Dynatrace Reports Second Quarter Fiscal Year 2027 Financial Results
Dynatrace, Inc. (DT) filed an SEC Form 8-K — Results of Operations and Financial Condition. EXHIBIT 99.1 Dynatrace Reports Second Quarter Fiscal Year 2027 Financial Results ARR grew 16% year-over-year to $2.21 billion GAAP Operating Margin of 16%; Non-GAAP Operating Margin of 32% Additional $1 billion authorized for share repurchase program Investor Day to be held in Fe
How this was made
The 30-second read
Why it matters
The earnings beat and expanded buyback are likely to attract buying pressure, especially from investors focused on AI‑enabled SaaS growth.
Market read
The results provide fresh guidance and a sizable buyback, offering a clear catalyst for short‑term trading decisions.
What to watch
Potential integration risk from the recent Arize acquisition could temper long‑term upside.
Dynatrace Reports Second Quarter Fiscal Year 2027 Financial Results: ARR grew 16% year-over-year to $2.21 billion; GAAP Operating Margin of 16%; Non-GAAP Operating Margin of 32%; Additional $1 billion authorized for share repurchase program.
ARR, total revenue and subscription revenue each grew at double-digit rates, while GAAP and non-GAAP operating margins improved year over year. The full-year outlook was raised for ARR and revenue, but it incorporates Arize and calls for lower non-GAAP operating margin and adjusted free cash flow than prior guidance.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Q2 fiscal 2027 total ARRother | $2.21B | – | 16 % |
| Q2 fiscal 2027 total ARR year-over-year increase, constant currencyother | 16 % | – | – |
| Q2 fiscal 2027 total revenueGAAP | $579.9M | – | 17 % |
| Q2 fiscal 2027 total revenue year-over-year increase, constant currencyother | 17 % | – | – |
| Q2 fiscal 2027 subscription revenueGAAP | $553.1M | – | 17 % |
| Q2 fiscal 2027 subscription revenue year-over-year increase, constant currencyother | 17 % | – | – |
| Q2 fiscal 2027 service revenueGAAP | $26.81M | – | – |
| Q2 fiscal 2027 total cost of revenueGAAP | $112.8M | – | – |
| Q2 fiscal 2027 gross profitGAAP | $467.2M | – | – |
| Q2 fiscal 2027 GAAP gross marginGAAP | 81 % | – | – |
| Q2 fiscal 2027 non-GAAP gross profitnon-GAAP | $480.3M | – | – |
| Q2 fiscal 2027 non-GAAP gross marginnon-GAAP | 83 % | – | – |
| Q2 fiscal 2027 research and development expenseGAAP | $132.2M | – | – |
| Q2 fiscal 2027 sales and marketing expenseGAAP | $180.3M | – | – |
| Q2 fiscal 2027 general and administrative expenseGAAP | $58.74M | – | – |
| Q2 fiscal 2027 total operating expensesGAAP | $371.5M | – | – |
| Q2 fiscal 2027 non-GAAP operating expensesnon-GAAP | $296.0M | – | – |
| Q2 fiscal 2027 income from operationsGAAP | $95.63M | – | – |
| Q2 fiscal 2027 GAAP operating marginGAAP | 16 % | – | – |
| Q2 fiscal 2027 non-GAAP income from operationsnon-GAAP | $184.3M | – | – |
| Q2 fiscal 2027 non-GAAP operating marginnon-GAAP | 32 % | – | – |
| Q2 fiscal 2027 interest income, netGAAP | $11.79M | – | – |
| Q2 fiscal 2027 income tax expenseGAAP | $39.20M | – | – |
| Q2 fiscal 2027 net incomeGAAP | $67.76M | – | – |
| Q2 fiscal 2027 diluted net income per shareGAAP | $ 0.23 | – | – |
| Q2 fiscal 2027 diluted weighted-average shares outstandingGAAP | 301,671 | – | – |
| Q2 fiscal 2027 non-GAAP net incomenon-GAAP | $161.6M | – | – |
