Summary
Dynatrace opened fiscal 2027 with total revenue of $554.55 million for the quarter ended June 30, 2026, up 16.2% from $477.35 million in the prior-year quarter. Subscription revenue reached $530 million, up 16%, or 15% on a constant currency basis. Total ARR was $2,136 million as of June 30, 2026, up 17% on both an as reported and a constant currency basis. Management highlighted 41% organic net new ARR growth, a figure that excludes $13 million of ARR contributed by the Bindplane acquisition, and record new logo ARR growth of more than 160%. Dollar-based net retention rate was 110%, down from 111% a year earlier. Annualized logs consumption nearly doubled over the last two quarters to $200 million, growing well over 100% year over year.
Profitability told a more mixed story. Gross profit rose 15.0% to $451.10 million, but gross margin slipped to 81.3% from 82.1%, a decline of 0.8 percentage points, as higher cloud-based hosting costs tied to SaaS utilization offset personnel efficiencies. Operating income was $71.48 million, up 14.7%, while operating margin eased to 12.9% from 13.1%. Net income fell 23.6% to $36.65 million, and diluted EPS came in at $0.12 versus $0.16 in the prior-year quarter. The gap between operating and net results traces largely to income tax expense of $44.2 million, up from $33.4 million, which the filing attributes to share-based compensation shortfalls in the current year against windfalls a year ago. Interest income, net, fell 28% as share repurchases reduced cash and marketable securities balances. On a non-GAAP basis, income from operations was $161.6 million at a 29% margin, and non-GAAP diluted EPS was $0.48.
Cash generation remained the strongest part of the story. Operating cash flow was $306.24 million, up 13.6% from $269.69 million, and capital expenditures fell 57.9% to $3.15 million. Adjusted free cash flow, a measure the company redefined this quarter, was $309.2 million at a 56% margin. Deferred revenue, current portion only, was $1.11 billion, up 10.6%, and remaining performance obligations reached $3.44 billion, up 17.9%. The company ended the quarter with $1,057.8 million in cash and cash equivalents and $398.9 million available under its credit facility. It spent $275 million repurchasing 7.1 million shares at an average price of $38.88, leaving $573.1 million available under the current authorization, and paid $99.5 million for the Bindplane acquisition.
Guidance for the second quarter of fiscal 2027 calls for total revenue growth of 14% to 15% as reported and 15% to 16% in constant currency, with subscription revenue growth of 14% to 15% as reported. Second-quarter non-GAAP income from operations is guided to $166 million to $170 million, and non-GAAP diluted EPS to $0.48 to $0.49. For the full fiscal year 2027, the company guides ARR to $2,359 million to $2,379 million, non-GAAP operating margin to 29.5% to 29.75%, non-GAAP diluted EPS to $1.97 to $1.99, and adjusted free cash flow to $610 million to $615 million at a 26.5% margin. Full-year total revenue growth is guided to 14% to 15% as reported and 14.5% to 15% in constant currency. Foreign exchange is expected to be a headwind of roughly $14 million on ARR and $4 million on revenue for the full year, an incremental headwind of about $23 million to ARR and $19 million to revenue relative to prior guidance.
Risks flagged in the filing center on the macroeconomic backdrop: geopolitical conditions, tariffs and trade policies, fluctuations in credit, equity and foreign currency markets, inflation, interest rates, and shifting customer buying patterns that can affect transaction size and sales cycle length. The company also disclosed that CFO Jim Benson will resign by the current fiscal year end on March 31, 2027, with a search for a successor already underway.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2027 | Q4 FY2026 | QoQ | Q1 FY2026 | YoY |
|---|---|---|---|---|---|
| Revenue | $554.5M | $531.7M | +4.3% | $477.3M | +16.2% |
| Gross profit | $451.1M | $430.3M | +4.8% | $392.1M | +15.0% |
| Gross margin | 81.3% | 80.9% | +0.4 pp | 82.2% | -0.8 pp |
| Research & development | $136.0M | $130.6M | +4.1% | $108.2M | +25.7% |
| Sales & marketing | $181.6M | $183.4M | -1.0% | $165.3M | +9.9% |
| General & administrative | $61.7M | $60.4M | +2.2% | $56.3M | +9.6% |
| Total operating expenses | $379.6M | $393.0M | -3.4% | $329.8M | +15.1% |
| Operating income (loss) | $71.5M | $37.3M | +91.4% | $62.3M | +14.7% |
| Operating margin | 12.9% | 7.0% | +5.9 pp | 13.1% | -0.2 pp |
| Net income (loss) | $36.7M | $17.4M | +110.4% | $48.0M | -23.6% |
| Net margin | 6.6% | 3.3% | +3.3 pp | 10.1% | -3.4 pp |
| Diluted EPS | $0.12 | $0.06 | +$0.06 | $0.16 | -$0.04 |
Risks
The filing notes competitors may incorporate AI more quickly or successfully, and that generic LLMs, generative AI, and vibe coding may reduce demand; it cites Cisco's 2024 acquisition of Splunk and Palo Alto Networks' 2026 acquisition of Chronosphere. MD&A highlights agentic AI as a key differentiation focus, increasing the cost of keeping pace.
