What happened

Shares of PagerDuty (NYSE:PD), the cloud-based IT management platform, were sliding last month after the company's second-quarter earnings report wasn't enough to meet investors' lofty expectations. The following day, the stock tumbled again on a broad sell-off in cloud stocks, and the stock finished September down 29%, according to S&P Global Market Intelligence.

As you can see from the chart below, the stock plunged early in the month and remained volatile for the duration of September.

PD data by YCharts.

So what

PagerDuty delivered a solid earnings report on Sept. 5 -- in fact, it beat estimates -- but it wasn't enough to stem the downward trend in the stock after an initial rise following its April IPO.

A person typing on a keyboard with digital lock images displayed above it..

Image source: Getty Images.

Revenue rose 45% to $40.4 million, topping estimates at $39.1 million. On the bottom line, its adjusted net loss expanded from $3.8 million to $5.3 million, and it finished with an adjusted per-share loss of $0.07, ahead of the analyst consensus of a loss of $0.10. The company's customer base reached 12,000 as it added clients including Marks and Spencer, Stripe, and DoorDash.

CEO Jennifer Tejada said: "This was our first $40 million quarter and a record quarter for growth in accounts investing over $100,000. We're excited to see a growing number of customers around the world utilize the PagerDuty platform to continually improve their digital operations."

The company also raised its full-year guidance slightly, calling for revenue of $162 million to $164 million, or 37% to 39% growth, up from the previous range of $161 million to $163 million.

Despite better-than-expected results, PagerDuty shares fell 11% the following day, one of a number of cloud stocks, including MongoDB and Zoom Video, to slip on otherwise strong earnings that week. That trend came to a head the following session, when cloud stocks broadly fell on Sept. 9, a sign that the market believed the whole sector to be overvalued. PagerDuty shares fell another 13% that day, and the stock remained volatile through the end of the month as investors continued to debate its valuation.

Now what

Through Oct. 10, PagerDuty has continued to slide as the company's IPO lockup period expired earlier this week, giving inside investors their first chance to sell the stock. The stock has now fallen by more than 50% since its peak in June, but it's still valued at a price-to-sales ratio above 10, meaning its slide could continue if skepticism over cloud stock valuations persists.