EPS of $-0.12 increased by 63.6% from previous year
Gross margin of 83.6%
Net income of -10.60M
""We achieved 9% annual growth in both revenue and ARR while expanding our non-GAAP operating margin by nearly 500 basis points to 18% — with free cash flow margin expanding from 15% to 23%, we see the culmination of the fiscal year as a clear testament to our operational discipline and efficient growth strategy."" - Jennifer Tejada
PagerDuty delivered a solid QQ4 2025 performance amid a transitional go-to-market environment and ongoing enterprise-focused platform transformation. Revenue of $121.446 million rose 9% year over year, with ARR exiting the quarter at $494 million, up 9% YoY. The company continued to sharpen its enterprise, top-down, multiproduct sales model, evidenced by multiproduct ARR now representing 65% of total ARR (up from 62% YoY) and 72 customers exceeding $1 million in ARR. Despite near-term growth moderation as PagerDuty accelerates the shift from a land-and-expand, product-led approach to a broader enterprise trend, management signaled durable demand for their Operations Cloud and AI-enabled capabilities. Q4 GAAP operating income was negative at -$11.7 million, yet non-GAAP operating margin expanded to 18% (vs. prior-year level), and free cash flow margin reached 24%. The company reaffirmed a constructive long-run growth path anchored by a TAM of roughly $50 billion and ongoing platform monetization initiatives, including AI agents and PD Advance, aimed at expanding ARRs across enterprise and commercial segments. Looking ahead, PagerDuty issued FY26 guidance of revenue $500–$507 million (7–8% growth) and non-GAAP EPS $0.90–$0.95, with an objective to lift long-term operating margin target to 30% and an FY26 operating margin of 19–20% in the near term. Management underscored three catalysts for ARR growth: (1) enterprise sales productivity, (2) platform monetization via AI capabilities and expanded packaging, and (3) Commercial segment momentum through digital acquisition and retention. The buyback program, a $150 million authorization, reinforces confidence in sustained free cash flow generation and balance-sheet strength.
Key Performance Indicators
Revenue
121.45M
QoQ: 2.10% | YoY:9.30%
Gross Profit
101.47M
83.55% margin
QoQ: 2.83% | YoY:18.71%
Operating Income
-11.72M
QoQ: -13.85% | YoY:54.05%
Net Income
-10.60M
QoQ: -79.00% | YoY:65.38%
EPS
-0.12
QoQ: -69.25% | YoY:63.64%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $121.446 million in Q4 2025, up 9% YoY; QoQ growth 2.1% (per earnings data).
ARR: Exiting Q4 2025 at $494 million, up 9% YoY; 65% of ARR from customers using 2+ paid products; 849 customers with >$100k ARR (up 6% YoY); 72 customers with >$1 million ARR (up 24% YoY).
Gross margin: 86% in Q4 2025 (high end of 84–86% target).
Operating performance: GAAP operating income -$11.7 million; GAAP operating margin -9.65%; Non-GAAP operating margin 18% in FY25.
Net income: -$10.6 million in Q4; net income margin -8.73% (net income per share -$0.12).
Financial Highlights
- Revenue: $121.446 million in Q4 2025, up 9% YoY; QoQ growth 2.1% (per earnings data).
- ARR: Exiting Q4 2025 at $494 million, up 9% YoY; 65% of ARR from customers using 2+ paid products; 849 customers with >$100k ARR (up 6% YoY); 72 customers with >$1 million ARR (up 24% YoY).
- Gross margin: 86% in Q4 2025 (high end of 84–86% target).
- Operating performance: GAAP operating income -$11.7 million; GAAP operating margin -9.65%; Non-GAAP operating margin 18% in FY25.
- Net income: -$10.6 million in Q4; net income margin -8.73% (net income per share -$0.12).
- Cash flow: Operating cash flow $31.4 million (26% of revenue); free cash flow $29 million (24% of revenue).
- Liquidity and leverage: Cash and investments approx. $571 million at quarter-end; total debt $463.7 million; net debt $117.2 million.
- RPO and billings: Ending RPO of ~$440 million; ~69% expected to be recognized in the next 12 months; trailing 12-month billings $485 million (+8% YoY).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
121.45M
9.30%
2.10%
Gross Profit
101.47M
18.71%
2.83%
Operating Income
-11.72M
54.05%
-13.85%
Net Income
-10.60M
65.38%
-79.00%
EPS
-0.12
63.64%
-69.25%
Key Financial Ratios
currentRatio
1.93
grossProfitMargin
83.6%
operatingProfitMargin
-9.65%
netProfitMargin
-8.73%
returnOnAssets
-1.14%
returnOnEquity
-8.17%
debtEquityRatio
3.57
operatingCashFlowPerShare
$0.34
freeCashFlowPerShare
$0.33
priceToBookRatio
13.12
priceEarningsRatio
-40.17
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategy and AI-enabled platform monetization: PagerDuty articulated a clear strategic pivot to enterprise top-down, multiproduct platform sales, with AI-driven automation and PD Advance as critical accelerants. Jen Tejada highlighted three catalysts for ARR growth: enterprise sales transformation, new platform monetization strategies (AI capabilities and packaging), and Commercial segment momentum through digital acquisition and retention programs. She stressed the long-term $50B TAM and the necessity of transforming go-to-market practices to capture value from large enterprise deals.
- Execution and capacity ramp: Howard Wilson and Jen noted that incremental ARR is expected to accelerate as the enterprise sales team ramps, with several new reps expected to reach productivity in the back half of FY26. The company signaled that go-to-market changes would yield gradual financial impacts, emphasizing efficiency enhancements and multiyear, multi-product deals as a core growth driver.
