Financial Data and Key Metrics Changes - PagerDuty reported revenue of $123 million, representing a 6% year-over-year growth [3][20] - Achieved GAAP profitability for the first time in company history, with a non-GAAP operating margin of 25%, exceeding guidance and showing an 800 basis point year-over-year expansion [3][20] - Annual recurring revenue (ARR) increased to $499 million, reflecting a 5% year-over-year growth [4][20] - Gross margin for Q2 was 86%, at the high end of the target range of 84% to 86% [22] - Cash from operations was $34 million, or 28% of revenue, with free cash flow at $30 million, or 24% of revenue [22] Business Line Data and Key Metrics Changes - New and expansion bookings increased by over 15% sequentially [4] - High-value customer base (spending over $100,000) grew to 868 customers, an increase of 20 customers sequentially and 48 year-over-year [5] - Dollar-based net retention (DBNR) was 102%, down from 104% in Q1, impacted by elevated churn and downgrades [20] Market Data and Key Metrics Changes - International revenue increased by 12% year-over-year, contributing 29% of total revenue [20] - Total paid customers grew to 15,322, adding 75 net new customers in Q2 [21] - Free and paid companies on the platform exceeded 33,000, marking a 13% increase compared to Q2 of the previous year [21] Company Strategy and Development Direction - The company is focusing on a strategic shift towards usage-based pricing models to better align revenue with customer value realization [5][35] - Continued investment in product innovation, including the launch of four new AI agents, which will be released with usage-based pricing models [9][10] - The appointment of a new Chief Revenue Officer aims to accelerate enterprise transformation and improve sales performance [17][37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of new and expansion revenue, with strong performance in international markets [34] - The transition to usage-based pricing is expected to enhance customer retention and align monetization with customer value [35][62] - Management anticipates significant incremental ARR growth in the second half of the fiscal year, supported by a maturing enterprise sales motion [20][25] Other Important Information - The company retired $58 million of convertible debt issued in June 2020, enhancing its financial position [23] - PagerDuty was recognized as the AIOps platform of the year in the 2025 AI Breakthrough Awards [16] - The Board expanded the share repurchase program to $200 million, providing flexibility for opportunistic share buybacks [23] Q&A Session Summary Question: What is the outlook for profitability and growth in the IT operations category? - Management noted that new and expansion revenue is showing recovery, with a 15% sequential increase and strong new customer additions [34] Question: What are the priorities for the new Chief Revenue Officer in the upcoming months? - The focus will be on accelerating enterprise transformation, improving sales consistency, and enhancing customer retention [37] Question: How does the company view the quality of its ARR? - The company has shifted towards large, long-term, profitable customers, with over 75% of ARR coming from enterprise companies [47] Question: What is the expected impact of the transition to usage-based pricing? - Management indicated that customers are open to the transition, and early feedback has been positive, with 60% of new products already utilizing this model [58] Question: How is the company addressing the challenges of seat optimization and downgrades? - Management is focused on improving account management and customer success to mitigate downgrades while also seeing growth in platform usage [62]