| Q2 fiscal 2027 non-GAAP diluted net income per sharenon-GAAP | $ 0.54 | – | – |
| Q2 fiscal 2027 net cash provided by operating activitiesGAAP | $41.09M | – | – |
| Q2 fiscal 2027 net cash provided by operating activities as a percent of revenueGAAP | 7 % | – | – |
| Q2 fiscal 2027 adjusted free cash flownon-GAAP | $42.29M | – | – |
| Q2 fiscal 2027 adjusted free cash flow marginnon-GAAP | 7 % | – | – |
| Six months ended September 30, 2026 total revenueGAAP | $1.13B | – | – |
| Six months ended September 30, 2026 gross profitGAAP | $918.3M | – | – |
| Six months ended September 30, 2026 income from operationsGAAP | $167.1M | – | – |
| Six months ended September 30, 2026 non-GAAP income from operationsnon-GAAP | $345.9M | – | – |
| Six months ended September 30, 2026 net incomeGAAP | $104.4M | – | – |
| Six months ended September 30, 2026 diluted net income per shareGAAP | $ 0.35 | – | – |
| Six months ended September 30, 2026 non-GAAP net incomenon-GAAP | $301.3M | – | – |
| Six months ended September 30, 2026 non-GAAP diluted net income per sharenon-GAAP | $ 1.01 | – | – |
| Six months ended September 30, 2026 net cash provided by operating activitiesGAAP | $347.3M | – | – |
| Six months ended September 30, 2026 adjusted free cash flownon-GAAP | $351.5M | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| SubscriptionSubscription revenue increased on an as reported and constant currency basis. | $553.1M | – | 17 % |
| ServiceNo segment-specific growth driver was reported. | $26.81M | – | – |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
Fiscal 2027 and Q3 Fiscal 2027 outlook
- RevenueFiscal 2027 total revenue $2,330 - $2,340; Fiscal 2027 subscription revenue $2,227 - $2,237; Q3 Fiscal 2027 total revenue $591 - $596; Q3 Fiscal 2027 subscription revenue $567 - $572
- NoteFiscal 2027 ARR $2,393 - $2,413
- NoteFiscal 2027 ARR as reported 16.5% - 17.5%; constant currency 17.5% - 18.5%
- NoteFiscal 2027 total revenue as reported 15.5% - 16%; constant currency 16%
- NoteFiscal 2027 subscription revenue as reported 15.5% - 16%; constant currency 16%
- NoteFiscal 2027 non-GAAP income from operations $653 - $661
- NoteFiscal 2027 non-GAAP operating margin 28% - 28.25%
- NoteFiscal 2027 non-GAAP net income $576 - $584
- NoteFiscal 2027 non-GAAP net income per diluted share $1.88 - $1.90
- NoteFiscal 2027 diluted weighted average shares outstanding 306 - 308
- NoteFiscal 2027 adjusted free cash flow $600 - $605
- NoteFiscal 2027 adjusted free cash flow margin 26%
- NoteQ3 Fiscal 2027 total revenue as reported 15% - 16%; constant currency 15.5% - 16.5%
- NoteQ3 Fiscal 2027 subscription revenue as reported 15% - 16%; constant currency 15.5% - 16.5%
- NoteQ3 Fiscal 2027 non-GAAP income from operations $152 - $157
- NoteQ3 Fiscal 2027 non-GAAP operating margin 26%
- NoteQ3 Fiscal 2027 non-GAAP net income $136 - $141
- NoteQ3 Fiscal 2027 non-GAAP net income per diluted share $0.44 - $0.45
- NoteQ3 Fiscal 2027 diluted weighted average shares outstanding 313 - 314
- NoteFiscal 2027 guidance reflects approximately 200 basis points of ARR growth accretion and 175 basis points of dilution to non-GAAP operating margin from the Arize acquisition.
- NoteForeign exchange is expected to be a headwind of approximately $20 million on ARR and approximately $6 million on revenue for fiscal 2027 compared to ARR and revenue at constant currency.
