We estimate $25 million in annual savings through operational efficiency, reduction in manual work and revenue protection from churn. A rapidly growing global cybersecurity leader also partnered with PagerDuty to reduce the strain on its teams by increasing productivity through automation. This aligned with the CEO’s objectives to improve customer service and reduce manual processes throughout the organization. These examples are representative of a growing number of strategic wins. Our competitive differentiators including our functional advantage, resilience at scale, short-term short time to value and low total cost of ownership provide an ROI that we believe outpaces the narrow set of use cases served by homegrown, low-cost and platform competitors.
We’ve begun piloting new bundling and pricing strategies to support more seamless user adoption and expand the surface area of the operations cloud within our customers. In some cases, this has reduced sales cycle time, generated pipeline and reduced retention risk. We plan to scale several initiatives over the next two quarters. Earlier this week at AWS re:Invent, PagerDuty was recognized as the AWS Marketplace Partner of the Year for North America. This honor recognizes us as a partner whose business model embraces specialization innovation and cooperation over the past year. This recognition validates the strategic nature of the Operations Cloud in modernizing operations. We plan to refine and deepen our technical and consulting partner relationships across the globe to unlock more value as we scale partnerships in FY ’25.
During Q3, we also welcomed Eric Johnson as our new CIO, Eric comes to us from SurveyMonkey and is focused on leading PagerDuty’s critical IT infrastructure, data management, enterprise systems and evangelism with fellow CIOs. Prior to this, he had served as the CIO and Senior Vice President of both DocuSign and Talent. We were honored to be recognized by Fortune in three Best Places to Work categories this quarter, including best workplaces in technology, best medium workplaces and PagerDuty’s employees ranked us as a great place to work. Additionally, PagerDuty was named one of the top 10 companies to work for in Portugal. Finally, we were named the definitive leader in GigaOm’s incident response radar. To summarize, while the environment remains tough, we significantly advanced the operations Cloud and Enterprise and saw momentum in expansion ARR.
While it’s too early to call a market recovery, we do see several green shoots, including enterprise and mid-market stabilization and demand for strategic operations cloud engagements. We are proud of our operating margin improvement and intend to continue to drive further margin expansion. But make no mistake, we are focused on growth. We expect the initiatives we have in place to position us well for growth reacceleration during the next fiscal year. We’ve made great progress on our mission to revolutionize operations, and I want to thank our teams for their commitment and our customers who trust PagerDuty to manage and automate their most grateful work. With that, I’ll turn the call over to Howard, and I look forward to your questions.
Howard Wilson: Thank you, Jen, and good day to everyone joining us on this afternoon’s call. In Q3, we delivered solid results above the guidance ranges we provided for both the top and the bottom line. We continue to adjust effectively to the economic environment with improvement in new business in enterprise and mid-market, both in terms of new acquisition and expansion. Cautious spending by customers continued to impact SMB and caused increased negotiation around renewals. However, several large six- and seven-figure transactions this quarter are providing evidence of PagerDuty’s key role in enabling our customers to mature and modernize their technology environments. Our multiyear initiatives focused on profitable growth continued to deliver operating margin improvements with over 1,000 basis points improvement this quarter.
Unless otherwise stated, all references to our expenses and operating results are on a non-GAAP basis and are reconciled to our GAAP results in the earnings release that was posted before the call. Revenue was $109 million in the third quarter, up 15% year-over-year. The contribution from international was 27% of total revenues, an increase from the 23% seen in Q3 of last year. Annual recurring revenue exiting Q3 grew 13% year-over-year to $439 million. We delivered 110% dollar-based net retention in Q3 compared to 123% in the same period one year ago. Our DBNR expectation for Q4 is approximately 106%. Customers spending over $100,000 in annual recurring revenue grew to 778, up 10% from a year ago. Total customer count of 15,049 declined year-over-year by 1% as demand among SMB and VSB accounts remain uneven.
