PD 10-K & 10-Q changes, risk factors and insider trading

•We derive a significant majority of our revenue from a single product.

•If our information technology systems or those of third parties with whom we work or our data,data are or were compromised, we could experience adverse consequences resulting from such compromise, including, but not limited to, significant costs, litigation and regulatory investigations and actions, harm to our reputation, loss of revenue or profits, loss of customers, and other adverse consequences.

Our revenue was $467.5$492.5 million, $430.7$467.5 million, and $370.8$430.7 million for the fiscal years ended January 31, 2026, 2025, 2024, and 2023,2024, respectively. Although we have historically experienced significant growth in our revenue, even if our revenue continues to increase, our revenue growth rate has declined significantly in recent periods and may decline in the future as a result of a variety of factors, including the maturation of our business. We may not be able to sustain prior growth rates or reaccelerate growth in the future. Overall growth of our revenue depends on a number of factors, including our ability to:

•successfully identify and acquire or invest in businesses, products, or technologies that we believe could complement or expand our platform; and

We may not successfully accomplish any of these objectives, which makes it difficult for us to forecast our future operating results. If the assumptions that we use to plan our business are incorrect or change in reaction to market changes, or if we are unable to maintain consistentreaccelerate revenue or revenue growth, our stock price could be volatile, and it may be difficult to achievesustain andor maintainincrease profitability. You should not rely on our revenue for any prior quarterly or annual periods as any indication of our future revenue or revenue growth.

•general administration, including legal, accounting, and compliance expenses associated with operating as a public company.

These investments may not result in increased revenue growth in our business.revenue. If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position, and results of operations will be harmed, and we may not be able to achievesustain or maintainincrease profitability over the long term. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and other unknown factors that may result in losses in future periods. If our revenue growth does not meet our expectations in future periods, our financial performance may be harmed, and we may not achievesustain or maintainincrease profitability in the future.

If we are unable to attract new customers, our revenue growth will be adversely affected.

To increase our revenue, we must continue to attract new customers, convert free customers to paying customers and increase sales to existing customers. Our ability to sell subscriptions for our products has in the past been and could in the future be impaired due to competitors introducing lower costlower-cost or differentiated products or services that are perceived to compete with our platform,platform and could also be impaired by market segment maturation and evolution of product and service offerings. Similarly, our subscription sales have in the past been and may in the future be adversely affected by customers or users within these organizations perceiving our products as having premium features that are not essential to their businesses, determining that features incorporated into competitive products reduce the need for our products or preferring to purchase competing products that are bundled with solutions offered by other companies, including our partners, that operate in adjacent market segments. Further, the current macroeconomic environment has made it more difficult to attract new customers and expand with existing customers, as we have seen customers display a higher level of scrutiny with their enterprise software spending and require additional sales support. As a result of these and other factors, we may be unable to attract new customers, which could have an adverse effect on our business, revenue, gross margins, and other operating results, and accordingly, on the trading price of our common stock.

Our previous and any future restructuring efforts may not result in the anticipated savings or operational efficiencies we expected, could result in greater total costs and expenses than we estimated, and could disrupt our business.

If we are unable to retain our current customers or sell additional functionality and services to them, our revenue growth will be adversely affected.

To increase our revenue, in addition to selling to new customers, we must retain existing customers and convince them to expand their use of our platform across their organizations — in terms of increasing the number of users, subscribing for additional functionality, and broadening the user base across multiple departments and business units. Our ability to retain our customers and increase the amount of their subscriptions could be impaired for a variety of reasons, including customer reaction to changes in the pricing of our products or the other risks described hereinherein, such as competitive factors, the macroeconomic environment.environment, and advances in artificial intelligence that may reduce demand for our solutions or require us to adapt our platform. As a result, we may be unable to renew our subscriptions with existing customers or attract new business from existing customers, which would have an adverse effect on our business, revenue, gross margins, and other operating results, and accordingly, the trading price of our common stock.

Our ability to sell additional functionality and services to our existing customers may require more sophisticated and costly sales efforts, especially as we target larger enterprises and more senior management who make these purchasing decisions. Similarly, the rate at which our customers purchase additional products and services from us depends on a number of factors, including general economic conditions and the pricing of the additional product functionality and services. In addition, we are evolving our go-to-market strategy in ways that may increase execution risk, including through increased adoption of usage-based pricing models and multiyear contract structures for certain products and customers. These changes may increase sales cycle complexity, affect the timing and predictability of revenue and billings, require additional sales enablement and customer education, and may not achieve the intended commercial or financial outcomes. If customers are slower than expected to adopt these models, if we misprice our offerings, or if these changes result in increased customer friction or reduced expansion, our ability to sell additional functionality and services, as well as our revenue, margins, and operating results, could be adversely affected. If our efforts to sell additional functionality and services to our customers are not successful, our business and growth prospects would suffer.

