Dynatrace Raises Fiscal 2027 ARR Outlook After Arize Close

The Tip Desk · November 3, 2026 · 3 min read

Second-quarter ARR reached $2.21 billion as the company lifted full-year ARR guidance to $2.393 billion–$2.413 billion and authorized an extra $1 billion of buybacks.

Dynatrace (DT), the AI-powered observability platform, reported second-quarter fiscal 2027 annual recurring revenue of $2.21 billion, up 16% year over year on both an as-reported and constant-currency basis. That growth rate slowed from 17% in the first quarter of fiscal 2027. Total revenue rose 17% to $580 million, a step-up from 16% growth in the prior quarter, with subscription revenue of $553 million.

GAAP income from operations was $96 million, and GAAP operating margin was 16%. Non-GAAP income from operations was $184 million, with a 32% non-GAAP operating margin. GAAP diluted earnings were $0.23 a share; non-GAAP diluted earnings were $0.54 a share. Adjusted free cash flow was $42.3 million, or 7% of revenue.

Platform consumption continued to grow in excess of 20% year over year, the company said, with AI customer cohorts consuming more than twice the rate of other customers. Log management grew well over 100% year over year. Infrastructure management surpassed $500 million in annualized consumption, growing approximately 30%. More than 1,100 customers were using Dynatrace agents for autonomous operations, up from more than 800 in the prior quarter. The company closed 14 deals exceeding $1 million in annual contract value, including a major U.S. bank whose total contract value now exceeds nine figures.

On October 1, 2026, Dynatrace completed the acquisition of Arize, combining AI evaluation and large-language-model monitoring with the Dynatrace platform. Chief Executive Officer Rick McConnell said the combination extends capabilities across the AI lifecycle from development through production. The company also announced a strategic partnership with CrowdStrike covering AI-native cybersecurity and observability.

The board authorized an incremental share-repurchase program of up to $1 billion, bringing remaining buyback capacity to approximately $1.3 billion. In the quarter, Dynatrace spent $246 million to repurchase 5.2 million shares at an average price of $47.38. Cash and cash equivalents were $2.08 billion at September 30, 2026.

Dynatrace raised its full-year fiscal 2027 ARR outlook to $2.393 billion–$2.413 billion, or 16.5%–17.5% as reported and 17.5%–18.5% in constant currency, from a prior range of $2.359 billion–$2.379 billion. Full-year total revenue guidance moved to $2.330 billion–$2.340 billion, and subscription revenue guidance to $2.227 billion–$2.237 billion. The company said the new outlook reflects the expected contribution from Arize, including approximately 200 basis points of ARR growth accretion for fiscal 2027. Foreign exchange is expected to be a headwind of about $20 million on ARR and $6 million on revenue for the year.

Full-year non-GAAP income from operations guidance was lowered to $653 million–$661 million, or a 28%–28.25% margin, from $682 million–$690 million. Adjusted free cash flow guidance was lowered to $600 million–$605 million. The company said Arize is expected to dilute non-GAAP operating margin by about 175 basis points in fiscal 2027.

For the third quarter of fiscal 2027, Dynatrace expects total revenue of $591 million–$596 million, or 15%–16% as reported and 15.5%–16.5% in constant currency, with subscription revenue of $567 million–$572 million and a 26% non-GAAP operating margin.

The company said it will host an Investor Day on February 16, 2027, in Las Vegas, where management is expected to detail a long-term roadmap toward a “Rule of 50” profile in fiscal 2029, defined as the sum of constant-currency ARR growth and non-GAAP operating margin, along with a capital-allocation framework and multi-year financial targets.