Summary
Dynatrace closed fiscal 2025 with a strong fourth quarter. Total revenue reached $445.16 million, up 16.9% from a year earlier. Subscription revenue was $424 million, up 18%, or 20% on a constant currency basis. Total ARR ended the period at $1,734 million, up 15%, or 17% in constant currency. Gross profit was $360.07 million, up 16.5%, while gross margin slipped to 80.9%, down 0.2 percentage points. Operating income rose to $42.91 million, up 85.6%, and operating margin climbed to 9.6%, up 3.6 percentage points. Net income was $39.30 million, up 3.6%.
Full year numbers tell a similar story. Revenue was $1.70 billion, up 18.7%. Gross profit was $1.38 billion, up 18.4%, with gross margin of 81.2%, down 0.2 percentage points. Operating income was $179.43 million, up 39.7%, and operating margin was 10.6%, up 1.6 percentage points. Net income was $483.68 million, up 212.8%, and diluted EPS was $1.59, up $1.07. That bottom line rests on a one-time item. An intra-entity transfer of the global economic rights of intellectual property to a Swiss subsidiary produced a large income tax benefit during the year, and the company says the move more closely aligns IP rights with business operations. Non-GAAP income from operations was $494 million for the year, and non-GAAP operating margin was 29%.
Cash generation held up. Fourth quarter operating cash flow was $162.79 million, up 23.6%, and full year operating cash flow was $459.42 million, up 21.5%. Free cash flow, a separate measure that also subtracts capital spending, was $431 million for the year and $145.5 million in the quarter. Capital expenditures were $14.57 million in the quarter, up 48.7%, and $26.11 million for the year, down 1.3%. Deferred revenue, current portion, was $1.09 billion, up 10.1%, and remaining performance obligations were $2.89 billion, up 19.4%. Dynatrace spent $43 million in the quarter to repurchase 787,000 shares at an average price of $53.99, leaving $327.4 million available under its $500 million program.
Operationally, the quarter brought 15 deals greater than $1 million in annual contract value, fourteen of them with partners. The Dynatrace Platform Subscription model now covers over 40% of the customer base and more than 60% of ARR, and consumption growth for DPS customers ran at twice the rate of SKU-based customers. Dynatrace signed a strategic collaboration agreement with AWS and opened early access for joint Google Cloud customers. Dollar-based net retention rate was 110%, down from 111% a year earlier.
Guidance for the full fiscal year 2026 puts ARR at $1,975 million to $1,990 million, with constant currency growth of 13% to 14%. Total revenue growth is guided to 14% to 15% in constant currency. Non-GAAP operating margin is guided to 29%, non-GAAP net income per diluted share to $1.56 to $1.59, and free cash flow to $505 million to $515 million at a 26% margin. For the first quarter of fiscal 2026, the company guides constant currency revenue growth of 16% to 17%, non-GAAP operating margin of 28% to 28.5%, and non-GAAP net income per diluted share of $0.37 to $0.38. The outlook assumes a foreign exchange tailwind of roughly $20 million on ARR and $17 million on revenue for the year, and excludes any share repurchases.