Our customers have no obligation to renew their subscriptions with us after the expiration of their subscription period. Our subscriptions with our customers are typically one year in duration but can range from monthly to multi-year. In order for us to maintain or improve our results of operations, it is important that our customers renew their subscriptions with us on the same or more favorable terms. We cannot accurately predict renewal or expansion rates given the diversity of our customer base, in terms of size, industry, and geography. Our renewal and expansion rates may decline or fluctuate as a result of a number of factors, including customer spending levels, customer dissatisfaction with our products and services, decreases in the number of users at our customers, changes in the type and size of our customers, pricing changes, competitive conditions, the acquisition of our customers by other companies, and general economic conditions. If our customers do not renew their subscriptions with us, or if they reduce their subscription amounts at the time of renewal, our revenue and other results of operations will decline and our business will suffer. In addition, we have recently experienced increased pressure from reductions in the number of seats and licensed users at certain customers, particularly among larger enterprise customers, as a result of organizational restructurings, cost-reduction initiatives, and changes in customer operating models. While the number of customers reducing usage may be limited, the magnitude of these reductions can be significant and may have a disproportionate impact on our revenue, dollar-based net retention rate, and operating results. We have, at times, underestimated the timing and extent of these reductions, and those dynamics could continue to adversely affect our ability to accurately forecast revenue, achieve expected growth rates, or meet financial guidance. If these trends persist or intensify, our business, results of operations, and financial condition could be materially and adversely affected. If our renewal or expansion rates fall significantly below the expectations of the public market, securities analysts, or investors, the trading price of our common stock would likely decline.

We derive a significant majority of our revenue from a single product.

Sales of subscriptions to our incident management offerings account for a significant majority of our revenue. We expect these subscriptions to continue to account for a large portion of our revenue for the foreseeable future. As a result, our operating results could suffer due to:

•the failure of our broader platform and other productsproducts, including newer AI-focused and agentic operations offerings, to achieve market acceptance;

Our platform and related products,,products, including AIOps and Automation, are designed to provide quick, reliable alerts, to communicate information frequently during critical business events,events (such as information relevant to mitigating the damaging effects of system problems,problems), and to automatically remediate systemssystem problems. Due to the nature of suchour products, we are potentially exposed to greater risks of liability for solution or system failures than may be inherent in other businesses. Although substantially all of our subscription agreements contain provisions limiting our liability to our customers, we cannot assure youguarantee that these limitations will be enforced nor that the costs of any litigation related to actual or alleged omissions or failures would not have a material adverse effect on us even if we prevail.

Further, certain of our insurance policies and the laws of some states may limit or prohibit insurance coverage for punitive or certain other types of damages or liability arising from gross negligence, and we cannot assure youguarantee that we are adequately insured against the risks that we face.

•fluctuations in demand for or pricing of our platform due to customers reducing their expenditures, whether as a cost-cutting measure or as a result of their insolvency or bankruptcy, and whether due to inflationary pressures, rising global interest rates, bank failures, or other reasons;

We recognize revenue for our cloud-hosted software subscription fees over the term of our subscription agreement,agreement. and ourOur subscriptions are typically one year in duration but can range from monthly to multi-year. As a result, much of our revenue is generated from cloud-hosted software subscriptions entered into during previous periods. Consequently, a decline in demand for our platform or a decline in new or renewed subscriptions in any one quarter may not significantly reduce our revenue for that quarter but could negatively affect our revenue in future quarters. Our revenue recognition model also makes it difficult for us to rapidly increase our revenue through the sale of additional cloud-hosted software subscriptions in any period, as revenue from customers is recognized over the applicable term of their cloud-hosted subscriptions.

Our ability to increase our customer base and achieve broader market acceptance of our digital operations platform will depend to a significant extent on our ability to expand our marketing and sales organizations. We plan to continue expanding our direct sales force and partners, both domestically and internationally. We also plan to continue dedicating significant resources to sales and marketing programs, including inbound marketing and online advertising. The effectiveness of these programs has varied over time and may vary in the future due to competition for key search terms, changes in search engine use, changes in the search algorithms used by major search enginesengines, and the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“U.K. GDPR”) and other similar data privacy initiatives. All of these efforts have required and will require us to continue to invest significant financial and other resources. Our business and operating results will be harmed if our sales and marketing efforts do not generate significant increases in revenue. We may not achieve anticipated revenue growth from expanding our sales force if we are unable to hire, develop, integrate, and retain talented and effective sales personnel, if our new and existing sales personnel, on the whole, are unable to achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective.

If our products fail to perform properly due to defects or similar problems, and if we fail to develop enhancements to resolve any defectdefects or other problems, we could lose customers, become subject to service performance or warranty claims, or incur other significant costs.

