10-Q · August 5, 2026
Dynatrace delivered $554.548 million of first-quarter revenue, up 16% year over year and 4.2% sequentially, supported by 17% ARR growth to $2.136 billion. Cash conversion was strong, with $306.240 million of operating…
Earnings analysis · 10-Q
DT earnings analysis
Filed November 3, 2026 · Our reading of the company's report
The latest report
Dynatrace delivered strong second-quarter growth, with revenue of $579.9 million, up 17% year over year, ARR of $2.207 billion, and GAAP operating margin improving to 16.5%. However, gross margin fell to 80.6% as…
Read full summary
Dynatrace delivered strong second-quarter growth, with revenue of $579.9 million, up 17% year over year, ARR of $2.207 billion, and GAAP operating margin improving to 16.5%. However, gross margin fell to 80.6% as cloud-hosting costs grew faster than subscription revenue, while quarterly adjusted free cash flow was only $42.3 million versus $303 million in the prior quarter. The new $1.438 billion exchangeable-note balance and the subsequent $815.9 million cash Arize acquisition increase balance-sheet, integration, and dilution risks; the 10-Q itself provided no quantitative guidance.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $0.23
What stood out
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Revenue growth remained strong
Revenue increased to $579.9 million from $493.8 million in the prior-year quarter, up $86.1 million or 17%; revenue also rose from $555 million in the prior quarter, an increase of approximately 4.5%. Subscription revenue grew 17% year over year to $553.1 million and service revenue grew 29% to $26.8 million.
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Operating leverage improved
GAAP operating income increased to $95.6 million from $73.0 million year over year, lifting operating margin to 16.5% from 14.8%. Sequentially, operating margin rose from approximately 12.9% in the prior quarter.
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ARR expanded 16% year over year
Annual recurring revenue reached $2.207 billion as of September 30, 2026, up 16% year over year, while dollar-based net retention was 109%.
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Quarterly cash generation improved
Net cash provided by operating activities was $41.1 million in the quarter and adjusted free cash flow was $42.3 million, versus $32.0 million and $27.8 million, respectively, in the prior-year quarter.
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Liquidity strengthened
Cash and cash equivalents increased to $2.076 billion from $1.097 billion at March 31, 2026, supported by $1.412 billion of net proceeds from exchangeable notes and $723.6 million of net financing cash inflow during the first six months.
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Backlog supports future revenue
The company reported $3.490 billion of remaining performance obligations as of September 30, 2026, with 52% expected to be recognized as revenue over the next 12 months.
What to watch
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Cloud costs pressured gross margin
Total gross margin declined to 80.6% from 81.8% year over year and from approximately 81.3% sequentially. Management attributed the pressure primarily to higher cloud-hosting costs; cost of subscription revenue increased 29% to $88.5 million versus 17% subscription-revenue growth.
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New exchangeable-note leverage
The company had $1.438 billion of exchangeable notes outstanding at September 30, 2026, carried at a net $1.411 billion, with a disclosed fair value of $1.583 billion. The notes could require cash settlement upon exchange, maturity, or a fundamental change, creating liquidity and dilution risk.
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Arize acquisition adds execution risk
Dynatrace acquired Arize on October 1, 2026 for $815.9 million in cash plus $98.2 million of restricted stock and RSUs, and also issued $26.0 million of additional RSUs to Arize employees. The transaction adds integration, execution, acquisition-cost, and potential dilution risk after the quarter end.
Management's outlook
The 10-Q does not provide quantitative revenue or EPS guidance; outlook and guidance were addressed separately in the November 3, 2026 earnings release/call.
Earlier filings 4
10-K · May 20, 2026
Dynatrace's 10-K report reveals a solid fiscal year 2026 with revenue reaching $2.02 billion, a robust 19% year-over-year growth. The firm emphasizes its commitment to leveraging AI for enhanced observability and…
10-Q · August 6, 2025
Dynatrace reported Q1 revenue of $477,349,000, up $78,129,000 versus $399,220,000 in the prior-year quarter, with margin expansion and stronger cash generation. Gross margin improved to 82.2% and operating margin to…
10-K · May 22, 2025
Dynatrace positions itself as an AI-powered, end-to-end observability platform (Grail data lakehouse, Davis AI engine, OneAgent, Smartscape) and emphasizes automation and agentic AI as core strategic differentiators.…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.