Capital returns
- During the second quarter of fiscal 2027, Dynatrace spent $246 million to repurchase 5.2 million shares at an average price of $47.38.
- Repurchases of common stock were $ 247,366 for the three months ended September 30, 2026 and $ 522,844 for the six months ended September 30, 2026.
- The Board of Directors authorized an incremental share repurchase program for up to $1 billion of common stock.
- Dynatrace currently has approximately $1.3 billion of total remaining buyback capacity.
What drove it
- Platform consumption continued to grow in excess of 20% year-over-year, with AI customer cohorts consuming more than twice the rate of other customers.
- Log management continued to grow well over 100% year-over-year.
- Infrastructure management surpassed $500 million in annualized consumption, growing approximately 30%.
- More than 1,100 customers were leveraging Dynatrace agents to facilitate autonomous operations, up from more than 800 last quarter.
- Dynatrace closed 14 deals exceeding $1 million in annual contract value during Q2.
- Dynatrace completed the acquisition of Arize on October 1, 2026.
- Dynatrace announced a strategic partnership with CrowdStrike.
Concerns
- GAAP gross margin was 81 % versus 82 % in the prior-year quarter, while non-GAAP gross margin was 83 % versus 84 %.
- Full-year fiscal 2027 non-GAAP operating margin guidance of 28% - 28.25% is below prior guidance of 29.5% - 29.75%.
- Fiscal 2027 guidance includes 175 basis points of dilution to non-GAAP operating margin from the Arize acquisition.
- Foreign exchange is expected to be a headwind of approximately $20 million on ARR and approximately $6 million on revenue for fiscal 2027.
- Six-month GAAP net income was $ 104,415 compared with $ 105,198 in the prior-year period.
What to watch
- Execution of the Arize integration and the expected approximately 200 basis points of ARR growth accretion and 175 basis points of non-GAAP operating-margin dilution in fiscal 2027.
- Whether platform consumption, AI customer consumption, log management, and infrastructure management sustain the reported growth trends.
- Delivery against Q3 fiscal 2027 total revenue guidance of $591 - $596 and non-GAAP operating margin guidance of 26%.
- The use of approximately $1.3 billion of remaining buyback capacity and the effect of share repurchases after September 30, 2026, which are excluded from guidance.
- Management's Investor Day on February 16, 2027, including its planned capital allocation framework and multi-year financial targets.
Balance sheet and cash flow
- Cash and cash equivalents were $ 2,075,629 at September 30, 2026, compared with $ 1,097,220 at March 31, 2026.
- Short-term marketable securities were $ 56,498 and long-term marketable securities were $ 49,112 at September 30, 2026.
- Exchangeable notes, net were $ 1,411,242 at September 30, 2026.
- Total assets were $ 5,278,898, total liabilities were $ 3,005,207, and total shareholders' equity was $ 2,273,691 at September 30, 2026.
- Net cash provided by operating activities was $ 41,085 for the three months ended September 30, 2026 and $ 347,325 for the six months ended September 30, 2026.
- Net cash used in investing activities was $ 12,323 for the three months ended September 30, 2026 and $ 85,232 for the six months ended September 30, 2026.
- Net cash provided by financing activities was $ 993,535 for the three months ended September 30, 2026, including proceeds from issuance of exchangeable notes, net of debt issuance costs, of $ 1,411,500.
- Cash, cash equivalents, and restricted cash at end of period were $ 2,080,280.
Analysis
Dynatrace reported continued double-digit growth in the second quarter of fiscal 2027. Total ARR was $ 2,207,223, up 16 %, while total revenue was $ 579,918 and subscription revenue was $ 553,112, each up 17 %. The company identified platform consumption growth in excess of 20% year-over-year, AI customer cohorts consuming more than twice the rate of other customers, log-management growth well over 100% year-over-year, and approximately 30% growth in infrastructure management as operating demand indicators.