While we rely predominantly on self-service purchases to establish new customer relationships, our inside and field sales teams target expansion opportunities with existing mid-market and enterprise customers. Sales to new and existing mid-market and enterprise customers involve risks that may not be present to the same extent or at all with sales to smaller organizations. As we continue to focus on increasing our sales to mid-market and enterprise customers, we face more complex customer requirements, substantial upfront sales costs, less predictability, and, in some cases, longer sales cycles than we do with smaller customers. With mid-market and enterprise customers, the decision to subscribe to our platform frequently may require the approval of multiple management personnel and more technical personnel than would be typical of a smaller organization, and accordingly, sales to mid-market and enterprise customers may require us to invest more time educating these decision makers. Purchases by mid-market and larger enterprise customers are also frequently subject to budget constraints and unplanned administrative, processing, and other delays. In recent periods, we have seen pronounced seat-based license compression and larger-than-expected deal size reductions at certain large enterprise customers, often associated with significant reorganizations, layoffs, leadership changes and heightened budget caution at those customers. These dynamics have negatively impacted our results of operations, and may create volatility in our renewals, expansions, and contractions and make our results more difficult to predict. Our ability to successfully sell our platform to mid-market and larger enterprise customers is also dependent upon the effectiveness of our sales force. For example, in the quarter ended October 31, 2024, several large enterprise deals were delayed due to extended procurement processes and sales cycles, which negatively impacted our results of operations. Our business increasingly depends on closing larger, more complex enterprise transactions with longer sales cycles, making our results more difficult to predict. Any shortfall in execution or delays in large deal closings could adversely impact our operating results in future periods. If we are unable to increase sales of our platform to mid-market and larger enterprise customers while mitigating the risks associated with serving such customers, our business, financial position, and operating results may be adversely affected.

Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers and potential customers. Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, heightened inflation and interest rates, bank failures, supply chain disruptions, labor shortages, exchange rate fluctuations, international trade relations, political turmoil, natural catastrophes, health epidemics or pandemics, geopolitical conflicts, and terrorist attacks on the United States, Europe, the Asia Pacific region, Japan, or elsewhere, could cause a decrease in business investments, including spending on information technology, and negatively affect the growth of our business. In particular, the United States has recently experienced historically high levels of inflation, which has increased and may continue to increase our supply, employeeemployee, and facilities costs and may decrease demand for our products. Furthermore, our customers have in the past and may in the future be materially negatively impacted by these factors, which has in the past caused and may in the future cause them to reduce their budgets, decrease their spending due to capital constraints, or be unable to fulfill their payment obligations to us, and our business could be negatively impacted. Competitors, many of whom are larger and have greater financial resources than we do, have responded and may in the future respond to challenging market conditions by lowering prices, bundling offerings or providing more customer support in an attempt to attract our customers. In addition, the increased pace of consolidation amongst customers and potential customers, such as those with established IT functions that render our products less relevant, may result in reduced overall spending on our products. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within any particular industry or how any such event may impact our business.

Issues relating to the responsible use of our technologies, including Emerging AI Technologies in our offerings, may result in reputational and/or financial harm and liability.

We are increasingly building AI capabilities into many of our products and services, including Emerging AI Technologies capabilities through the launch of PagerDuty AdvanceAdvance, andas AIOps.well as traditional AI capabilities through PagerDuty’s AIOps offering. Concerns relating to the responsible use of new and evolving technologies, such as Emerging AI Technologies, in our offerings may result in reputational and/or financial harm and liability and may cause us to incur costs to resolve such issues. For example, Emerging AI Technologies may be insufficient, biased, inaccurate, or of poor quality, which could result in customer legal allegations forregarding outcomes of our products, rejection or skepticism of our products, affect our reputation and brand, and negatively affect our financial results. Furthermore, Emerging AI Technologies pose emerging legal, social, and ethical issues and present risks and challenges that could affect its adoption, and therefore our business. If our offerings draw controversy due to their perceived or actual impact on society, such as Emerging AI Technologies solutions that have unintended consequences or are controversial because of their impact on critical infrastructure, human rights, privacy, employment, or other social, economic, or political issues, or if we are unable to develop and implement effective internal policies and frameworks relating to the responsible development and use of AI models and systems, we may experience brand, reputational, and/or competitive harm, or could face legal liability. Complying with multiple regulations from different jurisdictions related to AI could increase our cost of doing business, may change the way that we operate in certain jurisdictions, or may impede our ability to offer certain products and services in certain jurisdictions if we are unable to comply with regulations. Our failure to address concerns and regulationregulations relating to the responsible use of AI could slow adoption of both Emerging AI Technologies and traditional AI in our products and services or cause reputational and/or financial harm.

If we cannot continue to maintain our company culture as we grow,culture, our success and our business may be harmed.

We believe our culture has been a key contributor to our success to date and that the critical nature of the platform that we provide promotes a sense of greater purpose in our employees. Failure to preserve our culture could negatively affectsaffect our ability to retain and recruit personnel, which is critical to our growth,success, and to effectively focus on and pursue our corporate objectives. As we continue to grow, weWe may find it difficult to attract and retain high-performing top talent if we do not maintain a culture that is reflective of our talent. Thus, our company culture is a business imperative and critical to our competitive position within our industry. If we fail to maintain our company culture, our business and competitive position may be adversely affected.

