Overview of PagerDuty’s Financial Performance

PagerDuty is a leading provider of a digital operations management platform that helps organizations manage urgent and mission-critical work. The company has seen strong growth since its founding in 2009, expanding from a single product focused on on-call management for developers to a multi-product platform that serves a wide range of use cases across an organization.

In the fiscal year ended January 31, 2025, PagerDuty generated revenue of $467.5 million, up 9% from the prior year. This growth was driven primarily by expansion within the company’s existing customer base, as customers added more users and purchased additional products and services. PagerDuty ended the year with 15,114 paying customers globally, ranging from startups to large enterprises across a variety of industries.

Profitability and Margins

Despite the revenue growth, PagerDuty reported a net loss of $43.5 million for the fiscal year. However, the company’s gross margin improved to 83.0%, up from 81.9% in the prior year. This strong gross margin provides PagerDuty with the flexibility to invest in product development and go-to-market initiatives while maintaining operating leverage on its path to profitability.

The company’s operating expenses totaled $447.6 million, down slightly from the prior year. Research and development expenses increased 1.2% to $141.5 million as PagerDuty continued to invest in enhancing its platform and developing new products and features. Sales and marketing expenses rose 2.6% to $201.8 million as the company focused on expanding its enterprise customer base. General and administrative expenses decreased 7.4% to $104.3 million, driven by a reduction in real estate impairment charges compared to the prior year.

Liquidity and Capital Resources

As of January 31, 2025, PagerDuty had $570.8 million in cash, cash equivalents, and investments, providing ample liquidity to fund its operations and growth initiatives. The company generated $117.9 million in cash from operating activities during the fiscal year, up significantly from $72.0 million in the prior year.

PagerDuty has also taken steps to strengthen its capital structure, including the issuance of $402.5 million in 1.50% Convertible Senior Notes due 2028 in October 2023. The company used a portion of the proceeds from the notes to partially extinguish its existing 1.25% Convertible Senior Notes due 2025.

In addition, PagerDuty returned $100.1 million to shareholders through a share repurchase program during the fiscal year. The company has authorized a new $150 million share repurchase program that will run through March 2027, demonstrating its confidence in the long-term growth potential of the business.

Key Drivers of Performance

PagerDuty’s financial performance is driven by several key factors, including its ability to attract new customers, expand within its existing customer base, sustain product innovation, and continue investing in growth.

Attracting new customers, particularly in the enterprise segment, is crucial for PagerDuty’s continued growth. The company has focused its go-to-market efforts on serving larger organizations, with nearly half of the Fortune 500 and two-thirds of the Fortune 100 now relying on PagerDuty’s platform.

Expanding within the existing customer base is also a key priority, as the majority of PagerDuty’s revenue comes from its current customers. The company’s land-and-expand business model has led to a dollar-based net retention rate of 106% for the fiscal year, indicating that customers are increasing their spending on PagerDuty’s products and services over time.

Sustaining product innovation and technology leadership is critical for PagerDuty to maintain its competitive advantage. The company has invested heavily in research and development to enhance its platform and develop new products, features, and functionality that address the evolving needs of its customers.

Finally, PagerDuty plans to continue investing in its business to capitalize on its market opportunity. This includes growing its sales team, increasing marketing efforts to drive brand awareness, and expanding its research and development capabilities. While these investments may impact near-term profitability, the company believes they will contribute to its long-term growth.

Key Business Metrics

PagerDuty tracks several key business metrics to evaluate its performance, including the number of customers, the number of customers with annual recurring revenue (ARR) greater than $100,000, and its dollar-based net retention rate.

As of January 31, 2025, PagerDuty had 15,114 paying customers, up from 15,039 in the prior year. The number of customers with ARR greater than $100,000 increased to 849, compared to 804 in the prior year, reflecting the company’s success in serving larger enterprises.

PagerDuty’s dollar-based net retention rate was 106% for the fiscal year, indicating that existing customers are increasing their spending on the company’s platform over time. This metric highlights the loyalty of PagerDuty’s customer base and the effectiveness of its land-and-expand strategy.

Outlook and Risks

Looking ahead, PagerDuty faces both opportunities and challenges. The company operates in a large and growing market for digital operations management, with a significant opportunity to continue expanding its customer base and deepening its relationships with existing customers.

However, PagerDuty’s financial performance may be subject to the effects of macroeconomic conditions, such as global inflation, heightened interest rates, and economic uncertainty. The company will need to closely monitor these factors and their potential impact on its business.

Additionally, PagerDuty’s success is dependent on its ability to sustain product innovation and technology leadership, as well as its continued investment in growth initiatives. Failure to execute on these priorities could impact the company’s competitive position and financial performance.

Overall, PagerDuty’s financial results for the fiscal year ended January 31, 2025 demonstrate the company’s strong market position, loyal customer base, and operational efficiency. While the company faces some near-term challenges, its long-term growth prospects remain promising as it continues to invest in its platform and go-to-market capabilities.