How should traders approach PD's Q1 2026?

Traders should approach PagerDuty's (PD) Q1 2026 earnings with a cautious optimism, considering the following points: 1. **Expected Earnings and Revenue**: PagerDuty is estimated to report earnings per share (EPS) of approximately -$0.06 for Q1 2026, with a net income of -$0.06. The estimated EPS is a significant decrease from the previous quarter's EPS of $0.09, indicating a potential decline in profitability. However, the company's revenue is expected to grow by 6% to 8% year-over-year, reaching $118.0 million to $120.0 million. 2. **Historical Performance**: PagerDuty has a track record of beating EPS estimates 100% of the time over the last two years. This suggests that while the company may face challenges, it has the potential to exceed market expectations. 3. **Market Sentiment and Outlook**: Despite the expected loss, PagerDuty's stock has seen a 10% surge in the past month following the earnings announcement, indicating positive market sentiment. The company's management remains upbeat, stating a 10% year-on-year increase in recurring revenue and a healthy operating margin of 14%, which could be positive for future earnings. 4. **Challenges and Competitiveness**: The company acknowledges ongoing challenges from intense competition and heavy capital expenditures, which could impact short-term earnings. Traders should monitor how PagerDuty navigates these challenges and manages its expenses. 5. **Share Repurchase Program**: PagerDuty recently announced a $150 million share repurchase program, reflecting confidence in its financial plan and the durability of its free cash flow. This could be a sign of potential stock price appreciation in the future. In conclusion, while PagerDuty is facing some challenges, the expected revenue growth, historical performance, and positive market sentiment suggest that traders should consider a cautiously optimistic approach to Q1 2026 earnings. However, close monitoring of the company's expense management and competitiveness is warranted.