Profitability improved at the operating-income level. GAAP income from operations was $ 95,630 versus $ 72,969, and the GAAP operating margin was 16 % versus 15 %. Non-GAAP income from operations was $ 184,283 versus $ 152,819, with non-GAAP operating margin of 32 % versus 31 %. Gross-margin comparison was less favorable: GAAP gross margin was 81 % versus 82 %, and non-GAAP gross margin was 83 % versus 84 %. GAAP net income was $ 67,764, or $ 0.23 per diluted share, while non-GAAP net income was $ 161,575, or $ 0.54 per diluted share.
Cash generation was positive but comparatively modest within the quarter. Net cash provided by operating activities was $ 41,085, or 7 % of revenue, and adjusted free cash flow was $ 42,290, also with a 7 % margin. For the first six months, net cash provided by operating activities was $ 347,325 and adjusted free cash flow was $ 351,467. The balance sheet showed $ 2,075,629 of cash and cash equivalents, $ 56,498 of short-term marketable securities, $ 49,112 of long-term marketable securities, and $ 1,411,242 of exchangeable notes, net, at September 30, 2026.
Capital allocation remained active. Dynatrace spent $246 million to repurchase 5.2 million shares at an average price of $47.38 during the quarter, and the Board added an incremental authorization of up to $1 billion, bringing total remaining buyback capacity to approximately $1.3 billion. Financing cash flow included $ 1,411,500 of proceeds from issuance of exchangeable notes, net of debt issuance costs, alongside $ 412,563 for exchangeable note hedges and $ 244,806 of proceeds from related warrants over the six-month period.
The company raised its fiscal 2027 outlook for ARR, total revenue, and subscription revenue, with ARR now guided to $2,393 - $2,413 and total revenue to $2,330 - $2,340. The revised outlook incorporates the Arize acquisition, including approximately 200 basis points of ARR growth accretion, but also approximately 175 basis points of dilution to non-GAAP operating margin. Full-year non-GAAP operating-margin guidance is 28% - 28.25%, while Q3 guidance calls for 26%. Management also expects foreign exchange to be a headwind of approximately $20 million on ARR and approximately $6 million on revenue for fiscal 2027.
Management, verbatim
Our Q2 results reflect continued top-line growth and strong operational efficiency.
Rick McConnell, Chief Executive Officer, Dynatrace
As organizations increasingly deploy AI agents into production, the need for enterprise-grade observability and governance has never been greater.
Rick McConnell, Chief Executive Officer, Dynatrace
Our robust cash generation enables us to fund our strategic growth priorities while returning substantial capital to shareholders.
Jim Benson, Chief Financial Officer, Dynatrace
Not in the filing
stated, not guessed- Prior-release outlook section was not provided, so no actual-versus-prior-guidance comparisons are presented.
- Quarter-over-quarter comparisons were not reported for the financial metrics.
- GAAP free cash flow was not reported.
- Quarterly GAAP effective tax rate and quarterly non-GAAP effective tax rate were not reported.
- Segment operating income or segment margin data were not reported.
- Dividend information was not reported.
- Q3 fiscal 2027 ARR guidance was not reported.
- Q3 fiscal 2027 adjusted free cash flow guidance was not reported.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Dynatrace filed a Form 8‑K reporting its Q2 FY2027 financial results and a new $1 bn share repurchase program.
Ticker impact
Dynatrace disclosed Q2 FY2027 results with 16% ARR growth, 17% revenue increase and announced an additional $1 billion share repurchase authorization.
likely upward pressure as the market prices in strong growth and the new buyback capacity.
Revenue and ARR beat expectations, operating margins improved, and the $1 bn buyback expansion signals confidence, all of which typically drive buying interest.
Market effects
Strong performance may lift other AI‑observability and SaaS peers.
Positive for US tech sector sentiment.
Reinforces demand for AI‑driven monitoring solutions worldwide.
Counterpoint
If the market has already priced in the growth, the buyback may not add further upside.
Key entities
- companyDynatrace, Inc.
AI‑powered observability platform reporting Q2 FY2027 results.