Our success and future growth depend upon the continued services of our management team and other key employees. From time to time, there may be changes in our management team resulting from the hiring or departure of executives and key employees, which could disrupt our business. Our senior management and key employees are employed on an at-will basis. We currently do not have “key person” insurance on any of our employees. Certain of our key employees have been with us for a long period of time and have fully vested stock options or other long-term equity incentives that may become valuable and may be sold in the public markets, generating significant proceeds, which may reduce their motivation to continue to work for us. The loss of one or more of our senior management, particularly Jennifer Tejada, our Chief Executive Officer, or other key employees could harm our business, and we may not be able to find adequate replacements. We have announced the planned retirement of Howard Wilson, our Chief Financial Officer, and are conducting a search for a successor. While we are taking steps to ensure an orderly transition, any disruption during this process, difficulty attracting a qualified replacement, or loss of institutional knowledge could adversely affect our financial operations, internal controls, strategic planning, and investor confidence. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees, and we cannot ensure that we would be able to timely replace members of our senior management or other key employees should any of them depart.

We have an efficient operating model, which comes from a combination of our cloud-native architecture, optimal utilization of our third-party hosting providers, and prudent approach to headcount expansion. This has allowed us to achieve profitability and a gross margin of 83.0%84.9% for the fiscal year ended January 31, 2025.2026. OurThis stronghas gross margins allowallowed us the flexibility to invest more in our platform and go-to-market function while maintaining strong operating leverage on our path to profitability.

The majority of our revenue is generated from our existing customer base. Often, our customers expand the deployment of our platform across large teams and more broadly within the enterprise as they realize the benefits of our platform. We believe that our land and expandland-and-expand business model allows us to efficiently increase revenue from our existing customer base. Further, we will continue to invest in enhancing awareness of our brand, creating additional use cases, and developing more products, features, and functionality, which we believe are important factors to achieve widespread adoption of our platform.

We plan to continue investing in our business so we can capitalize on our market opportunity. We intendare to growfocusing our field sales teamresources to target expansion within our enterprise customers and to attract new customers. We expect to continue to make focused investments in marketing to drive brand awareness and enhance the effectiveness of our self-service, low friction customer acquisition model. We also intendcontinue to continuemake addinginvestments headcountin toheadcount, tools, and technology so our research and development team can continue to develop new and improved products, features, and functionality. Although these investments may adversely affect our operating results in the near term, we believe that they will contribute to our long-term growth.

Our key metrics include the results of Jeli, Inc. (“Jeli”) and Catalytic,, to the extent applicable, beginning on the respective acquisition datesdate of November 15, 2023 and March 8, 2022.2023.

We believe that the number of customers using our platform, particularly those that have subscription agreements for more than $100.0 thousand in ARR, are indicators of our market penetration, particularly within enterprise accounts, the growth of our business, and our potential future business opportunities. We define a customer as a separate legal entity, such as a company or an educational or government institution, that has an active subscription with us or one of our partners to access our platform. In situations where an organization has multiple subsidiaries or divisions, we treat the parent entity as the customer instead of treating each subsidiary or division as a separate customer. Increasing awareness of our platform and its broad range of capabilities, coupled with the fact that the world is always on and powered by increasingly complex technology, has expanded the diversity of our customer base to include organizations of all sizes across virtually all industries. Over time, enterprise customers have constituted a greater share of our revenue. The total number of paid customers and the number of customers with greater than $100.0 thousand in ARR were as follows as of the dates indicated:

______________ (1) Includes stock-based compensation expense as follows (in thousands):

Due to the low complexity of implementation and integration of our platform with our customers’ existing infrastructure, revenue from professional services has not been immaterialmaterial to date.

Cost of revenue primarily consists of expenses related to providing our platform to customers, including personnel expenses for operations and global support, payments to our third-party cloud infrastructure providers for hosting our software, payment processing fees, amortization of capitalized software costs, amortization of acquired developed technology,technology and intangible assets, and allocated overhead costs for facilities, information technology, and other allocated overhead costs. We will continue to invest additional resources in our platform infrastructure and our customer support and success organizations to expand the capability of our platform and ensure that our customers are realizing the full benefit of our offerings. The level and timing of investment in these areas could affect our cost of revenue in the future.

Cost of revenue increaseddecreased primarily due to: (i) ana increasedecrease of $2.0$6.4 million forin amortization of capitalizedacquired softwareintangible assets; and (ii) ana increasedecrease of $1.2$3.1 million in outside services spend for the customer service team; offset by (iii) an increase of $1.1$1.9 million in hosting, software, and telecom costs; and (iv) an increase of $0.5 million in amortization of acquired intangible assets; offset by (v) a decrease of $2.2 million in personnel costs primarily as a result of changes in the components of compensation plans and a decrease in stock-based compensation compared to the prior year; and (vi) a decrease of $1.0$0.9 million in costs to support the business and related infrastructure, which include allocated overhead costs; (v) an increase of $0.7 million in personnel costs, primarily as a result of an increase in headcount for cost of revenue employees; and (vi) an increase of $0.5 million for amortization of capitalized software costs.

