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Dynatrace (DT) Q1 FY27 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q1 FY27)· Information Technology· Aug 5, 2026

Source: earnings call transcript

Executive summary

Dynatrace Q1 FY27 — Strong Start with ARR Acceleration and Record New Logo Growth

Dynatrace delivered a strong Q1 FY27, exceeding top-line and profitability guidance, driven by accelerating ARR, record new logo growth, and robust logs consumption. The company is confident in its path to full-year ARR acceleration, leveraging its unified observability platform for AI-first environments and expanding monetization opportunities from AI workloads and agentic usage. Management noted that the strong Q1 performance reinforces their conviction in achieving ARR acceleration for the fiscal year.

Highlights

5

  • Total ARR grew 17% year-over-year to $2.14 billion.

  • Net new ARR was $85 million, growing 66% (41% organically) year-over-year.

  • Achieved record new logo growth of more than 160%, with an average land size of nearly $285,000.

  • Non-GAAP operating margin reached 29%, exceeding the high end of guidance by 100 basis points.

  • Logs consumption nearly doubled since crossing the $100 million milestone two quarters ago, now at nearly $200 million annualized.

Concerns

1

  • Anticipated full-year FX headwind of $14 million to ARR and $4 million to revenue, representing an incremental headwind of $23 million to ARR and $19 million to revenue.

Guidance & targets

CategoryTargetConfidence
Full-year FY27 Constant Currency ARR Growth
15.5% to 16.5%
high materiality
High
Full-year FY27 Total Revenue and Subscription Revenue Growth
14.5% to 15%
high materiality
High
Full-year FY27 Non-GAAP Operating Margin
29.75%
high materiality
High
Full-year FY27 Non-GAAP EPS
$1.97 to $1.99
high materiality
High
Full-year FY27 Diluted Share Count
295 million to 297 million shares
low materiality
High
Full-year FY27 Effective Cash Tax Rate
18.5%
low materiality
High
Full-year FY27 Adjusted Free Cash Flow Margin
26.5%
high materiality
High
Q2 FY27 Total Revenue and Subscription Revenue Growth
15% to 16%
medium materiality
High
Q2 FY27 Non-GAAP Operating Margin
29.5% to 30%
medium materiality
High
Q2 FY27 Non-GAAP EPS
$0.48 to $0.49
medium materiality
High
Full-year FY27 FX Headwind to ARR
$14M
medium materiality
High
Full-year FY27 FX Headwind to Revenue
$4M
medium materiality
High
Incremental Full-year FY27 FX Headwind to ARR
$23M
medium materiality
High
Incremental Full-year FY27 FX Headwind to Revenue
$19M
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Logs
Fastest-growing product category, expected to remain a powerful growth driver, accelerating consumption and providing a path to future ARR expansion. Bindplane acquisition is expected to be an accelerant to the logs business.
Annualized consumption: nearly $200MCrossed $100M milestone: 2 quarters ago
—well above 100%——

DT operating KPIs by quarter

DT operating KPIs stated on its earnings calls, by fiscal quarter
KPI Mar 2026 Q4 FY26This call Jun 2026 Q1 FY27Change vs prior quarter
Customers New logos added
126 We added 126 new logos in Q4 and including a record 9 7-figure lands as we continue to target new logos in large enterprise accounts with a higher propensity to expand. Source: earnings call transcript
122 In Q1, we added 122 new logos to the Dynatrace platform. Source: earnings call transcript
-3.2%
Net revenue retention rate
110% Net retention rate or NRR on a trailing 12-month basis was 110% in the fourth quarter. Source: earnings call transcript
110% Net retention rate, or NRR, was 110% on a 12-month basis. Source: earnings call transcript
0 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Total ARR $2.14B Q1 FY27

up 17% YoY

Net new ARR $85M Q1 FY27

up 66% YoY

Adjusted for foreign exchange movements

Organic net new ARR $73M Q1 FY27

up 41% YoY

Excludes $13M ARR contribution from Bindplane acquisition

Net retention rate (NRR) 110% Q1 FY27

On a 12-month basis

Product announcements

ProductTypeDetails
Blueboxlaunch

Deals & partnerships

Bindplane Acquisition of a company supporting OpenTelemetry data collection.

Supports the open standard for OpenTelemetry data collection, facilitating easier data ingestion and performing ahead of plan.

DevCycle Acquisition of a company supporting feature flags.

Acquired earlier this year, supports the open standard for feature flags.

