Shares in PagerDuty Inc. fell more than 3% in late trading today after the application observability platform provider fell short of expectations on revenue in its fiscal 2026 second quarter and similarly fell short on its full-year outlook.

For the quarter ended July 31, PagerDuty reported adjusted earnings per share of 30 cents, up from 21 cents per share in the same quarter of the previous fiscal year, on revenue of $123.4 million, up 6% year-over-year. The earnings per share were ahead of the 20 cents expected by analysts, while revenue fell just short of an expected $123.7 million.

As of the end of the quarter, PageDuty had annual recurring revenue of $499 million, up 5% year-over-year, and a dollar-based net retention rate of 102%. The company had 15,322 customers as of July 31, up from 15,044 a year prior and customers with an annual recurring revenue of $100,000 or more were 868, up from 820.

PagerDuty’s remaining performance obligations were sitting at $425 million as of July 31, with the company expecting to recognize revenue of approximately $295 million, or 69%, over the next 12 months.

Business highlights in the quarter included the launch of an artificial intelligence-powered, chat-first integration between PagerDuty Advance and Amazon Q Business for AI-powered, chat-first integration.

The company also introduced new automation and orchestration capabilities, including the general availability of context variables for incident custom fields. The update allows teams to reference and leverage incident data more effectively within Automation Actions, streamlining workflows and reducing manual intervention.

PagerDuty further broadened its service management functionality with the general availability of service reassignment across multiple environments such as Slack, Microsoft Teams, Operations Console and mobile.

“PagerDuty achieved important milestones in Q2, including GAAP profitability, solid growth across international markets, and paid customer additions that have already outpaced last year’s full year performance,” Chair and Chief Executive Jennifer Tejada said in the company’s earnings release. “As AI drives both opportunity but also unprecedented enterprise complexity and variability, PagerDuty is uniquely positioned at the center of the emerging AI ecosystem as the preferred real-time operations platform for enterprise and AI-native companies and innovators.”

For its fiscal third quarter, PagerDuty expects adjusted earnings per share of 24 to 25 cents on revenue of $124 million to $126 million. For the full year, the company expects adjusted earnings of $1 to $1.04 on revenue of $493 million to $497 million. The full year revenue outlook was down from a previous guidance of $500 million to $507 million and was below the $503.3 million expected by analysts.

Image: PagerDuty