Research and development: Research and development expenses consist primarily of personnel costs for our engineering, product, and design teams. Additionally, research and development expenses include outside services, depreciation of equipment used in research and development activities, acquisition-related expenses, impairment of capitalized software costs, and allocated overhead costs. We expect that our recurring research and development expenses will increase in dollar value as our business grows.

The increasedecrease in research and development was primarily driven by: (i) ana increasedecrease of $2.8$15.9 million in personnel costs as a result of increaseda bonusesdecrease in headcount for research and development employees inand thedecreased currentcosts yearrelated to stock-based compensation; offset byand (ii) a decrease of $0.9$0.8 million in costs to support the business and related infrastructure, which include allocated overhead costs; offset by (iii) a net increase of $1.1 million in other expenses, primarily due to impairment of capitalized software of $1.2 million; and (iv) an increase of $0.7 million in outside servicesconsulting spend due to higher leverage of internal resources.services.

Sales and marketing: Sales and marketing expenses consist primarily of personnel costs, costs of outside services, costs of general marketing and promotional activities, training and travel-related expenses, amortization of acquired intangible assets, allocated overhead costs, and credit loss expense. Sales commissions earned by our sales force that are considered incremental and recoverable costs of obtaining a subscription with a customer are deferred and amortized on a straight-line basis over the expected period of benefit, which we have determined to be four years. We expect that our recurring sales and marketing expenses will generally increase in dollar value and continue to be our largest operating expense for the foreseeable future as we expand our sales and marketing efforts.

The increasedecrease in sales and marketing was primarily duedriven by: (i) ana increasedecrease of $3.0$9.9 million in personnel costs as a result of a decrease in headcount for sales and marketing employees and decreased costs related to stock-based compensation; (ii) a decrease of $8.1 million in outside consulting services; (iiiii) a decrease of $2.8 million in training and travel-related costs; offset by (iv) an increase of $2.5$2.0 million in marketing costs for media campaigns in the current year; and (iiiv) an increase of $1.5 million in training and travel-related costs; and (iv) an increase of $1.4 million in personnel costs, primarily related to an increase in stock-based compensation, commissions, and bonuses; offset by (v) a decrease of $1.8$0.7 million in costs to support the business and related infrastructure, which include allocated overhead costs.

General and administrative: General and administrative expenses consist primarily of personnel costscosts, training and travel-related costs, and outside services fees for finance, legal, human resources, information technology, and other administrative functions. In addition, general and administrative expenses include non-personnel costs, such as legal, accounting, and other professional fees, hardware and software costs, certain tax, license and insurance-related expenses, acquisition-related expenses, and allocated overhead costs. We expect that our recurring general and administrative expenses will increase in dollar value as our business grows. However, we expect that our general and administrative expenses will decrease as a percentage of our revenue over the longer term, as we expect our investments to allow for improved efficiency for future growth in the business.

The decrease in general and administrative was driven by: (i) a decrease of $8.7$6.9 million inrelated to personnel costs primarily driven by decreased costs related to priorstock-based year real estate impairment charges that did not recur in the current yearcompensation; and (ii) a decrease of $1.5$0.5 million in training and travel-related costs; related(iii) toa decrease of $0.1 million in insurance, business taxes,taxes and licenses; offset by (iiiiv) an increase of $1.4$3.3 million in personneloutside costs,consulting primarilyservices; drivenand by(v) increasedan bonusesincrease of $1.7 million in costs to support the business and related toinfrastructure, generalwhich andinclude administrativeallocated employees.overhead costs.

Non-Operating ExpensesIncome (Expense)

The following table sets forth our non-operating income (expensesexpense) for the periods indicated (in thousands, except percentages):

Interest income increaseddecreased primarily due to accretiona on our cash, cash equivalent and investment balancesdecrease in theinterest currentrates year.year-over-year.

Interest expense: Interest expense consists primarily of contractual interest expense and amortization of debt issuance costs on our 1.25% Convertible senior notes due 2025 (the “2025 Notes”) that were partiallyrepaid extinguishedduring inthe Octoberyear 2023ended January 31, 2026 and the contractual interest expense and amortization of debt issuance costs on our 1.50% Convertible Senior Notes due 2028 (the “2028 Notes”) that were issued in October 2023.

Other expense,income (expense), net: Other expense,income (expense), net primarily consists of foreign currency transaction gains and losses.

The change in (Provision for) benefit from) income taxes: (Provisionprovision for) benefit from income taxes consistsis primarily attributable to the release of income taxes in certain foreign and U.S. jurisdictions in which we conduct business. We maintain a fullthe valuation allowance onagainst our netU.S. federal and certain state deferred tax assetsassets. asThe we(benefit havefrom) concluded that it is more likely than not that the deferred tax assets will not be realizedprovision for allincome years presented. The provisiontaxes may fluctuate to the extent the mix of earnings fluctuates between jurisdictions with different tax rates.

