SAN FRANCISCO, August 28, 2026, 13:49 EDT – PagerDuty (PD) shares rose 9.9% after the company said a 15% cut to its workforce would boost its margin outlook, even as sales stayed flat.
- Shares of PagerDuty increased by 9.9% to $13.88 as of 13:35 EDT.
- Revenue for the quarter rose by 0.8%, with the non-GAAP operating margin coming in at 23.7%.
- The company plans to cut its workforce by approximately 15%.
- Free cash flow was $32.8 million, representing 26% of revenue.
PagerDuty stock rose on Friday after the company provided a stronger margin forecast. The surge increased its market capitalisation by about $99 million.
The contrast is pronounced. Revenue saw minimal growth, as the company moved to cut approximately 15% of its current positions.
PagerDuty Inc. (NYSE: PD) changed hands at $13.88 as of 13:35 EDT. Trading volume totaled 2.09 million shares. Shares advanced 9.9% WSJ mover data.
Revenue for the fiscal second quarter increased by 0.8% to $124.4 million. Annual recurring revenue totaled $501 million. Dollar-based net retention stood at 98%, indicating that existing customers spent a bit less compared to the previous year.
Profitability saw a quicker improvement. GAAP operating income rose to $10.2 million compared with $3.6 million. Non-GAAP operating margin widened to 23.7% quarterly results.
| Metric | Q2 FY2027 | Investor read-through |
|---|---|---|
| Revenue | $124.4 million, +0.8% | Growth was almost unchanged |
| ARR | $501 million | Annual recurring revenue surpassed $500 million |
| Non-GAAP operating margin | 23.7% | Operating efficiency increased faster than revenue |
| Free cash flow | $32.8 million | Equivalent to 26% of revenue for the quarter |
| Headcount action | About 15% reduction | Improves margins, introduces operational risk |
Management expects a non-GAAP operating margin of 26.5% to 27.5% for the next quarter. For the full year, the outlook is 25% to 26%. The midpoint stands roughly two percentage points higher than the most recent quarter.
The upgrade comes with a price tag. PagerDuty anticipates restructuring expenses between $5.5 million and $7.5 million, with the majority projected for the fiscal third quarter Form 8-K.
Strong cash flow offers flexibility for restructuring. Free cash flow totaled $32.8 million. As of July 31, cash and investments stood at $470 million.
The customer base demonstrated slight stability. PagerDuty reported 15,506 paid customers. The number of customers with annual spending exceeding $100,000 rose by 24 quarter-over-quarter, reaching 884.
Canaccord Genuity increased its price target to $15, up from $10, while maintaining its Buy recommendation. This new target represented an upside of roughly 8% compared to Friday’s last quoted price analyst action.
The company projects subdued revenue in the near term. Third-quarter guidance is set between $123 million and $125 million, with the midpoint coming in just under the most recent quarter’s figure.
Significant risks persist. Workforce cuts may impact both product development and customer service. Any retention rate under 100% means margin performance still relies on managing expenses.
The rally reflects expectations for a more streamlined operating model, but not a return to growth. PagerDuty now needs to demonstrate that it can achieve improved margins alongside stronger retention and steady revenue.
