PagerDuty, Inc. Q4 FY2025 earnings call

• PagerDuty delivered third consecutive year of non-GAAP profitability with 9% annual growth in revenue and ARR, and non-GAAP operating margin expanded by nearly 500 basis points to 18%.
• Q4 revenue was $121 million, exceeding guidance, and ARR reached $494 million. Near-term growth moderation due to enterprise sales transformation, but fundamental drivers remain strong.
• 3 catalysts for ARR growth: optimizing field organization efficiency, new platform monetization strategies, and building momentum in Commercial segment through digital acquisition and retention.
• Expanded AI capabilities with PagerDuty AI agents, democratized access, integrated with partners like Slack, Zoom, and Amazon Q.
• Customer highlights included a North American financial institution expanding its commitment, a global semiconductor supplier scaling its partnership, a European telecom provider becoming a $1 million ARR customer, and a global media enterprise expanding its use of PagerDuty.
• Market momentum with PagerDuty On Tour 2025 events in key regions.
• Leadership team additions, including SVP of Product and Chief Customer Officer, and initiated search for Chief Revenue Officer.

For the fourth quarter, revenue was $121 million, up 9% year-over-year. Annual recurring revenue (ARR) exited Q4 at $494 million, up 9% year-over-year. International revenue increased 10% annually, contributing 28% of total revenue. Customers spending over $100,000 in annual recurring revenue grew to 849, up 6% from a year ago. Customers with annual recurring revenue over $1 million increased to 72, up 24% compared to Q4 of last year. Annual recurring revenue from customers using 2 or more paid products was 65%, up from 62% in FY '24. Annual recurring revenue contribution from Incident Management was 70% of the total compared to 73% in FY '24. The contribution from our $100,000 cohort was 71%, up from 70% in FY '24.

• Q1 fiscal 2026: Revenue expected in the range of $118 million to $120 million (6%-8% growth), net income per diluted share $0.18 to $0.19 (implies 15% operating margin).
• Full fiscal year 2026: Revenue guidance $500 million to $507 million (7%-8% growth), net income per diluted share $0.90 to $0.95 (implies 19%-20% operating margin).
• Long-term operating margin target increased from 20% to 30%.

• Known and unknown risks in forward-looking statements, including macroeconomic volatility, execution challenges in go-to-market transition, and potential impact of market changes on customer spending.

Q: Andrew Sherman asked about market changes and business impact, specifically any effect of the current macro environment on PagerDuty's business.

A: Jennifer Tejada responded that it's too soon to tell if the macro environment will affect customer spending, but customers focus on ROI, short payback, and efficiency. Revenue optimization is a growing theme, and focus remains on execution and strong account engagement.

Q: Koji Ikeda asked about competitive opportunities, specifically a legacy vendor potentially going end of life.

A: Jennifer Tejada stated PagerDuty has strong product differentiation and differentiation for large enterprise, with ability to scale reliably and securely, and strong retention levels.

Q: Sanjit Singh asked about ARR outside Incident Management and PD Advance's impact on deal sizes.

A: Jennifer Tejada said AIOps and automation are leading in the 30% ARR outside Incident Management, and PD Advance helps with responder efficiency, with consumption-based pricing complementing flexible models.

Q: Pinjalim Bora asked about sales execution issues and fixes for the new year.

A: Jennifer Tejada discussed adapting to changed customer buying behavior, shifting to top-down platform sales, and hiring reps with appropriate profiles. Howard Wilson added reconfiguring sales and marketing resources to optimize efficiency while evolving to enterprise sales motion.

Q: Nicholas Altmann asked about ARR mix and seasonality.

A: Jennifer Tejada and Howard Wilson discussed new use cases driving ARR growth outside Incident Management, and seasonality expected to ramp gradually through the year as sales team changes take effect.

Q: Jeff Van Rhee asked about pipeline and sales changes.

A: Howard Wilson mentioned strong pipeline entering the year, focusing on pipeline quality and velocity. Jennifer Tejada emphasized continuing to scale the right rep profile and account engagement across the sales organization to improve execution.