Sales cycles can range from several months to over a year, large strategic deals bring longer cycles and greater uncertainty, and a significant portion of transactions occur in the last two weeks of each quarter. MD&A cites macroeconomic factors affecting the size of transactions and length of sales cycles.
The filing states annual revenue grew 19% in the year ended March 31, 2026, but total revenue grew 16% in the quarter ended June 30, 2026 and ARR growth was 17% versus 18% a year earlier. It warns recent rapid growth may not be indicative of future growth.
Dollar-based net retention rate was 110% as of June 30, 2026 compared with 111% as of June 30, 2025, and customers have no obligation to renew at similar terms. Declines in retention or expansion could harm future revenue.
The filing and MD&A cite geopolitical considerations, tariffs and trade policies, fluctuations in credit, equity, and foreign currency markets, inflation, interest rates, and consumer confidence as factors that may affect customer buying patterns and spending. These conditions could elongate sales cycles and reduce deal sizes.
Dynatrace announced on August 5, 2026 that its CFO will retire by March 31, 2027, following recent hires of a new Chief Customer Officer and Chief People Officer. Competition for AI and machine learning talent is intense, particularly in Europe where R&D is concentrated.
Starboard Value disclosed a substantial investment in April 2026, and Dynatrace announced two new board appointments in July 2026 following engagement. Activism could divert management attention, create employee and partner uncertainty, and force strategic decisions.
The filing states Dynatrace has in the past been and may in the future be the target of cybersecurity attacks, including social engineering and phishing, and its multi-tenant platform means a breach could affect a significant number of customers. AI-enhanced and state-sponsored attacks are increasing detection difficulty.
The EU AI Act and a growing patchwork of U.S. federal, state, and local AI laws may increase compliance costs and legal liability as Dynatrace embeds agentic and generative AI into its platform. Non-compliance can lead to significant fines.
Growth increasingly depends on GSIs such as Accenture, Atos, Deloitte, DXC, and Kyndryl and hyperscalers including AWS, GCP, and Azure. These agreements are generally non-exclusive and some partners compete with Dynatrace, so partner failure or termination could limit sales and distribution.
Total gross margin decreased to 81% for the quarter ended June 30, 2026 from 82% a year earlier, and subscription gross margin decreased to 85% from 86%, primarily due to higher cloud-based hosting costs from increased customer utilization. Continued cloud cost increases could pressure margins.
Dynatrace acquired Metis, DevCycle, and Bindplane in the last two years, with Bindplane driving a $1.3 million increase in amortization of acquired technology and $99.5 million of investing cash use in Q1 FY2027. Integration, dilution, or impairment risks could disrupt operations.
Income tax expense was $44.2 million for Q1 FY2027, up $10.8 million from $33.4 million a year earlier, primarily due to share-based compensation shortfalls. This contributed to net income declining 23.6% while operating income rose 14.7% in the quarter.
For the three months ended June 30, 2026, $461.0 million of revenue was recognized from deferred revenue at the beginning of the period, so a decline in new or renewed contracts may not be immediately reflected in current revenue but will affect future quarters.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Total ARR
Dollar-Based Net Retention Rate
Summary, forecast, risks and KPIs are extracted from Dynatrace, Inc.'s SEC filings for Q1 FY2027 (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.