What happened

Shares of PagerDuty (PD -3.51%) were climbing today after the stock posted better-than-expected results in its second-quarter earnings report.

As of 12:56 p.m. EDT on Friday, the stock was up 10.5%.

Two people looking at a computer and smiling

Image source: Getty Images.

So what

The maker of cloud software that helps companies identify outages and other issues in their tech infrastructure said revenue rose 33% to $67.5 million, its strongest growth rate in five quarters and ahead of estimates at $65.6 million.

The company expanded relationships in the quarter with a number of major customers, including Anheuser-BuschAutodesk, and Nvidia. Dollar-based net retention rate was up 126%, meaning revenue from existing customers was up 26%, another sign that its land-and-expand strategy is paying off.

PagerDuty also added new companies like Citigroup and Mattress Firm in the quarter, growing its customer base to almost 18,000. 

On the cost side, gross margin in the quarter slipped from 86.9% to 82.3%, and the adjusted operating loss widened from $3.2 million to $9.9 million. On a per-share basis, the company posted an adjusted loss per share of $0.13 compared to a $0.04 loss in the quarter a year ago. Still, that beat estimates of a $0.15 per-share loss.

CEO Jennifer Tejada said: "Q2 was an inflection point for PagerDuty. We delivered strong financial results and demonstrated increasing market share leadership. The durability of our growth, the long-term potential for our platform and the legacy we are building are clear. Our solid top-line beat was driven by accelerating demand for both our new Automation offering and our comprehensive Digital Operations plan, especially in the enterprise and mid-market segments."

Now what

Investors also seemed impressed with the company's guidance as PagerDuty forecast 28% to 32% revenue growth for the third quarter, to reach $69 million to $71 million, ahead of the consensus at $68.3 million. For the full year, it called for revenue of $273 million to $276 million, up 28% to 29%, which was also better than the average analyst estimate at $270.5 million.

That guidance, along with the acceleration in revenue growth and strong net retention rate, all show that the cloud stock's growth story is on track.