Top global financial institution Expansion deal for AI model validation and cost control. 7-figure ACV

Customer is using Dynatrace to validate model consumption, control cost, and maintain full data lineage from prompt to response, deploying AI with greater confidence and reducing compliance/audit risk.

Leading recreational vehicle retailer Expansion deal for custom CRM application development. 6-figure ACV

Customer uses Dynatrace as their operational system of record while building a custom CRM application through AI-assisted development.

One of Latin America's largest financial institutions New logo win for observability stack consolidation. 8-figure ACV

Selected Dynatrace to consolidate a fragmented multi-vendor observability stack across a complex environment, supporting mission-critical citizen-facing services.

Risks & headwinds

Foreign currency fluctuations (strong U.S. dollar) FY27

Incremental headwind of $23 million to ARR and $19 million to revenue for full year FY27. Total FX headwind of $14 million to ARR and $4 million to revenue for full year FY27.

Mitigation:Guidance incorporates the anticipated impact.

What to watch in Q2 FY27

Net new ARR productivity

Next quarter (Q2 FY27) and beyond.
Current Trailing 12-month organic net new ARR growth of 17% in Q1 FY27, up from 12% in Q4.
Target Continued acceleration or sustained high growth.

Why it matters

Indicates the effectiveness of go-to-market changes and overall business momentum, crucial for full-year ARR acceleration.

Due to that lens, we have now delivered 4 consecutive quarters of acceleration in trailing 12-month organic net new ARR growth. Growth reached 17% on an organic basis in Q1. up from 12% in Q4, demonstrating continued momentum.

Find out whether DT delivers this. Inve re-checks your case every morning.

Q&A highlights

What factors are contributing to the significant strength in new logo acquisition, and where are these new customers being found?

The strong new logo performance, including an average land size of nearly $285,000, is a result of go-to-market changes made two years ago, which focused investments on strategic and enterprise accounts. The primary sales play is platform consolidation, offering economic benefits to customers by moving from fragmented tools to a single vendor.

“It is a function of some of the go-to-market changes that we made 2 years ago, where we waited investments in strategic and enterprise accounts. And what you're seeing is growing traction.”

asked by Brent Thill · answered by James Benson

2 min read 6 chapters

Detailed narrative

AI's Contribution to Observability and Monetization

AI is driving increased consumption across the Dynatrace platform, creating demand for new AI observability capabilities, and enabling direct monetization of agent usage. AI workloads generate significantly more telemetry data than traditional systems, which is a key driver for the growth of log management. The company monetizes its own AI and agents through DPS usage, as agents become consumers of observability.

AI Observability Market Opportunity

Dynatrace estimates the AI observability total addressable market will exceed $10 billion by 2030, growing at more than 50% annually. This represents the next logical evolution of the broader observability market, as AI workloads introduce new challenges such as verifying model accuracy and ensuring agentic systems deliver intended outcomes, which traditional observability did not address.

Dynatrace's AI-First Platform and Differentiators

The Dynatrace platform is built for an AI-first world, providing a common source of trusted context for both AI agents and human operators through its Grail and Smartscape technologies. Dynatrace intelligence combines deterministic and agentic AI to deliver precise causal insights, enabling confident action. This depth of insight provides a distinct advantage as agents become a larger part of enterprise operations.

Commitment to Open Standards and Interoperability

Dynatrace is purposefully building for an open, interoperable ecosystem. Recent acquisitions, Bindplane (OpenTelemetry data collection) and DevCycle (feature flags), reflect a deliberate commitment to open standards. The platform is designed to work alongside existing enterprise tools, including partners like ServiceNow, and to operate natively in multi-cloud environments, enhancing trust and competitive advantage.

Customer Success and Adoption of AI Observability

Over 1,000 customers now use Dynatrace to observe AI and LLM workloads in production, up from approximately 850 last quarter. Additionally, more than 800 customers are running operations autonomously with Dynatrace's agentic capabilities, up from around 500 last quarter. Consumption growth for customers in these AI cohorts is 1.5 times higher than that of non-AI cohort customers, demonstrating the impact of AI on platform usage.

CFO Jim Benson's Retirement

Jim Benson, Chief Financial Officer, plans to retire from Dynatrace by the end of the fiscal year. The company will conduct a thorough search for his successor. Rick McConnell expressed deep gratitude for Jim's leadership and contributions in scaling the business, strengthening the financial profile, and positioning Dynatrace for its next phase of growth.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.