Dynatrace ((DT)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Dynatrace’s recent earnings call reflected a positive sentiment, highlighting strong financial performance and significant growth in strategic areas such as large deals and log management. Despite these achievements, the company remains cautious in its guidance due to potential macroeconomic uncertainties.
Strong Start to Fiscal 2026
Dynatrace reported a robust beginning to fiscal 2026, with subscription revenue growing by 19% and Annual Recurring Revenue (ARR) increasing by 16%. The company also achieved a pretax free cash flow of 33% of revenue on a trailing 12-month basis, indicating solid financial health.
Expansion of Large Deals
The company successfully closed 12 seven-figure Annual Contract Value (ACV) deals during the quarter. The strategic enterprise pipeline saw a nearly 50% year-over-year growth, with the contribution of deals greater than $1 million more than doubling, showcasing Dynatrace’s ability to secure substantial contracts.
Growth in Log Management
Dynatrace experienced a remarkable 36% sequential increase in logs consumption, with a year-over-year growth of over 100%. The company is on track to achieve $100 million in annualized logs consumption by the end of this fiscal year, underscoring its strength in log management.
Recognition as Industry Leader
Dynatrace was named a leader in the 2025 Gartner Magic Quadrant for observability platforms and ranked #1 in four out of six use cases in the 2025 Gartner critical capabilities for observability platforms report. This recognition solidifies its position as a top player in the industry.
Increase in DPS Adoption
Over 45% of Dynatrace’s customer base and more than 65% of ARR is now on the Dynatrace Platform Subscription licensing model. This shift leads to higher consumption and capability adoption, reflecting the company’s successful transition to a subscription-based model.
Prudent Guidance Despite Strong Start
Despite a strong start to the fiscal year, Dynatrace maintained its full-year ARR growth guidance at 13% to 14% in constant currency. This cautious approach considers macroeconomic uncertainties and the variability in the timing of large deals.
Decline in New Logo Additions
The company added 103 new logos in the quarter, a decrease compared to previous periods. This trend highlights Dynatrace’s focus on expanding existing customer relationships rather than acquiring new ones.
Forward-Looking Guidance
Looking ahead, Dynatrace provided substantial guidance, highlighting a robust start to the fiscal year. The company maintained its full-year ARR growth guidance of 13% to 14% in constant currency and increased revenue guidance due to a revised on-demand consumption revenue estimate. Dynatrace forecasts total revenue between $1.97 billion and $1.98 billion, with an operating margin of 29%. Non-GAAP EPS guidance was also raised to a range of $1.58 to $1.61 per diluted share.
In conclusion, Dynatrace’s earnings call painted a positive picture of the company’s financial health and strategic growth areas, despite maintaining cautious guidance due to macroeconomic uncertainties. Key takeaways include strong fiscal performance, significant growth in large deals and log management, and recognition as an industry leader.