Restructuring costs: PagerDuty views restructuring costs, such as employee severance-related costs and real estate impairment costs, as events that are not necessarily reflective of operational performance during a period. In particular, PagerDuty believes the consideration of measures that exclude such expenses can assist in the comparison of operational performance in different periods which may or may not include such expenses.

We define non-GAAP operating income as income (loss) from operations excluding stock-based compensation expense, employer taxes related to employee stock transactions, acquisition-related expenses, amortization of acquired intangible assets, and restructuring costs, shareholder matters, and impairment of long-lived assets, which are not necessarily reflective of operational performance during a given period. We define non-GAAP operating margin as non-GAAP operating income as a percentage of revenue.

We define non-GAAP net income attributable to PagerDuty, Inc. common stockholders as net income (loss) attributable to PagerDuty, Inc. common stockholders excluding stock-based compensation expense, employer taxes related to employee stock transactions, amortization of debt issuance costs, amortization of acquired intangible assets, acquisition-related expenses, restructuring costs, shareholder matters, impairment of long-lived assets, gain on extinguishment of convertible senior notes, adjustment attributable to redeemable non-controlling interest, and income tax effects and adjustments, which are not necessarily reflective of operational performance during a given period.

As of January 31, 2025,2026, our principal sources of liquidity were cash and cash equivalents and investments totaling $570.8$469.8 million. We believe that our existing cash and cash equivalents, investments, and net cash generated from our operating activities will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Since inception, we have financed operations primarily through sales of our cloud-hosted software subscriptions, net proceeds received from sales of equity securities, and the issuance of our 2025 Notes and 2028 Notes (collectively, the “Notes”).Notes. We believe we will meet long-term expected future cash requirements and obligations through a combination of cash flows from operating activities and available cash and short-term investment balances.

Refer to Note 9,8. Debt and Financing Arrangements, in the notes to our consolidated financial statements included in this Annual Report on Form 10-K for discussion of our debt arrangements, including the timing of expected maturity of such arrangements. The $57.5 million principal of our 2025 Notes was repaid by us in cash at maturity during the year ended January 31, 2026.

In March 2025, we announced that our Board of Directors approved a share repurchase program (the “2025 Share Repurchase Program”) for the repurchase of shares of our common stock in an aggregate amount of up to $150.0 million. TheIn August 2025, our Board of Directors approved an additional $50.0 million under the 2025 Share Repurchase ProgramProgram, replacesthus allowing for the 2024repurchase Shareof Repurchaseshares Program,of whichthe wasCompany’s completedcommon stock in Novemberan 2024.aggregate amount of up to $200.0 million. No other changes were made to the program. The 2025 Share Repurchase Program does not obligate us to acquire a specified number of shares, and may be suspended, modified, or terminated at any time, without prior notice. The repurchases are expected to be executed from time to time through March 13, 2027, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions,purchases or other legally permissible means, including through Rule 10b5-1 plans. As of January 31, 2026, we had repurchased 10,073,731 shares under the 2025 Share Repurchase Program and subsequently retired 9,710,463 of those shares. The cost of the remaining 363,268 shares is recorded as treasury stock in the consolidated balance sheets. As of January 31, 2026, $63.1 million of the total amount authorized to be repurchased remained available.

Our estimated future obligations as of January 31, 20252026 include both current and long-term obligations. Our debt obligations total $450.7$395.7 million, all of which $57.4 million is short-term, and the remainder is long-term. Additionally, we had $1.8$1.0 million of irrevocable standby letters of credit outstanding which were fully collateralized by our restricted cash, all of which represents a long-term cash obligation. Under our operating leases, we had a current obligation of $3.3$5.0 million and a long-term obligation of $9.6$12.6 million. Operating lease obligations primarily represent the initial contracted term for leases that have commenced as of January 31, 2025,2026, not including any future optional renewal periods. Additionally, as of January 31, 2025,2026, we had non-cancellable purchase commitments with certain service providers totaling approximately $72.0$44.4 million. Refer to Note 10.9. Commitments and Contingencies for additional information regarding our purchase commitments.

Other than the risk factors below, there have been no material changes from the risk factors described in Part I. Item 1A., “Risk Factors” in our Annual Report on Form 10-K for year ended January 31, 2026:2026, as updated by the “Risk Factors” described under Part I. Item 1A., “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended April 30, 2026.

