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Why Is Dynatrace (DT) Up 8% Since Last Earnings Report?
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A month has gone by since the last earnings report for Dynatrace (DT - Free Report) . Shares have added about 8% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Dynatrace due for a pullback? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Dynatrace, Inc. before we dive into how investors and analysts have reacted as of late.
Dynatrace Q1 Earnings Beat on ARR Growth and Strong New-Logo Wins
Dynatrace reported first-quarter fiscal 2027 adjusted earnings of 48 cents per share, beating the Zacks Consensus Estimate by 6.67%. The bottom line increased 14.3% year over year, supported by revenue upside and disciplined spending.
Revenues of $554.55 million rose 16.2% and topped the consensus mark by 0.96%. Annual recurring revenues, or ARR, reached $2.136 billion, up 17%, as organic net new ARR growth accelerated 41%.
DT Revenue Growth Stays Subscription-Led
Subscription revenues increased 15.9% year over year to $530.26 million and accounted for most of quarterly sales. Management linked the performance to strong net new ARR, growing platform consumption, and enterprise demand for end-to-end observability.
Services revenues rose 22.4% year over year to $24.29 million. Total revenues and subscription revenues also exceeded the high end of management’s guidance, each growing 15% on a constant-currency basis.
Dynatrace Gains From Larger New-Logo Deals
Net new ARR was $85 million, up 66% year over year. Excluding the $13 million contribution from Bindplane, organic net new ARR totaled $73 million, reflecting the company’s fourth consecutive quarter of acceleration in trailing 12-month organic net new ARR growth.
Dynatrace added 122 new logos, while average landing size increased to nearly $285,000. Record new-logo ARR growth exceeded 160%, aided by large platform-consolidation transactions, including an eight-figure annual contract value win with a major Latin American financial institution.
Gross retention remained in the mid-90% range, while the trailing 12-month net retention rate was 110%. Average ARR per customer increased to well above $500,000, reflecting broader adoption among enterprise clients.
DT Sees Faster Logs and AI Consumption
Annualized log-management consumption approached $200 million after nearly doubling over two quarters and continued to grow well above 100% year over year. Management expects Bindplane’s open-telemetry capabilities to support data ingestion and further strengthen the logs business.
More than 1,000 customers used DT to observe artificial intelligence and large-language-model workloads in production, up from roughly 850 in the prior quarter. More than 800 customers used the company’s agentic capabilities for autonomous operations, up from about 500.
Consumption growth among customers using AI capabilities ran 1.5 times above that of non-AI customers. Management identified higher telemetry volumes, AI-observability workloads and direct agent usage as three separate monetization opportunities.
DT Operating Details
For the first quarter of fiscal 2027, non-GAAP gross margin was 84%, down from 85% in the year-ago quarter.
On a GAAP basis, research and development expenses increased 25.7% to $135.99 million, reflecting continued platform investment. Sales and marketing expenses rose 9.9% to $181.63 million, while general and administrative expenses increased 9.6% to $61.74 million.
Non-GAAP operating income rose 12.9% year over year to $161.60 million, while the related margin was 29% compared with 30% a year earlier. GAAP operating income climbed 14.7% year over year to $71.48 million.
DT Generates Cash and Returns Capital
The company ended June 30, 2026, with $1.06 billion in cash and cash equivalents. During the quarter, DT repurchased 7.1 million shares for $275 million at an average price of $38.88.
Net cash provided by operating activities increased 13.6% year over year to $306.24 million. Adjusted free cash flow rose 17.9% year over year to $309.18 million, with the adjusted free cash flow margin expanding to 56% from 55%.
Dynatrace Updates Fiscal 2027 Outlook
For the second quarter of fiscal 2027, Dynatrace expects revenues of $565-$570 million and subscription revenues of $540-$545 million. Non-GAAP operating margin is projected to be in the range of 29.5%-30%, with adjusted earnings of 48-49 cents per share.
For fiscal 2027, management now expects revenues of $2.306-$2.320 billion and ARR of $2.359-$2.379 billion. The company raised the high end of its non-GAAP operating margin outlook to 29.75% and lifted adjusted earnings guidance to $1.97-$1.99 per share.
The outlook includes foreign-exchange headwinds of roughly $14 million to ARR and $4 million to revenues. Dynatrace maintained its constant-currency ARR growth forecast of 15.5%-16.5% and adjusted free cash flow margin target of 26.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in fresh estimates.
VGM Scores
Currently, Dynatrace has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock has a score of F on the value side, putting it in the bottom 20% quintile for value investors.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Dynatrace has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Dynatrace belongs to the Zacks Computers - IT Services industry. Another stock from the same industry, ServiceNow (NOW - Free Report) , has gained 24.1% over the past month. More than a month has passed since the company reported results for the quarter ended June 2026.
ServiceNow reported revenues of $3.99 billion in the last reported quarter, representing a year-over-year change of +24%. EPS of $0.90 for the same period compares with $0.82 a year ago.
ServiceNow is expected to post earnings of $1.03 per share for the current quarter, representing a year-over-year change of +7.3%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for ServiceNow. Also, the stock has a VGM Score of D.
