenue of nearly $493 million, up 5% year-over-year. Wilson said GAAP net income was $174 million, which included a one-time $169 million income tax benefit from the release of a valuation allowance.
Non-GAAP operating income was $121 million, or 25% of revenue, up from $83 million, or 18%, a year ago. Wilson said the company is “closing in” on its long-term target of 30% non-GAAP operating margin. Tejada said non-GAAP operating margin expanded by nearly 700 basis points during the year, supported by structural efficiency initiatives and AI adoption.
PagerDuty also emphasized capital returns. Wilson said the company repurchased approximately 10 million shares during fiscal 2026 under its $200 million authorization, with roughly $63 million remaining at quarter end. In Q4 alone, PagerDuty repurchased eight million shares for $99 million. The company ended the quarter with $470 million in cash, equivalents, and investments.
For fiscal 2027, Wilson said guidance reflects a “prudent” view given ongoing macro pressure from seat compression, with an expectation that consumption pricing and new AI products will partially offset those headwinds. The company guided:
- Q1 FY2027 revenue of $118 million to $120 million and EPS of $0.23 to $0.25, implying 19% to 20% non-GAAP operating margin.
- Full-year FY2027 revenue of $488.5 million to $496.5 million and EPS of $1.23 to $1.28, implying 24% to 25% non-GAAP operating margin.
On cash flow, Wilson said free cash flow margin is expected to be two to four percentage points lower than fiscal 2026 due to lower interest income, higher facilities capital expenditures, and payment timing. He also said the EPS outlook incorporates a 20% non-GAAP tax rate for each quarter of fiscal 2027.
Finally, Tejada noted leadership updates, including the appointment of Scott Aronson to the board and Chris Ferro as Chief Legal Officer. She said the search for a new finance chief is progressing, with an expectation to appoint a candidate in Q2, and that Wilson will support the transition.
About PagerDuty (NYSE:PD)
PagerDuty, Inc engages in the operation of a digital operations management platform in the United States and internationally. The company’s digital operations management platform collects data and digital signals from virtually any software-enabled system or device and leverage machine learning to correlate, process, and predict opportunities and issues. Its platform includes PagerDuty Incident Management that provides a real-time view across the status of a digital service while incorporating noise reduction to remove false positives; AIOps that applies machine learning to correlate and automate the identification of incidents from billions of events; Process Automation offers centralized design time and run time environment for orchestrating automated workflows that span across departments, technologies, and networks; Customer Service Operations, which is offered to orchestrate, automate, and scale responses to customer impacting issues.
