PagerDuty, Inc. (NYSE: PD) reported its first quarter fiscal 2026 results today, showing steady growth amid transitional dynamics in its go-to-market strategy. For the quarter ended April 30, 2025, the company achieved a revenue of $120 million, reflecting an 8% increase compared to the same period last year. The annual recurring revenue (ARR) rose to $496 million, marking a 7% year-over-year growth.

The company reported a non-GAAP operating income of $24 million, translating to a non-GAAP operating margin of 20%, surpassing guidance by 500 basis points. However, PagerDuty also experienced a GAAP loss from operations amounting to $10 million. The gross margin was recorded at 86%, aligning with the upper end of the company’s target range of 84% to 86%.

Customer metrics showed notable developments. Total paid customers increased to 15,247, reflecting a gain of 127 new customers, the highest quarterly customer acquisition in the last eight quarters. However, the dollar-based net retention rate declined to 104%, influenced by higher-than-anticipated customer downgrades in the enterprise segment.

In terms of financial guidance, PagerDuty expects second quarter revenue within the range of $122.5 million to $124.5 million, which represents a growth rate of 6% to 7%. For the full fiscal year 2026, the company has adjusted its revenue outlook to between $493 million and $499 million, lower than the previous guidance of $500 million to $507 million, indicating a growth rate of 5% to 7%. Net income per diluted share is expected to be in the range of $0.19 to $0.20 for the next quarter and $0.95 to $1.00 for the full year, improving from prior estimates.

Cash flow performance remained robust, with cash provided by operating activities reaching $31 million, equating to 26% of total revenue, while free cash flow stood at $29 million, or 24% of revenue. The balance sheet reflects a stable position, ending the quarter with $597 million in cash, cash equivalents, and investments. Remaining performance obligations amounted to approximately $430 million, with about 70% expected to be recognized over the next year.

Looking ahead, PagerDuty is focusing on improving execution and sales efficiency as a critical part of its strategy to recapture growth and enhance customer retention. The company aims to streamline its sales and marketing efforts while refining its enterprise engagement model, signifying an ongoing commitment to bolster its operations moving forward.