Why PagerDuty Just Popped 30% Today
Key Points
PagerDuty delivered a beat and raise quarter.
However, the company's growth prospects don't look particularly great.
That being said, management was able to boost margins and buy back a lot of stock last quarter at a very cheap price.
- 10 stocks we like better than PagerDuty ›
Shares of enterprise software company PagerDuty (NYSE: PD) rallied on Friday, jumping 33.8% as of 3:56 p.m. EDT.
PagerDuty runs a platform that collects data and signals from any software-enabled device, then predicts problems or remediates them as they occur. While this service could benefit from generative AI, the stock had been caught up in the "SaaS-pocalypse" this year, as investors feared AI upstarts disrupting established SaaS vendors.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
However, last night's first-quarter earnings call and guidance seemed to put some concerns to rest. Meanwhile, PagerDuty benefited from a relief rally across the software sector today.
Paging a big beat
In the first quarter, PagerDuty saw revenue grow 1% to $121 million, while adjusted (non-GAAP) earnings per share grew 33.3% to $0.32. Both figures handily surpassed expectations. For the current quarter, management forecasts slight quarter-over-quarter revenue growth of $122 million to $124 million, with adjusted EPS of $0.29 to $0.31.
While 1% revenue growth doesn't exactly jump off the page, PagerDuty did an excellent job of expanding operating and free cash flow margins. Adjusted operating margins increased 4.3 percentage points, from 20.3% to 24.6%, while free cash flow margins expanded by nearly 10 percentage points, from 24.2% to 34.1%.
With those increased profits, PagerDuty repurchased a boatload of its own stock in the quarter to the tune of $65.5 million. That brought the average share count down by a whopping 15% relative to the year-ago quarter, while still leaving PagerDuty with a strong balance sheet, with cash and equivalents of $440 million against $396 million of convertible notes.
Image source: Getty Images.
Pagerduty still doesn't look expensive
For the year ahead, PagerDuty expects $488.5 million to $496.5 million in revenue and adjusted EPS of just $1.27 to $1.32. Even after today's jump, the stock is only trading around around 7.5 times that forward adjusted EPS guidance.
On the one hand, there is a good reason PagerDuty is so cheap: its revenue growth rate has basically slowed to a halt, and even this year's revenue estimates are flat with the prior year. So, there are legitimate questions about the competitiveness of its solutions.
Yet with the stock as cheap as it was heading into earnings, it's no surprise that even a slight beat and better cash flow generation was enough to catapult shares higher.
Should you buy stock in PagerDuty right now?
Before you buy stock in PagerDuty, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and PagerDuty wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $465,733!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,313,467!*
Now, it’s worth noting Stock Advisor’s total average return is 985% — a market-crushing outperformance compared to 211% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of May 29, 2026.
Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Recommended Articles
