Dynatrace Accelerated ARR Growth, Trimmed Currency-Exposed Outlook
Revenue reached $554.5 million as the observability software maker absorbed a widening foreign-exchange headwind.
Observability software maker Dynatrace (DT) accelerated annual recurring revenue growth to 17% in reported and constant currency, as organic net-new ARR increased 41% from a year earlier.
ARR reached $2.136 billion, up from $2.054 billion at fiscal year-end, breaking from the 16% constant-currency growth recorded in each of the preceding two earnings quarters. New-logo ARR growth exceeded 160%, a company record, while annualized logs consumption nearly doubled over two quarters to $200 million.
Total revenue rose 16% from a year earlier and about 4% sequentially, while constant-currency growth slowed to 15% from 16% in fiscal Q4. Subscription revenue increased 16% to $530.3 million. Diluted non-GAAP earnings rose 14% to $0.48 a share, while GAAP earnings declined to $0.12 a share from $0.16.
Higher costs tempered the revenue gains. GAAP and non-GAAP gross margins each narrowed 1 percentage point, to 81% and 84%, respectively, as cost of revenue grew about 21%. Non-GAAP operating income increased to $161.6 million, while its margin slipped to 29% from 30%. GAAP operating income rose to $71.5 million and its margin held at 13%.
Operating cash flow increased 14% to $306.2 million, and adjusted free cash flow rose 18% to $309.2 million under a new definition that added back acquisition-related, restructuring and other nonrecurring cash payments. Dynatrace recast prior periods to match the measure. Acquisition cash spending totaled $99.5 million, while related and restructuring costs were $7.7 million.
Dynatrace lowered the midpoint of its fiscal 2027 reported-currency ARR forecast by $23 million, to a range of $2.359 billion to $2.379 billion, due to an incremental currency headwind of the same amount. Constant-currency ARR growth guidance remains 15.5% to 16.5%. The company cut the midpoint of its revenue outlook by $13 million to account for currency effects, while slightly raising its constant-currency growth expectation.
Full-year non-GAAP operating-income guidance remains $682 million to $690 million, and the margin outlook increased slightly to 29.5% to 29.75%. Non-GAAP earnings guidance rose to $1.97 to $1.99 a share as projected diluted shares declined following repurchases. Dynatrace spent $275 million to buy back 7.1 million shares during the quarter, extending the stepped-up pace of capital returns.