PagerDuty’s second quarter results reflected ongoing operational discipline, but the market reacted negatively due to continued headwinds in annual recurring revenue and subdued billings growth. Management cited elevated customer seat optimization and cost containment as major factors, resulting in increased churn and downgrades. CEO Jennifer Tejada pointed to a sequential uptick in new and expansion bookings and strong international performance, but acknowledged that North American sales execution remained inconsistent, prompting leadership changes and organizational restructuring in that region.
Is now the time to buy PD? Find out in our full research report (it’s free).
PagerDuty (PD) Q2 CY2025 Highlights:
- Revenue: $123.4 million vs analyst estimates of $123.7 million (6.4% year-on-year growth, in line)
- Adjusted EPS: $0.30 vs analyst estimates of $0.20 (49.3% beat)
- Adjusted Operating Income: $31.41 million vs analyst estimates of $20.81 million (25.4% margin, 50.9% beat)
- The company reconfirmed its revenue guidance for the full year of $495 million at the midpoint
- Management raised its full-year Adjusted EPS guidance to $1.02 at the midpoint, a 4.6% increase
- Operating Margin: 2.9%, up from -13.8% in the same quarter last year
- Customers: 15,322, up from 15,247 in the previous quarter
- Annual Recurring Revenue: $499 million vs analyst estimates of $505.4 million (5.3% year-on-year growth, 1.3% miss)
- Billings: $113.6 million at quarter end, up 3.1% year on year
- Market Capitalization: $1.55 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From PagerDuty’s Q2 Earnings Call
- Sanjit Singh (Morgan Stanley) asked why growth in PagerDuty’s IT operations segment is slower than adjacent markets. CEO Jennifer Tejada explained that seat-based optimization and customer cost controls weighed on the quarter, but new logo growth and usage-based adoption are improving.
- Koji Ikeda (Bank of America) inquired about the quality and composition of ARR and billings stabilization. Tejada noted a shift toward large, profitable enterprise customers and rapid expansion in AI-native segments, while CFO Howard Wilson highlighted that over 75% of ARR now comes from enterprise accounts and that multi-product adoption is rising.
- Jacob Roberge (William Blair) probed the planned transition to usage-based pricing and customer response. Tejada said customer feedback has been positive, with strong usage-based product growth, but acknowledged the shift will be gradual due to multiyear contracts.
- Andrew Sherman (TD Cowen) questioned the timeline and impact of usage-based adoption on growth. Tejada clarified that while some benefits will appear in the second half, broader growth acceleration will take longer, driven by enterprise sales tenure and AI-native customer traction.
- Mike Richards (RBC, for Matt Hedberg) sought details on future pricing models for core incident management. Tejada indicated a hybrid approach of platform- and usage-based pricing is likely, with a focus on predictability and customer flexibility as the company iterates its pricing strategy.
Catalysts in Upcoming Quarters
In the coming quarters, our team will closely monitor (1) the pace of adoption and monetization of PagerDuty’s new AI and automation products, (2) the effectiveness of the sales organization’s transformation—especially in North America, and (3) the progress of the shift to usage-based pricing and its impact on retention and revenue growth. Execution on expanding the enterprise customer base and successfully navigating large renewals will also be key indicators of sustained momentum.
PagerDuty currently trades at $16.93, up from $15.62 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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