What Happened?
Shares of IT incident response platform PagerDuty (NYSE:PD) jumped 18.8% in the afternoon session after the company put up impressive fourth quarter results: PagerDuty's strong growth in customers allowed it to beat analysts' revenue, EPS, and adjusted operating income expectations.
The only soft spot was revenue guidance for the year (2025), which came in just a bit below expectations. PagerDuty sees revenue growing 7%-8% for the full year, a slight slowdown from 2024's 8.5% gain. Still, the company's ability to grow sales helped push its non-GAAP operating margin up during the quarter, nearly doubling from last year. This improvement contributed to the earnings beat. And given its strong full EPS guidance, it's clear the company is staying focused on profitability. Overall, this was a solid quarter.
The shares closed the day at $18.40, up 18.2% from previous close.
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What The Market Is Telling Us
PagerDuty’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. Moves this big are rare for PagerDuty and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 6 months ago when the stock dropped 17.3% on the news that the company reported weak second-quarter earnings results. PD dropped its full-year revenue guidance, which is never a good sign. In addition, revenue missed by a narrow margin during the quarter, indicating that sales might be under pressure.
During the earnings call, management called out challenges in the SMB segment, which led to high churn rates and downgrades. As a result, the sales strategy increasingly focused on large enterprise deals that involved multiple products and spanned a longer duration. On the other hand, EPS came in well ahead of consensus estimates. Overall, this was a mediocre quarter.
PagerDuty is up 2.1% since the beginning of the year, but at $18.38 per share, it is still trading 20.7% below its 52-week high of $23.17 from April 2024. Investors who bought $1,000 worth of PagerDuty’s shares 5 years ago would now be looking at an investment worth $1,428.
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