PagerDuty, Inc. (PD): A Bull Case Theory 

We came across a bullish thesis on PagerDuty, Inc. on Wrigh’s Substack by William Wright. In this article, we will summarize the bulls’ thesis on PD. PagerDuty,Inc.’s share was trading at $10.60 as of January 30th. PD’s trailing and forward P/E were 6.53 and 9.18 respectively according to Yahoo Finance.

PagerDuty (PD) is positioned as the central nervous system for modern digital operations, sitting above IT infrastructure to ensure mission-critical services remain operational. Unlike monitoring peers such as Datadog or Splunk, PagerDuty not only detects incidents but orchestrates responses, ingesting signals from over 700 integrations, applying AIOps to filter noise, correlating events, and directing remediation through human expQerts or autonomous agents. Its neutrality across cloud environments and 15 years of accumulated incident-resolution data give it a differentiated advantage, particularly as IT complexity and AI-driven code generation increase event volume and operational risk.

Despite this strategic position, PD trades at all-time lows of ~2.3x EV/Sales and ~10x adjusted free cash flow due to a sharp deceleration in growth. The headwind stems from a legacy seat-based pricing model that has been pressured by industry layoffs and efficiency gains, driving seat compression and declining dollar-based net retention. Importantly, customers are not leaving the platform; large enterprises are renewing while reducing spend, and new logo wins continue at smaller entry points. In response, PagerDuty is transitioning to consumption-based pricing, creating a near-term “air pocket” as usage rises but monetization lags, with consensus modeling muted growth through FY2027 despite AIOps usage growing over 50% year over year.

This dislocation obscures improving fundamentals, including recent GAAP profitability, disciplined cost control, and sustained 80%+ gross margins. At the same time, significant C-suite and control-function turnover, changes to change-in-control terms, and multiple confirmed approaches from advisors suggest active strategic consideration. With peers acquired at 4–5.5x EV/Sales, PagerDuty’s current valuation implies substantial upside in a takeout scenario, offering an attractive risk-reward skew with a meaningful margin of safety.

Previously, we covered a bullish thesis on Datadog, Inc. (DDOG) by @bigbullcap in May 2025, which highlighted the company’s multi-product engine, diversified ARR mix, and strong net retention driven by product expansion. DDOG’s stock price has appreciated by approximately 12.98% since our coverage due to improving sentiment around execution and growth durability. William Wright shares a similar view but emphasizes valuation dislocation and takeout optionality in PagerDuty (PD).

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Disclosure: None.