PagerDuty reported another profitable quarter in fiscal 2027 as annual recurring revenue crossed the $500 million level, free cash flow reached nearly $33 million, and the company extended its streak of positive GAAP earnings to five consecutive quarters.
Annual recurring revenue reached $501 million as of July 31, 2026, establishing a new threshold for the company’s recurring revenue base. Second-quarter revenue increased 0.8% year-over-year to $124.4 million and finished above the high end of PagerDuty’s guidance range.
While top-line growth remained modest, profitability and cash generation were considerably stronger indicators of the company’s operating progress.
PagerDuty generated $10.2 million of GAAP operating income, representing an 8.2% operating margin. Non-GAAP operating income reached $29.5 million, producing a non-GAAP operating margin of 23.7%.
Net income attributable to common stockholders was $4.7 million, or $0.06 per diluted share, marking PagerDuty’s fifth consecutive quarter of GAAP profitability.
Non-GAAP diluted earnings were $0.32 per share.
The strongest financial angle may be the company’s cash generation.
Net cash provided by operating activities reached $36.9 million, while free cash flow was $32.8 million. That translates into a free cash flow margin of roughly 26% of quarterly revenue, based on the reported figures.
PagerDuty ended July with $470 million of cash, cash equivalents and investments, giving the company substantial liquidity relative to its operating needs.
Management highlighted the combination of ARR exceeding $500 million and $33 million of quarterly free cash flow as evidence that its strategy is beginning to gain traction.
The customer base remains broad. PagerDuty had 15,506 paid customers at quarter-end, including 884 customers generating more than $100,000 of ARR.
Dollar-based net retention stood at 98%, indicating that spending across the existing customer base remained just below the prior-year level on a comparable basis.
PagerDuty also highlighted customer wins and expansions involving Anthropic, CoreWeave, Palo Alto Networks, Delivery Hero, Kawasaki Heavy Industries and Banco Pichincha.
Those relationships are particularly relevant as PagerDuty attempts to reposition its platform around AI-first operations rather than traditional incident-response software alone.
During the quarter, PagerDuty made major upgrades to its autonomous site reliability engineering agent, expanded integration across the incident-management lifecycle and enhanced its agentic offering designed to simplify on-call shift management.
The company argues that AI is changing both how software is created and how software infrastructure needs to be monitored and operated.
That transition could expand PagerDuty’s role from alerting and incident management toward increasingly autonomous detection, diagnosis and remediation.
PagerDuty’s platform includes more than 750 integrations, and the company says it is used by approximately two-thirds of the Fortune 100 and nearly half of the Fortune 500.
Management also recently underwent significant changes. John DiLullo was appointed chief executive officer, Eric Prengel was named chief financial officer following the retirement of Howard Wilson, and Alex Shootman joined the board.
For the fiscal third quarter, PagerDuty expects revenue of $123 million to $125 million, a non-GAAP operating margin of 26.5% to 27.5%, and non-GAAP diluted EPS of $0.34 to $0.36.
For the full fiscal year, the company expects revenue of $491.5 million to $496.5 million, a non-GAAP operating margin of 25% to 26%, and non-GAAP diluted EPS of $1.33 to $1.37.
The midpoint of third-quarter non-GAAP operating-margin guidance is 27%, which would be approximately 330 basis points above the 23.7% margin produced in Q2.
That potential expansion illustrates the shift occurring beneath PagerDuty’s relatively slow revenue growth.
The company is generating meaningful cash, sustaining GAAP profitability and improving its non-GAAP earnings profile while building AI-oriented products intended to increase the strategic importance of its operations platform.
Crossing $500 million of ARR provides an additional milestone. The more important question for the next phase will be whether PagerDuty can translate its stronger profitability and AI product development into a renewed acceleration in recurring revenue growth.
KEY QUOTES:
“We delivered revenue above the high end of our guidance range, crossed $500 million in ARR, and generated $33 million in free cash flow this quarter, providing encouraging signals that our strategy is gaining traction.”
“Just as importantly, the underlying fundamentals are strengthening. Non-GAAP operating income also came in ahead of expectations and we enjoyed our fifth consecutive quarter of GAAP profitability. AI is transforming how software is built and operated, and PagerDuty is uniquely positioned to benefit from that shift.”
John DiLullo, Chief Executive Officer of PagerDuty