Financial Data and Key Metrics Changes - In Q1 2026, total revenue reached $181.4 million, near the high end of guidance, reflecting strong execution across the business [33] - Service revenue was $176.3 million, above the high end of guidance, showing a 2% year-over-year improvement [33] - Gross margin was 67.8%, down year-over-year and sequentially, primarily due to a shift towards usage-based communication platform revenue [34] - Cash flow from operations exceeded $11 million for the quarter, with $82.2 million in cash, cash equivalents, and restricted cash at quarter-end [36] Business Line Data and Key Metrics Changes - Consumption-based revenue, primarily from CPaaS solutions, grew more than 30% year-over-year [14] - Usage-based revenue accounted for approximately 17% of total service revenue, up from 12% in Q1 2025 [33] - Revenue from customers using three or more products now accounts for about one-third of annual subscription revenue [22] Market Data and Key Metrics Changes - Adoption of the intelligent customer assistant rose 75% year-over-year, with voice interactions growing more than 7x year-over-year [18] - 8x8 is recognized as a top five Operator Connect partner worldwide, enhancing visibility in the ecosystem [17] Company Strategy and Development Direction - The company is transitioning from SKU-based selling to outcome-based selling, focusing on solutions rather than features [19] - The product roadmap includes enhancements with AI-enabled tools and a modern intuitive interface to improve customer outcomes [25] - The company is expanding internationally, targeting industries like retail, healthcare, and government [25] Management's Comments on Operating Environment and Future Outlook - Management noted that the headwinds from the Fuse upgrade are receding, with expectations of a 1.5% growth headwind for the next year [50][52] - Despite macro pressures, only 17% of enterprises plan to reduce customer engagement budgets, indicating a strong market for customer experience solutions [9] - The company remains confident in its long-term growth strategy and ability to execute against it, despite anticipated lower gross margins due to the growth of communications platform solutions [40] Other Important Information - The company made a $15 million term loan prepayment during Q1, reducing total debt by 40% since August 2022 [32] - Stock-based compensation as a percentage of revenue was 3.5%, reflecting a downward trend in this expense [36] Q&A Session Summary Question: What does the headwind from the Fuse migration look like? - The Fuse headwind to growth is about 3% in the last quarter, with expectations to retain roughly half of the remaining Fuse revenue as customers migrate to the 8x8 platform [49][50] Question: How do you see the margin profile evolving? - The usage-based margin profile is lower but growing faster, with expectations of a 1% to 2% increase in usage-based revenue per quarter [53][54] Question: How does the company weigh buying versus building in the AI space? - The company prefers building and partnering over buying, focusing on in-house AI development and partnerships with best-in-breed providers [58] Question: Are there any trends in legacy migrations? - The company is seeing a tailwind from legacy vendors facing challenges, which is beneficial for overall industry performance [63] Question: What is the growth outlook for the CPaaS business geographically? - The Asia business is growing rapidly, over 30% year-over-year, with traction also seen in the UK and the US [78]

As AI continues to transform industries, companies are faced with the critical challenge of effectively monetizing AI-driven products in a way that captures value, ensures customer adoption, and scales revenue sustainably. Unlike traditional SaaS models, AI-powered products have unique complexities - such as fluctuating usage patterns, variable compute costs, and evolving customer demands, making conventional pricing strategies unhelpful to the growth of an AI product-led startup. In this session, Alvaro Mo ...

Pricing Principles for AI Products - Pricing is a form of friction that can either enable or prevent product adoption, requiring careful consideration of value delivery and target audience [2] - Traditional pricing principles emphasize simplicity, value signaling through willingness to pay, and margin protection [8] - AI native pricing prioritizes predictability for mature companies needing to budget, speed for early-stage products, and adapting to variable costs [10][11][12] Key Considerations for AI Pricing - Audience understanding is crucial, considering their buying journey, value expectations, and decision-making processes [15][16] - Packaging and pricing tiers influence user perception and incentives, shaping how users interact with the product [18][19] - Margin structure should focus on axes of scaling and flexibility to experiment, rather than fixed margins due to rapidly changing underlying costs [13][14] Strategies for Margin Management and Flexibility - Differentiate through R&D innovation and pass technical advantages to users as pricing leverage [23][24] - Implement rate limits or guardrails to prevent degenerate workloads and incentivize reasonable usage, rather than linearly scaling costs [25] - Incrementally evolve pricing in response to R&D investments, aligning monetization with the perceived value by end-users [30][31] Future Trends in AI Agent Pricing - Expect continued price wars and a move towards effectively unlimited plans with caps and guardrails [36][37] - Outcome-based pricing will become more prevalent, requiring clear definitions of success and measurable SLAs [37][38] - Real-time visibility, spend management, and balance alerts will become more sophisticated, offering users greater control over spend [38][39][40]