PagerDuty Inc.’s stock was headed higher in extended trading after the application observability firm reported fourth-quarter earnings results that surpassed analysts’ expectations today.

The company reported earnings before certain costs such as stock compensation of 22 cents per share, beating Wall Street’s target of 16 cents. Revenue for the quarter rose 9% from a year earlier, to $121.4 million, surpassing the Street’s estimate of $119.53 million.

All told, the company delivered a net loss of $8.9 million, but though it’s still unprofitable, it’s making encouraging progress. One year earlier, it posted a much wider net loss of $28.8 million.

Investors seemed pleased enough, as PagerDuty’s stock gained more than 5% after-hours, clawing back earlier losses during the regular trading session.

PagerDuty is a leader in the application observability market. It sells a cloud monitoring platform that enterprises use to notify their developers and engineers of technical issues with their apps and the infrastructure that supports them. Not only that, it provides tools to help those users do quick troubleshooting of any problems that occur, allowing customers to avoid too much application downtime.

Chairperson and Chief Executive Jennifer Tejada (pictured) said the company’s strong performance was the result of its relentless focus on operational excellence and efficient growth.

“Customers continue to prioritize digital operations as mission-critical to their business,” she added.

The company had more good numbers to share, also reporting annual recurring revenue of $494 million, up 9% from a year earlier. Meanwhile, its number of customers that generate at least $100,000 in annual revenue ticked up by 6%, to 849. Its number of total paying customers also increased, rising to 15,114 from 15,039 in the year-ago quarter.

Full-year revenue totaled $467.5 million, up 9% from the previous year.

The results were good enough that investors were even willing to overlook the company’s guidance, which was somewhat mixed. For the quarter in progress, PagerDuty is looking for earnings of 18 to 19 cents per share on revenue of $118 million to $120 million. Wall Street is eyeing 19 cents in earnings on $121.2 million in sales.

For the full year fiscal 2026, PagerDuty sees total revenue of between $500 million and $507 million, trailing the Street’s estimate of $510.6 million.

The somewhat disappointing guidance might be due to PagerDuty’s struggles to attract new customers, said Andy Thurai, vice president and principal analyst of Constellation Research Inc. He said the company pulled off a big surprise by delivering positive earnings growth of 9%, when many analysts had expected a decline. But much of that growth can be attributed to recent pricing changes, which have upset many of its existing customers, he pointed out.

“Given that the net dollar retention rate is 106% and the overall revenue growth is just under 9%, that suggests any growth derived from new customers is not very high,” Thurai said. “There is a lot of competition in the incident intelligence market segment, both from new vendors and observability firms expanding into the space. Given its low valuation of $1.5 billion, PagerDuty could well end up being an acquisition target for someone who might be tempted by its huge customer base and decent revenue.”

To try and appease investors, PagerDuty announced a decision to set aside $150 million for a new stock buyback program, which should help support its share price over the longer term.

“This second share repurchase program underscores our ongoing share count growth while reflecting our board and management team’s continued confidence in our long-term strategy and market opportunity,” said Chief Financial Officer Howard Wilson.

Photo: SiliconANGLE