PagerDuty, Inc. (PD) delivered one of those classic "good news, bad news" quarterly reports that Wall Street absolutely hates. The company beat on earnings, missed on revenue, and then issued guidance that had analysts reaching for the delete key on their financial models.
The operational resilience software company reported third-quarter earnings of 33 cents per share on Tuesday, comfortably beating the analyst consensus estimate of 25 cents. That's the kind of number that usually sends stocks higher. But then came the revenue figure: $124.545 million, missing the $125.034 million estimate. Not a huge miss, but enough to raise eyebrows.
The real problem? Fourth-quarter guidance. PagerDuty said it expects adjusted earnings of 24 cents to 25 cents per share, roughly in line with the 24-cent consensus. But revenue guidance of $122 million to $124 million came in well below the $127.295 million Wall Street was expecting. That's the kind of gap that makes investors nervous about demand trends.
Management Strikes an Optimistic Tone
Despite the weak guidance, CEO Jennifer Tejada emphasized the company's strengths. "PagerDuty delivered $125 million in revenue and our second consecutive quarter of GAAP profitability, reflecting disciplined execution and continued margin expansion," she said. Tejada highlighted that 34,000 paid and free customers rely on PagerDuty as enterprises scale AI operations, and noted the company's "product leadership, a strong balance sheet, and robust free cash flow" while navigating a pricing and go-to-market transition.
Investors weren't buying it. PagerDuty shares plummeted 25.5% to $11.31 on Wednesday, erasing months of gains.
Analysts Lower Their Targets
Following the earnings announcement, three analysts adjusted their outlook on the stock while maintaining their overall ratings:
- RBC Capital analyst Matthew Hedberg kept his Outperform rating but lowered his price target from $18 to $17.
- Morgan Stanley analyst Sanjit Singh maintained an Equal-Weight rating and cut his target from $17 to $16.
- TD Cowen analyst Andrew Sherman stuck with his Buy rating but slashed his price target from $22 to $20.
The pattern here is telling: analysts still see value in the business model, but they're recalibrating expectations based on near-term headwinds. When every analyst lowers targets on the same day, it's usually because the story just got more complicated, even if the long-term thesis remains intact.