Risks look familiar. Management points to the macroeconomic environment, geopolitical disruption, foreign currency swings, competition, and the challenge of maintaining recent revenue growth rates. Security breaches and any real or perceived defects in the platform are named as exposures. Tax policy matters as well. IRC Section 174 forces the company to capitalize and amortize research spending, which has raised U.S. federal and state cash taxes and reduced cash flow since fiscal 2024, and the company continues to monitor the OECD Pillar Two 15% global minimum tax. Share-based compensation also keeps GAAP results well below non-GAAP results.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2025 | Q3 FY2025 | QoQ | Q4 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $445.2M | $436.2M | +2.1% | $380.8M | +16.9% |
| Gross profit | $360.1M | $353.6M | +1.8% | $309.0M | +16.5% |
| Gross margin | 80.9% | 81.1% | -0.2 pp | 81.1% | -0.3 pp |
| Research & development | $103.3M | $98.3M | +5.0% | $84.3M | +22.6% |
| Sales & marketing | $161.8M | $154.5M | +4.7% | $148.8M | +8.7% |
| General & administrative | $52.1M | $49.4M | +5.5% | $47.3M | +10.0% |
| Total operating expenses | $317.2M | $306.1M | +3.6% | $285.9M | +11.0% |
| Operating income (loss) | $42.9M | $47.5M | -9.6% | $23.1M | +85.6% |
| Operating margin | 9.6% | 10.9% | -1.2 pp | 6.1% | +3.6 pp |
| Net income (loss) | $39.3M | $361.8M | -89.1% | $37.9M | +3.6% |
| Net margin | 8.8% | 82.9% | -74.1 pp | 10.0% | -1.1 pp |
| Diluted EPS | $0.13 | $1.19 | -$1.06 | $0.13 | ±$0.00 |
| Customers | 4,100 | — | — | 4,000 | +2.5% |
Risks
The company observed global economic uncertainty and lengthening sales cycles over the last year, and MD&A notes the current macroeconomic environment can include geopolitical considerations, credit and foreign currency fluctuations, and changes in customer buying patterns. These conditions may cause customers to defer or cancel discretionary observability purchases.
ARR was $1,734 million as of March 31, 2025, reflecting 15% year-over-year growth, down from 21% as of March 31, 2024 and 25% as of March 31, 2023. This deceleration may not be indicative of future growth and could pressure the company's ability to sustain recent expansion rates.
The company plans to evolve into an agentic AI platform and has made significant investments in application security, Grail, AutomationEngine, and AppEngine, but AI may not work as anticipated or may produce unexpected results. Competitors including Cisco, which acquired Splunk in 2024, may also bundle or expand AI-enabled observability offerings.
The company is experiencing an increase in large, strategic deals with longer sales cycles, greater uncertainty of completing the sale, and specially negotiated terms. Transactions are seasonally concentrated, with the third and fourth fiscal quarters typically largest and a significant portion closing in the last two weeks of each quarter.
When the company updated its go-to-market strategy during fiscal 2025, more than 30% of customer accounts transitioned to new sales representatives. It is difficult to predict whether these changes will achieve their desired effects, and a negative impact on retention and other results is possible.
The observability market is highly competitive and fragmented, and many competitors have greater brand recognition, larger sales and marketing budgets, and the ability to bundle offerings. Customers may also build in-house solutions using open source software, which could reduce demand for Dynatrace.
The dollar-based net retention rate was 110% as of March 31, 2025, down from 111% as of March 31, 2024 and 119% as of March 31, 2023. Customers have no obligation to renew, and retention and expansion rates may decline due to satisfaction, pricing, competition, or macroeconomic factors.
In the last two years, the company hired a new Chief Customer Officer, Chief Revenue Officer, Chief Marketing Officer, and various new sales and marketing leaders. Competition for skilled personnel is intense, particularly in Europe where research and development operations are concentrated.
The company is subject to a wide range of laws and regulations, including the EU Digital Operational Resilience Act (DORA) effective January 17, 2025, and evolving AI, cybersecurity, data governance, and trade controls. Non-compliance could lead to fines, sanctions, or increased costs of doing business.
The fiscal 2025 IP Transfer resulted in a $320.9 million tax benefit and deferred tax asset, based on significant management assumptions about discount rates and future revenue and expenses. If different assumptions were used, it could materially impact the IP valuation and tax results.
Service gross margin decreased to 4% in fiscal 2025 compared to 8% in fiscal 2024, primarily due to increased personnel costs and share-based compensation expense. The company expects gross margin to fluctuate based on revenue mix and cloud hosting costs.
The Credit Facility contains a financial covenant requiring compliance with a maximum leverage ratio, and a default could accelerate indebtedness and permit lenders to exercise remedies against substantially all assets. As of March 31, 2025, $399.2 million was available with $0.8 million of letters of credit outstanding.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Total ARR
Free Cash Flow
Free Cash Flow Margin
Summary, forecast, risks and KPIs are extracted from Dynatrace, Inc.'s SEC filings for Q4 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.