The tech world is obsessed with growth. It's the lifeblood of the industry, the metric by which success is measured, the siren song that lures investors and entrepreneurs alike. So, when a company like PagerDuty, a leader in digital operations management, reports "only" 10% ARR growth, some might see it as a cause for concern.

But beneath the surface of those seemingly modest numbers lies a story of strategic brilliance and a company poised to capitalize on a rapidly evolving tech landscape. In fact, a closer look at PagerDuty's Q1 2025 earnings transcript reveals a hidden gem that most analysts seem to have missed: This "slow" growth is actually a rocket ship in disguise.

Why PagerDuty's "Slow" Growth is Deceptive

PagerDuty's move upmarket, specifically their laser focus on the enterprise segment, is paying off in ways that aren't immediately obvious from the headline ARR growth figure. They're not chasing every customer under the sun; they're strategically targeting the biggest fish in the pond - the Global 2000. And these whales are hungry for what PagerDuty is offering.

Key Takeaways from the Q1 2025 Earnings Transcript:

Multi-year, multi-product deals are surging: This isn't just about selling more seats; it's about customers committing to the entire PagerDuty Operations Cloud – Incident Management, AIOps, Automation, and Customer Service Ops. These are strategic, long-term partnerships that lock in revenue and create a sticky ecosystem. Large deal momentum is undeniable: Customers spending over $100,000, $500,000, and $1 million are all growing at impressive rates, demonstrating the appetite for PagerDuty's platform among the biggest spenders. Pipeline visibility stretches further than ever: PagerDuty has shifted from a transactional, short-term sales cycle to a more strategic, multi-quarter approach. This means greater predictability and a stronger foundation for future growth.

DBNR and ARR Growth: The Numbers Tell a Story

The transcript is peppered with examples of these trends. A multibillion-dollar SaaS customer chose PagerDuty's enterprise incident management plan over a patchwork of point solutions, resulting in a six-figure expansion. A leading global athletic apparel company, already a decade-long PagerDuty customer, signed a flexible pricing agreement for their AIOps solution, resulting in over $1 million in annual savings and displacing a point solution. A multinational home improvement retailer even inked a three-year commitment valued at over $6 million.

These aren't isolated wins. They are compelling evidence of a larger trend: Large enterprises are choosing PagerDuty as their strategic partner for managing the growing complexities of their digital operations. And this trend is only going to accelerate as technology continues to become more mission-critical and the stakes of downtime rise ever higher.

Here's where the hypothesis comes in: PagerDuty's true growth potential is masked by the current macro environment. While the company isn't banking on a macroeconomic improvement, if it does occur, it would represent significant upside potential.

The Data:

DBNR is expected to strengthen in the second half: PagerDuty projects a flat DBNR of 106% for Q2 but anticipates growth in this metric during the second half. This indicates a growing confidence in their ability to expand within existing customers. ARR growth is set to accelerate in the back half: PagerDuty is guiding for 9% to 11% revenue growth for FY25, with a strong emphasis on the second half. They're confident in their ability to convert their robust pipeline into accelerated ARR growth.

Charting the Course: DBNR Growth Projection

Beyond the Horizon: Untapped Potential

Furthermore, PagerDuty's expansion into new frontiers, such as the US public sector, adds another layer of untapped potential. With their recent FedRAMP authorization, the company is poised to grab a piece of a market that's ripe for digital transformation and increasingly dependent on reliable digital operations.

And let's not forget the generative AI revolution. While still in its early stages, generative AI is poised to explode the volume and complexity of software development, creating even greater demand for solutions like PagerDuty's Operations Cloud.

PagerDuty isn't just riding the wave; they're actively shaping it, integrating generative AI into their own platform through features like PagerDuty copilot, further differentiating their offerings and strengthening their competitive advantage.

Conclusion: A Rocket Ship Ready for Launch

PagerDuty's Q1 2025 earnings might not scream "hypergrowth" at first glance, but beneath the surface lies a powerful narrative of strategic focus, product-market fit, and a company perfectly positioned to capitalize on a rapidly evolving technological landscape.

This isn't a company clinging to its past success; it's a company building a rocket ship, quietly and strategically, preparing for a launch into a future where reliable digital operations are no longer a luxury but a necessity. And when that launch happens, those who mistook "slow" growth for weakness will be left in the dust.

"Fun Fact: PagerDuty's name is a playful nod to their early focus on on-call management, but the company has evolved into a far more comprehensive platform, reflecting their commitment to innovation and addressing the evolving needs of their customers."