What Happened?
Shares of digital operations platform PagerDuty (NYSE: PD) fell 25.8% in the afternoon session after the company reported its third-quarter results and provided a disappointing revenue forecast, signaling slowing growth.
While revenue for the third quarter of 2025 grew 4.7% year-over-year to $124.5 million, meeting expectations, the company's outlook for the future raised concerns among investors. PagerDuty issued fourth-quarter revenue guidance of $123 million, which fell below analysts' estimates and implied a growth rate of just 1.3% year-over-year. The company also trimmed its full-year revenue forecast, citing challenges with customer spending. The downbeat forecast prompted negative reactions from Wall Street. For instance, Craig-Hallum downgraded the stock from Buy to Hold, and RBC Capital reduced its price target, describing the results and outlook as mixed.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy PagerDuty? Access our full analysis report here.
What Is The Market Telling Us
PagerDuty’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. But moves this big are rare even for PagerDuty and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 22 days ago when the stock dropped 3.4% on the news that markets became increasingly wary of high valuations following a significant AI-driven rally.
The tech-heavy Nasdaq fell approximately 1.4% as a wave of caution swept through the market. A key example of this trend is Palantir Technologies, which saw its shares drop around 7% despite reporting record quarterly results that surpassed analyst estimates and raising its full-year revenue outlook. This seemingly contradictory movement highlighted a broader sentiment shift. Investors appeared to be engaging in profit-taking, concerned that the recent surge in AI-related stocks had led to stretched valuations. This broader market caution affected high-growth technology companies that had previously surged on AI optimism but faced increased scrutiny, signaling a potential cooling-off period for the sector. Adding serious weight to this caution, leadership at both Goldman Sachs and Morgan Stanley highlighted the possibility of a correction in the equity markets over the next couple of years. Despite the euphoria driven by AI optimism and the promise of future rate cuts, these banks viewed this cooling-off period not as a disaster, but as a necessary and healthy feature of a long-term bull market.
PagerDuty is down 35.5% since the beginning of the year, and at $11.62 per share, it is trading 46.4% below its 52-week high of $21.65 from December 2024. Investors who bought $1,000 worth of PagerDuty’s shares 5 years ago would now be looking at an investment worth $339.72.
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