View the Zacks #1 Rank List
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Why Is Dynatrace (DT) Up 8% Since Last Earnings Report?
A month has gone by since the last earnings report for Dynatrace (DT - Free Report) . Shares have added about 8% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Dynatrace due for a pullback? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Dynatrace, Inc. before we dive into how investors and analysts have reacted as of late.
Dynatrace Q1 Earnings Beat on ARR Growth and Strong New-Logo Wins
Dynatrace reported first-quarter fiscal 2027 adjusted earnings of 48 cents per share, beating the Zacks Consensus Estimate by 6.67%. The bottom line increased 14.3% year over year, supported by revenue upside and disciplined spending.
Revenues of $554.55 million rose 16.2% and topped the consensus mark by 0.96%. Annual recurring revenues, or ARR, reached $2.136 billion, up 17%, as organic net new ARR growth accelerated 41%.
DT Revenue Growth Stays Subscription-Led
Subscription revenues increased 15.9% year over year to $530.26 million and accounted for most of quarterly sales. Management linked the performance to strong net new ARR, growing platform consumption, and enterprise demand for end-to-end observability.
Services revenues rose 22.4% year over year to $24.29 million. Total revenues and subscription revenues also exceeded the high end of management’s guidance, each growing 15% on a constant-currency basis.
Dynatrace Gains From Larger New-Logo Deals
Net new ARR was $85 million, up 66% year over year. Excluding the $13 million contribution from Bindplane, organic net new ARR totaled $73 million, reflecting the company’s fourth consecutive quarter of acceleration in trailing 12-month organic net new ARR growth.
Dynatrace added 122 new logos, while average landing size increased to nearly $285,000. Record new-logo ARR growth exceeded 160%, aided by large platform-consolidation transactions, including an eight-figure annual contract value win with a major Latin American financial institution.
Gross retention remained in the mid-90% range, while the trailing 12-month net retention rate was 110%. Average ARR per customer increased to well above $500,000, reflecting broader adoption among enterprise clients.
DT Sees Faster Logs and AI Consumption
Annualized log-management consumption approached $200 million after nearly doubling over two quarters and continued to grow well above 100% year over year. Management expects Bindplane’s open-telemetry capabilities to support data ingestion and further strengthen the logs business.
More than 1,000 customers used DT to observe artificial intelligence and large-language-model workloads in production, up from roughly 850 in the prior quarter. More than 800 customers used the company’s agentic capabilities for autonomous operations, up from about 500.
Consumption growth among customers using AI capabilities ran 1.5 times above that of non-AI customers. Management identified higher telemetry volumes, AI-observability workloads and direct agent usage as three separate monetization opportunities.
DT Operating Details
For the first quarter of fiscal 2027, non-GAAP gross margin was 84%, down from 85% in the year-ago quarter.
On a GAAP basis, research and development expenses increased 25.7% to $135.99 million, reflecting continued platform investment. Sales and marketing expenses rose 9.9% to $181.63 million, while general and administrative expenses increased 9.6% to $61.74 million.
Non-GAAP operating income rose 12.9% year over year to $161.60 million, while the related margin was 29% compared with 30% a year earlier. GAAP operating income climbed 14.7% year over year to $71.48 million.
DT Generates Cash and Returns Capital
The company ended June 30, 2026, with $1.06 billion in cash and cash equivalents. During the quarter, DT repurchased 7.1 million shares for $275 million at an average price of $38.88.
Net cash provided by operating activities increased 13.6% year over year to $306.24 million. Adjusted free cash flow rose 17.9% year over year to $309.18 million, with the adjusted free cash flow margin expanding to 56% from 55%.
Dynatrace Updates Fiscal 2027 Outlook
For the second quarter of fiscal 2027, Dynatrace expects revenues of $565-$570 million and subscription revenues of $540-$545 million. Non-GAAP operating margin is projected to be in the range of 29.5%-30%, with adjusted earnings of 48-49 cents per share.
For fiscal 2027, management now expects revenues of $2.306-$2.320 billion and ARR of $2.359-$2.379 billion. The company raised the high end of its non-GAAP operating margin outlook to 29.75% and lifted adjusted earnings guidance to $1.97-$1.99 per share.
The outlook includes foreign-exchange headwinds of roughly $14 million to ARR and $4 million to revenues. Dynatrace maintained its constant-currency ARR growth forecast of 15.5%-16.5% and adjusted free cash flow margin target of 26.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in fresh estimates.
VGM Scores
Currently, Dynatrace has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock has a score of F on the value side, putting it in the bottom 20% quintile for value investors.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Dynatrace has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Dynatrace belongs to the Zacks Computers - IT Services industry. Another stock from the same industry, ServiceNow (NOW - Free Report) , has gained 24.1% over the past month. More than a month has passed since the company reported results for the quarter ended June 2026.
ServiceNow reported revenues of $3.99 billion in the last reported quarter, representing a year-over-year change of +24%. EPS of $0.90 for the same period compares with $0.82 a year ago.
ServiceNow is expected to post earnings of $1.03 per share for the current quarter, representing a year-over-year change of +7.3%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for ServiceNow. Also, the stock has a VGM Score of D.