Summary
Dynatrace opened fiscal 2025 with total revenue of $399.22 million in the quarter ended June 30, 2024, up 19.9% from the prior-year quarter. ARR reached $1,541 million, up 19% year over year, or 20% on a constant currency basis. Total revenue constant currency growth was 21%. The dollar-based net retention rate was 112%, compared with 116% a year earlier. Management pointed to demand for large strategic deals and continued cloud migration as drivers. The company expanded its platform with a Site Reliability Guardian App, a Davis Anomaly Detection App, and a Vulnerabilities App. Dynatrace added Kubernetes Security Posture Management, completed FedRAMP Moderate reauthorization to Rev.5, became the first AWS partner to integrate with its Application Migration Service, and won a 2024 Microsoft Americas Partner of the Year Award.
Profitability was steady on a GAAP basis. Gross profit rose 19.9% to $324.47 million, while gross margin was 81.3%, flat from the prior-year quarter. Operating income rose 22.6% to $42.03 million, and operating margin was 10.5%, up 0.2 percentage points. Net income rose 1.1% to $38.62 million. Diluted EPS was $0.13, flat year over year. Non-GAAP results were stronger. Non-GAAP income from operations was $114.25 million, non-GAAP operating margin was 29%, non-GAAP net income was $98.926 million, and non-GAAP diluted EPS was $0.33, compared with $0.27 a year earlier.
Cash generation was a highlight. Operating cash flow rose 72.3% to $230.74 million. Capital expenditures fell 67.3% to $3.36 million. Free cash flow was $227.382 million, compared with $123.636 million a year earlier. Deferred revenue, current portion, was $862.08 million, up 19.4%. Remaining performance obligations were $2.32 billion, up 24.9%. The company repurchased about 1.1 million shares for about $50 million under its $500 million share repurchase program. The cash flow statement showed a decrease in accounts receivable from timing of customer receipts and a decrease in deferred revenue from sales-cycle seasonality, which is higher in the third and fourth quarters of the fiscal year.
Guidance points to continued growth. For the second quarter of fiscal 2025, Dynatrace guides non-GAAP income from operations of $113 million to $116 million, non-GAAP operating margin of 28% to 28.5%, non-GAAP net income of $96 million to $99 million, and non-GAAP diluted EPS of $0.32 to $0.33. Total revenue is guided to grow 15% to 16% as reported and 16% to 17% at constant currency. For the full fiscal year 2025, the company maintained guidance for ARR of $1,720 million to $1,735 million, non-GAAP income from operations of $459 million to $467 million, non-GAAP operating margin of 28%, non-GAAP net income of $383 million to $392 million, non-GAAP diluted EPS of $1.26 to $1.29, free cash flow of $386 million to $398 million, and free cash flow margin of 23.5% to 24%. It now expects foreign exchange to be a headwind of about $12 million on ARR and about $10 million on revenue for fiscal 2025.
Risks include macroeconomic and geopolitical disruption, foreign currency fluctuations, changes in customer buying patterns and sales cycle length, competition, execution on AI innovation including Davis AI, security breaches, hiring and retention, and acquisition integration. The quarter showed strong cash flow and ARR growth, while net income growth lagged operating income growth and the dollar-based net retention rate slipped. The second quarter non-GAAP operating margin guidance of 28% to 28.5% is below the first quarter non-GAAP operating margin of 29%.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2025 | Q4 FY2024 | QoQ | Q1 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $399.2M | $380.8M | +4.8% | $332.9M | +19.9% |
| Gross profit | $324.5M | $309.0M | +5.0% | $270.5M | +19.9% |
| Gross margin | 81.3% | 81.1% | +0.2 pp | 81.3% | +0.0 pp |
| Research & development | $87.6M | $84.3M | +3.9% | $66.3M | +32.1% |
| Sales & marketing | $145.1M | $148.8M | -2.5% | $125.1M | +16.0% |
| General & administrative | $45.0M | $47.3M | -5.0% | $39.1M | +15.1% |
| Total operating expenses | $282.4M | $285.9M | -1.2% | $236.3M | +19.5% |
| Operating income (loss) | $42.0M | $23.1M | +81.8% | $34.3M | +22.6% |
| Operating margin | 10.5% | 6.1% | +4.5 pp | 10.3% | +0.2 pp |
| Net income (loss) | $38.6M | $37.9M | +1.8% | $38.2M | +1.1% |
| Net margin | 9.7% | 10.0% | -0.3 pp | 11.5% | -1.8 pp |
| Diluted EPS | $0.13 | $0.13 | ±$0.00 | $0.13 | ±$0.00 |
Risks
Management says it continues to factor a challenging macroeconomic climate, with geopolitical considerations, credit/equity/foreign-currency fluctuations, inflation, interest rates and consumer confidence potentially affecting customer buying patterns and the length of sales cycles. The filing also notes observed global economic uncertainty and lengthening sales cycles, and warns that a U.S. federal government shutdown or 2024 election uncertainty could increase volatility.
The company is seeing an increase in large, strategic deals where customers make broader observability architecture decisions; these deals carry longer sales cycles, greater uncertainty of completing the sale, and specially negotiated terms. Sales are seasonally concentrated, with the third and fourth fiscal quarters typically largest and a significant portion of transactions occurring in the last two weeks of a quarter.
Dollar-based net retention rate was 112% as of June 30, 2024, compared with 116% as of June 30, 2023. The risk factors disclose that when the go-to-market strategy was updated earlier this year, more than 30% of customer accounts transitioned to new sales representatives, and the company says it is difficult to predict whether these changes will achieve their desired effects and a negative impact on retention is possible.
Competition is intense and evolving, including new and evolving uses of AI; the filing notes that Cisco acquired Splunk earlier this year and that larger competitors may bundle offerings, exert pricing pressure, or reduce Dynatrace's market share. The company is also expanding into new and adjacent markets, which increases competitive exposure.
The company is subject to rapidly evolving privacy, data protection, data transfer and AI laws, including the GDPR, CCPA, EU AI Act and proposed U.S. AI rules. Compliance may require changes to data practices, increase research and development burdens, and expose Dynatrace to fines of up to 4% of worldwide annual revenue for serious GDPR breaches.
Dynatrace has in the past been the target of cybersecurity attacks, including email phishing, and uses a multi-tenant platform, so a security breach could potentially affect a significant number of customers. The filing also notes increased risk from a majority of employees working partially or fully remote.
The company has had significant senior management changes in the last two years, including new Chief Revenue Officer, Chief Marketing Officer, Chief Legal Officer, Chief People Officer and Chief Accounting Officer, and all senior managers are employed at will. Competition for employees with industry experience is intense, particularly in Europe where research and development operations are concentrated.
The company relies on partners including GSIs such as Accenture, Deloitte, DXC and Kyndryl, and hyperscalers such as AWS, GCP and Azure; partner agreements are generally non-exclusive and some partners compete with Dynatrace. If these partnerships do not contribute to sales growth or are terminated, the company's ability to grow could be harmed.
The risk factors caution that rapid revenue growth in recent periods may not be indicative of future growth, and the company may not sustain growth consistent with recent history. The MD&A reports ARR year-over-year increase was 19% as of June 30, 2024, compared with 25% as of June 30, 2023.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Free Cash Flow
Dollar-Based Net Retention Rate
ARR
Non-GAAP Income from Operations
Summary, forecast, risks and KPIs are extracted from Dynatrace, Inc.'s SEC filings for Q1 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.