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    DT
    Earnings call· Jun 2026(Q1 FY27)

    Dynatrace Q1 FY27 earnings call DT

    Aug 5, 2026 Source

    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

    14
    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

    1
    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%——

    Operational metrics

    13
    Non-GAAP operating margin
    29%100 bps above high end of guidance
    Q1 FY27

    Reflects disciplined investment approach.

    Non-GAAP net income
    $140M
    Q1 FY27

    Reported for the quarter.

    Non-GAAP EPS
    $0.48$0.03 above high end of guidance
    Q1 FY27

    Per diluted share.

    Share repurchases
    $275Mvs $224M in Q4
    Q1 FY27

    Increased pace of repurchases, reflecting confidence in operational momentum and long-term growth.

    New logos added
    122
    Q1 FY27

    Contributed to record new logo ARR growth.

    Average land size (new logos)
    nearly $285,000
    Q1 FY27

    Reflects focus on high-quality customers with strong expansion potential.

    Average ARR per customer
    well over $500,000
    Q1 FY27

    Reflecting broader adoption and value delivery, with potential to exceed $1M+ long-term.

    Customers observing AI/LLM workloads
    more than 1,000up from roughly 850 last quarter
    Q1 FY27

    Indicates growing adoption of AI observability.

    Customers running autonomous operations
    more than 800up from roughly 500 last quarter
    Q1 FY27

    Leveraging Dynatrace's agentic capabilities.

    Consumption growth for AI cohorts
    1.5x higherthan non-AI cohort customers
    Q1 FY27

    Highlights the impact of AI workloads on platform usage.

    Gross retention rate
    mid-90s
    Q1 FY27

    Underscores strategic importance of Dynatrace.

    DPS renewal activity
    70%
    back half of FY27

    Weighting of annual resets for DPS contracts.

    Trailing 12-month organic net new ARR growth
    17%up from 12% in Q4
    Q1 FY27

    Fourth consecutive quarter of acceleration, smoothing quarter-to-quarter impact of large enterprise transactions.

    Industry KPIs

    8
    MetricValueDetails
    Revenue growth$555M total, $530M subscriptionUSD
    Arr net new arr$2.14B (ending ARR), $85M (net new ARR), $73M (organic net new ARR)USD
    Customer account count122 new logoscustomers
    Large deal new logo metrics122 new logoscustomers
    Gross retention renewal ratemid-90s%
    Operating FCF margin rule of 4029% (non-GAAP operating margin), 28% (adjusted FCF margin TTM)%
    Ai product adoption monetization>1,000 customers (observing AI/LLM), >800 customers (autonomous operations)customers
    Net revenue net dollar retention110%%

    Orderbook & backlog

    4
    Total ARR$2.14BQ1 FY27

    up 17% YoY

    Net new ARR$85MQ1 FY27

    up 66% YoY

    Adjusted for foreign exchange movements

    Organic net new ARR$73MQ1 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

    1
    ProductTypeDetails
    Blueboxlaunch

    Deals & partnerships

    5
    BindplaneAcquisition of a company supporting OpenTelemetry data collection.

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

    DevCycleAcquisition of a company supporting feature flags.

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

    Top global financial institutionExpansion 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 retailerExpansion 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 institutionsNew 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

    1
    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

    5

    Net new ARR productivity

    Next quarter (Q2 FY27) and beyond.
    CurrentTrailing 12-month organic net new ARR growth of 17% in Q1 FY27, up from 12% in Q4.
    TargetContinued 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.

    Q&A highlights

    6

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.