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IT incident response platform PagerDuty (NYSE:PD) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 7.8% year on year to $119.8 million. The company expects next quarter’s revenue to be around $123.5 million, close to analysts’ estimates. Its non-GAAP profit of $0.24 per share was 28.3% above analysts’ consensus estimates.

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PagerDuty (PD) Q1 CY2025 Highlights:

• Revenue: $119.8 million vs analyst estimates of $119.2 million (7.8% year-on-year growth, in line)

• Adjusted EPS: $0.24 vs analyst estimates of $0.19 (28.3% beat)

• Adjusted Operating Income: $24.36 million vs analyst estimates of $17.95 million (20.3% margin, 35.7% beat)

• The company dropped its revenue guidance for the full year to $496 million at the midpoint from $503.5 million, a 1.5% decrease

• Management raised its full-year Adjusted EPS guidance to $0.98 at the midpoint, a 5.4% increase

• Operating Margin: -8.6%, up from -19.5% in the same quarter last year

• Free Cash Flow Margin: 24.2%, similar to the previous quarter

• Customers: 15,247, up from 15,114 in the previous quarter

• Billings: $113.4 million at quarter end, up 6.4% year on year

• Market Capitalization: $1.47 billion

Company Overview

Started by three former Amazon engineers, PagerDuty (NYSE:PD) is a software-as-a-service platform that helps companies respond to IT incidents fast and make sure that any downtime is minimized.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, PagerDuty grew its sales at a 16.2% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our standards for the software sector, which enjoys a number of secular tailwinds.

This quarter, PagerDuty grew its revenue by 7.8% year on year, and its $119.8 million of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 6.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 8.5% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and indicates its products and services will face some demand challenges.

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