Our success and future growth depend upon the continued services of our management team and other key employees. From time to time, there may be changes in our management team resulting from the hiring or departure of executives and key employees, which could disrupt our business. Our senior management and key employees are employed on an at-will basis. We currently do not have “key person” insurance on any of our employees. Certain of our key employees have been with us for a long period of time and have fully vested stock options or other long-term equity incentives that may become valuable and may be sold in the public markets, generating significant proceeds, which may reduce their motivation to continue to work for us. The loss of one or more of our senior management, or other key employees could harm our business, and we may not be able to find adequate replacements. In May 2026, we announced the succession of our Chief Executive Officer, Jennifer Tejada, and the appointment of a new Chief Executive Officer, John DiLullo. Additionally, in November 2025, we announced the planned retirement of Howard Wilson, our Chief Financial Officer, and are conducting a search for a successor. While we are taking steps to ensure orderly leadership transitions, any disruption during this process, difficulty attracting a qualified replacement for our Chief Financial Officer, or loss of institutional knowledge could adversely affect our financial operations, internal controls, strategic planning, and investor confidence. Further, such changes may create uncertainty or present challenges related to continuity of our business, preservation of our culture, and our ability to attract and retain highly qualified personnel. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees, and we cannot ensure that we would be able to timely replace members of our senior management or other key employees should any of them depart.

In today's environment, every business is fundamentally a digital business. Whether in retail, financial services, healthcare, telecommunications, or supply chain logistics, modern commerce depends on increasingly complex networks of digital infrastructure, cloud services, applications, and distributed teams that operate in an always-on world. This complexity continues to accelerate as organizations adopt AI-driven systems and integrate artificial intelligenceAI across their operations.

Three months ended AprilJuly 30,31, 2026 compared to three months ended AprilJuly 30,31, 2025 The following table sets forth our results of operations for the periods indicated and as a percentage of revenue (in thousands, except percentages):

We generate revenue primarily from cloud-hosted software subscription fees.fees, which include platform subscriptions and credit packs for flexible platform capacity. We also generate revenue from term-license software subscription fees. Our subscriptions are typically one year in duration but can range from monthly to multi-year. Subscription fees are driven primarily by the number of customers, the number of users per customer, and the level of subscription purchased.purchased, and committed platform capacity. We generally invoice customers in advance in annual installments for subscriptions to our software. Revenue related to our cloud-hosted software subscriptions is recognized ratably over the related contractual term beginning on the date that our platform is made available to a customer. For our term-license software subscriptions, we recognize license revenue upon delivery, and software maintenance revenue ratably, typically beginning on the start of the contractual term of the arrangement.

Research and development expenses decreasedremained flat primarily due to: (i) a decrease of $5.4 million in personnel costs primarily as a result of a decrease in stock-based compensation; offset by (ii) an increase of $1.1$1.7 million in costs to support the business and related infrastructure, which include allocated overhead costs; and (iiiii) an increase of $0.4$0.5 million in outside services spend.spend; offset by (iii) a decrease of $2.0 million in personnel costs primarily as a result of a decrease in stock-based compensation; and (v) a decrease of $0.1 million in training and travel-related costs.

Sales and marketing expenses decreased primarily due to: (i) a decrease of $6.9$5.9 million in personnel costs, driven largely by a decrease in headcount and a decrease in stock-based compensation; (ii) a decrease of $1.2 million in training and travel-related costs; (iii) a decrease of $1.0 million in marketing costs for media campaigns; (iv) a decrease of $0.5$0.7 million in costs to support the business and related infrastructure, which include allocated overhead costs; andoffset by (viii) aan decreaseincrease of $0.5$0.4 million in credittraining lossand expense.travel-related costs; and (iv) an increase of $0.2 million in outside services spend for consulting services.

General and administrative expenses decreased primarily due to: (i) a decrease of $1.9$2.6 million in personnel costs, driven largely by a decrease in headcount and a decrease in stock-based compensation; offset by (ii) aan decreaseincrease of $1.8 million in outside services spend for consulting services; and (iii) a decrease of $0.2 million in insurance, business taxes, and licenses costs; offset by (iv) an increase of $0.2$0.3 million in costs to support the business and related infrastructure, which include allocated overhead costs.

Interest income decreased primarily due to a decreaselower incash and cash equivalents balance and lower interest rates year-over-year.

Interest expense: Interest expense consists primarily of contractual interest expense and amortization of debt issuance costs on our 1.25% Convertible senior notes due 2025 (the “2025 Notes”) that were repaid during the yearthree months ended JanuaryJuly 31, 20262025 and the contractual interest expense and amortization of debt issuance costs on our 1.50% Convertible Senior Notes due 2028 (the “2028 Notes”) that were issued in October 2023.

Interest expense decreased primarily due to a decrease in interest expense related to our convertible notes, driven by the repayment of the 2025 Notes during thethree yearmonths ended JanuaryJuly 31, 2026 .2025.

Provision for (benefit from) income taxes: Provision for (benefit from) income taxes consists primarily of income taxes in certain foreign and U.S. jurisdictions in which we conduct business.

The change in provision for (benefit from) income taxes is primarily attributable to an increase in pre-tax income, as well as tax deficiencies from stock-based compensation.