- AI agents and PD Advance as value levers: Management underscored the introduction of 3 specialized AI agents (Site Reliability Engineering, Operations Analysis, Scheduling Optimization) and the broader PD Advance program, designed to compress incident resolution times and broaden usage across tiers. An AI-use-case library and ecosystem partnerships (Slack, Zoom, AWS) were presented as levers to expand ARR and adoption, while a consumption-based pricing element was being explored.
- Balance sheet and capital allocation: The CFO highlighted a new $150 million share repurchase program, signaling confidence in durable free cash flow generation alongside a succinct purchase of $100 million repurchases in Q2 FY25 completed in Q4. This supports investor-friendly capital allocation and liquidity provisioning while sustaining the enterprise transformation.
"We achieved 9% annual growth in both revenue and ARR while expanding our non-GAAP operating margin by nearly 500 basis points to 18% — with free cash flow margin expanding from 15% to 23%, we see the culmination of the fiscal year as a clear testament to our operational discipline and efficient growth strategy."
— Jennifer Tejada
"Revenue for the quarter was $121 million, up 9% year-over-year. International revenue increased 10% annually, contributing 28% of total revenue. Annual recurring revenue exiting Q4 grew 9% year-over-year to $494 million."
— Howard Wilson
Forward Guidance
PagerDuty maintains a constructive FY26 outlook anchored by disciplined cost management, ARR expansion from a broadened product set, and a continued shift to enterprise, multi-product, top-down sales. Key guidance items:
- Q1 FY26 revenue: $118–$120 million, up 6–8% YoY; Q1 diluted non-GAAP EPS: $0.18–$0.19; Q1 operating margin: ~15%.
- FY26 revenue: $500–$507 million, up 7–8% YoY; FY26 diluted non-GAAP EPS: $0.90–$0.95; FY26 operating margin: 19–20%.
- Long-term operating margin target raised to 30%, signaling a path to sustained profitability as the sales transition matures.
- Tax and financing: Non-GAAP tax rate of 22% assumed for FY26; interest payments on 2028 convertible notes occur semiannually; remaining balance of 2025 convertibles due in Q2 FY26.
- Margin discipline and growth: Management emphasized that platform innovation and monetization will take time to translate into P&L improvements, with incremental ARR growth tied to ramping enterprise reps and expanding into higher-ARPU, multi-product customers.
- Monitoring factors: The key factors for investors to monitor are enterprise sales ramp efficiency, the contribution of AI/PD Advance to ARR mix, progression of large deals (>$1M ARR), net retention differentials between enterprise and commercial, and the cadence of free cash flow expansion as operating leverage improves. The expected acceleration in ARR in H2 FY26 will be contingent on successful execution of the enterprise sales transformation and greater monetization of AI-enabled capabilities.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
PD Focus
83.55%
-9.65%
-8.17%
-40.17%
ESTC
73.80%
-12.30%
-5.57%
-63.00%
GTLB
89.20%
-9.15%
0.74%
511.02%
AMPL
74.70%
-45.40%
-11.00%
-10.34%
CXM
71.00%
5.16%
16.10%
5.75%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
PagerDuty enters FY26 with a differentiated enterprise platform positioned to monetize AI-enabled digital operations at scale. The Q4 2025 results show a resilient revenue base, a strong ARR mix, and meaningful progress on the enterprise transformation. The guidance implies mid-to-high single-digit ARR growth in the near term with a plan to accelerate in H2 as the enterprise sales force achieves full productivity. The raised long-term operating margin target to 30% reflects a commitment to profitability as the operating leverage from scale and platform monetization consolidates. The primary catalysts are enterprise-ready top-down platform selling, AI-driven automation within PD Advance, and expanded ecosystem partnerships that unlock multi-use-case deployments across CIO/CTO-led budgets. The buyback authorization underscores confidence in durable free cash flow and a disciplined capital allocation framework.
Risks to watch include the persistence of macro headwinds affecting enterprise deals, execution risk in scaling the dual-track GTM (land-and-expand vs. top-down platform), and potential concentration in a few large customers. Given the current metrics—ARR growth of 9% YoY, 72 >$1M ARR, 849 >$100k ARR, 86% gross margins, 24% FCF margin, and a robust liquidity position—the stock offers an asymmetric risk-reward profile for investors inclined to back a transition into a more monetizable AI-enabled platform with a long runway of enterprise deployments. Overall, a cautious, upside-biased stance is warranted until FY26 execution cadence proves consistent across all regions and product lines, and the AI monetization path demonstrates material, sustained ARR uplift.
Key Investment Factors
Growth Potential
Large, durable TAM (~$50B) in digital operations, with a multi-product platform that couples incident management, AIOps, automation, and PD Advance. The AI agents and wider ecosystem integrations (Slack, Zoom, Amazon Q) create cross-sell opportunities and broaden addressable use cases beyond traditional incident management.
Profitability Risk
Execution risk from enterprise GTM transformation; macro volatility impacting enterprise buying cycles; reliance on large deals for ARR growth and retention; competition from legacy incumbents and newer observability vendors; integration risk with ecosystem partners; debt burden and near-term cash flow variability due to timing of large deals and RPO recognition.
Financial Position
Robust liquidity with approximately $571M in cash and investments; total debt around $463.7M, resulting in net debt of about $117M; trailing billings at $485M and RPO ~$440M indicating strong revenue visibility; gross margin at 86% supports operating leverage as GTM shifts progress; long-term operating margin target increased to 30% underscoring a commitment to profitability over time.