PagerDuty, Inc.

Q1 FY27 revenue was $121 million, up 1% year over year. Non-GAAP operating income was $30 million, or 25% of revenue, versus $24 million, or 20% of revenue in the same quarter last year. Gross margin was 86%, at the high end of the 84% to 86% target range. GAAP net income was $10.2 million, and the company reported its fourth consecutive quarter of GAAP profitability. ARR exiting Q1 was $496 million, flat year over year; dollar-based net retention was 97%; customers spending over $100,000 in ARR were 860, up 1% year over year; and total paid customers reached 15,380. Cash from operations was $44 million and free cash flow was $41 million. The company ended the quarter with $444 million in cash, cash equivalents and investments. For Q2 FY27, PagerDuty expects revenue of $122 million to $124 million and net income per diluted share of $0.29 to $0.31, implying operating margin of 22% to 23%. For full-year FY27, it guided to revenue of $488.5 million to $496.5 million, net income per diluted share of $1.27 to $1.32, and operating margin of 24% to 25%. Management said the full-year revenue range is unchanged and that the EPS increase reflects the reduced share count after the buyback program. It also said Q1 free cash flow was elevated by collections and should normalize in Q2, and that some Q1 margin outperformance reflected marketing spend timing that it expects to deploy in Q2.

Jennifer Tejada framed the quarter as evidence that PagerDuty’s AI-first platform and new usage-based pricing are strengthening the business. She highlighted the transition from seat-based licensing toward Operations Cloud as a major growth lever, saying the model reduces friction, expands product adoption, and should translate usage growth into revenue growth over time. Her tone was confident and reflective, emphasizing that the company has evolved from a small single-product business into a profitable platform with a clear path to 30% non-GAAP operating margin.

Howard Wilson emphasized that the business model transition is showing early traction, noting that the ARR of customers on Operations Cloud pricing nearly doubled from Q4 to Q1 and that over 15 customers spending more than $100,000 annually have moved to the model. He cited Q1 revenue of $121 million, gross margin of 86%, operating income of $30 million, GAAP net income of $10.2 million, cash from operations of $44 million, free cash flow of $41 million, and ending cash and investments of $444 million. He also pointed to capital returns, saying the company repurchased 8.5 million shares for $63 million, completed the prior $200 million buyback authorization, and launched a new $100 million repurchase program.

Analysts focused on the drop in net retention, the balance between AI product investment and margin expansion, and how far the consumption model can scale. Management said the lower net retention reflects a mix of customer dynamics, including some seat-based compression and pressure in certain mid-market SaaS segments, but argued gross retention is improving and that many customers moving to Operations Cloud are renewing at higher values with expansions. On AI-native customers, Tejada said they are adopting earlier because resilience and reliability matter sooner in their lifecycle, and that the usage-based model plus PLG motion is helping PagerDuty land and expand with both startups and larger enterprises.