PagerDuty 2026 Q3 Earnings Profitability Surges 2734% Amid Revenue Growth

PagerDuty (PD) reported mixed results for fiscal 2026 Q3, with revenue falling short of estimates despite strong net income and EPS performance. The company also lowered full-year revenue guidance, signaling cautious optimism about its strategic shifts toward usage-based pricing and AI-driven operations.

Revenue

The total revenue of PagerDuty increased by 4.7% to $124.55 million in 2026 Q3, up from $118.95 million in 2025 Q3. This growth, however, missed analyst estimates by $0.31 million, reflecting ongoing challenges in enterprise seat license retention and expansion deal sizes.

Earnings/Net Income

PagerDuty returned to profitability with EPS of $1.72 in 2026 Q3, reversing from a loss of $0.07 per share in 2025 Q3 (2557.1% positive change). Meanwhile, the company achieved a remarkable turnaround with net income of $161.40 million in 2026 Q3, representing a 2734.3% positive swing from the net loss of $-6.13 million in 2025 Q3. This dramatic improvement underscores the effectiveness of cost discipline and margin expansion initiatives. The EPS performance was robust, marking a significant positive shift in profitability.

Price Action

The stock price of PagerDuty has edged up 1.34% during the latest trading day, has edged up 0.60% during the most recent full trading week, and has dropped 6.12% month-to-date.

Post-Earnings Price Action Review

The strategy of buying PagerDuty (PD) shares after a revenue drop quarter-over-quarter on the financial report release date and holding for 30 days resulted in a -6.42% return. This underperformed the benchmark significantly, achieving an excess return of -72.41% and a CAGR of -2.20%. The strategy also exhibited high volatility, with a maximum drawdown of 0.00% and a Sharpe ratio of -0.05, indicating a risky and disappointing investment approach.

CEO Commentary

Jennifer Tejada, CEO, highlighted Q3 2026 results: $125M revenue (+5% YoY), 29% non-GAAP operating margin (up 750 bps YoY), and GAAP profitability for the second quarter. She emphasized challenges from seat license compression in large enterprises due to budget caution, offset by new customer growth (+284 net new customers YoY) and high-value customer growth (+5% YoY to 867). Strategic priorities include expanding margins via operational efficiency, advancing AI operations (AIOps) and agentic solutions, and transitioning to usage-based pricing to align with customer outcomes. Tejada expressed cautious optimism, noting progress in retention through multiyear agreements and professional services, while acknowledging macroeconomic pressures.

Guidance

For Q4 2026, PagerDuty guides revenue of $122–124M (0–2% growth) and net income per share of $0.24–0.25, implying 21% operating margin. Full-year 2026 revenue is projected at $490–492M (5% growth) with net income per share of $1.11–1.12 and 24% operating margin. Howard Wilson, CFO, cited lower-than-expected dollar-based net retention due to seat-based reductions and expansion deal size pressures, alongside margin expansion from operational efficiency. The guidance assumes stabilization in churn and accelerated adoption of usage-based pricing.

Additional News

1. Strategic Shift to Usage-Based Pricing: PagerDuty announced a pivot to usage-based pricing models, aligning revenue with customer outcomes and aiming to drive long-term value.

2. AI-Driven Operational Enhancements: The company unveiled new AI operations (AIOps) tools at KubeCon, emphasizing automation and incident response capabilities.

3. Leadership Stability: Jennifer Tejada reaffirmed her commitment to operational efficiency and customer retention strategies during the earnings call, signaling continuity in leadership.

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