Digital operations management specialist PagerDuty (PD 0.58%) reported fiscal 2025 third-quarter earnings on Tuesday, Nov. 26, that topped estimates. The company's non-GAAP EPS of $0.25 exceeded both analyst projections of $0.17 and management's guidance of $0.16-$0.17. Revenue also outpaced expectations, totaling $118.9 million against the estimated $116 million, reflecting a 9.4% year-over-year increase.
Despite areas for potential improvement, such as an ongoing operating loss, the quarter was overall positive with advancements in enterprise market expansions and product innovation.
| Metric | Q3 FY2025 | Analysts' Estimate | Q3 FY2024 | Change (YOY) |
|---|---|---|---|---|
| Non-GAAP EPS | $0.25 | $0.17 | $0.20 | 25% |
| Revenue | $118.9 milliion | $116 milliion | $108.7 milliion | 9.4% |
| Non-GAAP operating income | $25 milliion | - | $15 milliion | 67% |
| Free cash flow | $19.4 milliion | - | $15.2 milliion | 28% |
Source: PagerDuty. Note: Analyst consensus estimates provided by FactSet. Management expectations based on management's guidance, as provided on Sept. 3, 2024. YOY = Year over year. GAAP = Generally accepted accounting principles.
PagerDuty's Core Business Overview
PagerDuty provides clients with a comprehensive digital operations management platform, empowering organizations to manage real-time incident responses and optimize workflows. Its robust suite of tools enables rapid detection, investigation, and resolution of operational issues.
Focusing on enterprise and mid-market clients, PagerDuty’s growth strategy revolves around expansion and new product developments, particularly integrating AI capabilities into its offerings. A pivotal element of its business strategy is its substantial investment in product innovation, ensuring the platform remains competitive and adaptable.
NYSE: PD
Key Data Points
Quarterly Highlights
PagerDuty's key achievements in Q3 include a 9.4% year-over-year revenue uplift to $118.9 million. This growth aligns with its strategy of expanding its enterprise footprint, leveraging effective land-and-expand sales models.
Operating income stood out with a non-GAAP figure of $25 million (21% of revenue) compared to $15 million in the prior year, driven by streamlined operations and effective cost management. While the company reported a $10.3 million operating loss, non-GAAP adjustments emphasized a healthier financial position.
Additional accolades include PagerDuty’s recognition as an AI Operations leader by GigaOm, highlighting its innovative AI-powered features. These developments solidified its standing in a competitive market, supported by ongoing investments in research and development.
Despite the positive financial results, challenges lingered. The decline in dollar-based net retention rate from 110% to 107% signals a potential challenge in upsell activities, but robust annual recurring revenue growth of 10% to $483 million provided a stabilizing counterbalance.
Looking Ahead: Future Outlook
Management has offered an optimistic outlook for PagerDuty’s fiscal trajectory, raising full-year non-GAAP EPS guidance to $0.78-$0.79, up from prior projections of $0.67-$0.72. For the fourth quarter, revenue is projected between $118.5 million and $120.5 million, which would represent a 7%-8% growth range, aligning with recent performance trends.
The focus remains on strengthening enterprise relationships and innovation initiatives. Investors should note the emphasis on integrating AI into operations, expanding international presence, and enhancing customer retention through improved service offerings. These strategic directions indicate PagerDuty’s commitment to sustaining growth and addressing key challenges in retention and operating efficiency.