We define non-GAAP operating income as income (loss) from operations excluding stock-based compensation expense, employer taxes related to employee stock transactions, amortization of acquired intangible assets, acquisition-related expenses, restructuring costs, and shareholder matters, and executive transition costs, which are not necessarily reflective of operational performance during a given period. We define non-GAAP operating margin as non-GAAP operating income as a percentage of revenue.

We define non-GAAP net income attributable to PagerDuty, Inc. common stockholders as net income (loss) attributable to PagerDuty, Inc. common stockholders excluding stock-based compensation expense, employer taxes related to employee stock transactions, amortization of debt issuance costs, amortization of acquired intangible assets, acquisition-related expenses, restructuring costs, shareholder matters, executive transition costs, adjustment attributable to redeemable non-controlling interest, and income tax effects and adjustments, which are not necessarily reflective of operational performance during a given period.

As of AprilJuly 30,31, 2026, our principal sources of liquidity were cash and cash equivalents and investments totaling $444.0$470.0 million. We believe that our existing cash and cash equivalents, investments, and net cash generated from our operating activities will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Since inception, we have financed operations primarily through sales of our cloud-hosted software subscriptions, net proceeds received from sales of equity securities, and the issuance of our 2028 Notes. We believe we will meet long-term expected future cash requirements and obligations through a combination of cash flows from operating activities and available cash and short-term investment balances.

A significant majority of our customers pay in advance for our cloud-hosted and term-license software subscriptions. Therefore, a substantial source of our cash is from our deferred revenue, which is included in the liabilities section of our condensed consolidated balance sheet. Deferred revenue consists of the unearned portion of customer billings, which is recognized as revenue in accordance with our revenue recognition policy. As of AprilJuly 30,31, 2026, we had deferred revenue of $243.4$236.0 million, of which $240.6$233.5 million was recorded as a current liability and expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria are met.

In March 2025, we announced that our Board of Directors approved a share repurchase program (the “2025 Share Repurchase Program”) for the repurchase of shares of our common stock in an aggregate amount of up to $150.0 million. In August 2025, our Board of Directors approved an additional $50.0 million under the 2025 Share Repurchase Program, thus allowing for the repurchase of shares of the Company’s common stock in an aggregate amount of up to $200.0 million. No other changes were made to the program. The 2025 Share Repurchase Program did not obligate us to acquire a specified number of shares, and could be suspended, modified, or terminated at any time, without prior notice. During the threesix months ended AprilJuly 30,31, 2026, we repurchased 8,532,838 shares of common stock through open market purchases at an average per share price of $7.40, completing the 2025 Share Repurchase Program, and retired 8,896,106 shares, which includes 363,268 which remained on the consolidated balance sheet as of January 31, 2026. Under the 2025 Share Repurchase Program, we repurchased a total of 18,606,569 shares of common stock through open market purchases at an average per share price of $10.75 for a total repurchase price of $200.0 million. As of AprilJuly 30,31, 2026, all repurchased shares have been retired.

Our estimated future obligations as of AprilJuly 30,31, 2026 include both current and long-term obligations. Our debt obligations total $396.3$396.9 million, all of which is long-term. Additionally, we had $1.0 million of irrevocable standby letters of credit outstanding which were fully collateralized by our restricted cash, all of which represents a long-term cash obligation. Under our operating leases, we had a current obligation of $5.2$6.0 million and a long-term obligation of $11.2$9.9 million. Operating lease obligations primarily represent the initial contracted term for leases that have commenced as of AprilJuly 30,31, 2026, not including any future optional renewal periods.

Our changes in cash can be impacted by the effect of fluctuating exchange rates. Foreign exchange had a negative effect on cash in the threesix months ended AprilJuly 30,31, 2026, decreasing our total cash balance by $0.1 million as of AprilJuly 30,31, 2026 and a positive effect on cash in the threesix months ended AprilJuly 30,31, 2025, increasing our total cash balance by $0.3$0.1 million as of AprilJuly 30,31, 2025.

Net cash provided by operating activities improved, primarily due to improvements in our operating income (loss) performance due to the 1.0%0.9% increase in revenue, along with a 16.4%11.7% decrease in operating expenses. Cash provided by operating activities is subject to variability period-over-period as a result of timing differences, including with respect to the collection of receivables and payments of accounts payable, and other items.

Net cash used in investing activities increased, primarily due to a decrease in proceeds from maturities of available-for-sale investments, offset by an increase in purchases of available-for-saleproperty investments.and equipment.

Net cash used in financing activities increased, primarily due to an increase in repurchases of common stock, a decrease in proceedscash ofused issuanceto fromrepay commonour stockconvertible uponsenior exercise of stock options,notes, and a decrease in employee payroll taxes related to the net share settlement of restricted stock units.

We had $1.0 million of irrevocable standby letters of credit outstanding as of AprilJuly 30,31, 2026. Letters of credit are primarily used as a form of security deposits for the spaces we lease.