Dynatrace, Inc. (DT) | Investment Case

1. Company Snapshot

1.a. Company Description

Dynatrace, Inc.provides a software intelligence platform for dynamic multi-cloud environments.It operates Dynatrace, a software intelligence platform, which provides application and microservices monitoring, runtime application security, infrastructure monitoring, digital experience monitoring, business analytics, and cloud automation.

Its platform allows its customers to modernize and automate IT operations, develop and release software, and enhance user experiences.The company also offers implementation, consulting, and training services.Dynatrace, Inc.

markets its products through a combination of direct sales team and a network of partners, including resellers, system integrators, and managed service providers.It serves customers in various industries comprising banking, insurance, retail, manufacturing, travel, and software.The company operates in North America, Europe, the Middle East, Africa, the Asia Pacific, and Latin America.

Dynatrace, Inc.was founded in 2005 and is headquartered in Waltham, Massachusetts.

Show Full description

1.b. Last Insights on DT

Dynatrace's recent performance was negatively impacted by a decrease in investor confidence, as evident from the stock's 52-week low. Congress Asset Management Co. and SG Americas Securities LLC reduced their stakes in the company. Despite this, some analysts forecast growth, with an average recommendation of "Moderate Buy" from 24 analysts. Additionally, Exane Asset Management purchased a new stake in Dynatrace. The company's AI-powered observability platform and strong cash flow are notable strengths. A shareholder letter highlighted Dynatrace's commitment to value creation.

1.c. Company Highlights

Last Price	36.2
Change Percentage	-0.56%
Open	36.25
Previous Close	36.4
Market Cap ( Millions)	10912
Volume	5993262
Year High	57.55
Year Low	31.64
M A 50	36.59
M A 200	43.87

FCF Yield	4.27%
Dividend Yield	0.00%
ROE	6.81%
Debt / Equity	5.61%
Net Debt / EBIDTA	-311.07%
Price To Book	3.96
Price Earnings Ratio	59.06
Price To FCF	23.43
Price To sales	5.65
EV / EBITDA	33.1

2. Dynatrace's Strong Q3 FY2026 Results: A Deeper Dive

Dynatrace reported a robust financial performance in Q3 FY2026, with ARR reaching $1.97 billion, representing a 16% growth. The company's revenue and EPS also exceeded expectations, with EPS coming in at $0.44, beating estimates of $0.41. The strong financial performance was driven by the growing demand for Dynatrace's AI-powered observability platform, with net new ARR growing 11% year-over-year, marking the third consecutive quarter of double-digit growth.

Publication Date: Feb -17

                                    📋 Highlights
                                    16% ARR Growth:
                                                Annual Recurring Revenue reached $1.97 billion, with 16% growth driven by three consecutive quarters of double-digit net new ARR growth.
$100M+ Logs Consumption:
                                                Annualized logs consumption surpassed $100 million, highlighting growth in log management as a key revenue driver.
$1B Share Repurchase Program:
                                                Announced a $1 billion share repurchase program, doubling the previous $500 million program to return capital to shareholders.
Raised Full-Year Guidance:
                                                Upgraded ARR growth to 15.5–16% (targeting >$2 billion ARR) and subscription revenue growth to 16%, with $13M higher free cash flow guidance.
End-to-End Observability Momentum:
                                                Strong demand for end-to-end observability solutions, with 21% new logo ARR contribution and 11% YoY net new ARR growth.

                                

Financial Highlights

The company's financial performance was characterized by strong ARR growth, robust new logo ARR, and increasing consumption of its log management solution, with annualized logs consumption surpassing $100 million. The average land size in Q3 was particularly robust at over $200,000, driving new logo ARR to over 21% of the total ARR. The company's guidance for the full year has been raised across the board, including ARR growth to 15.5% to 16% and total revenue and subscription revenue growth guidance by 75 basis points to 16% growth.

Valuation Metrics

With a P/E Ratio of 60.7 and an EV/EBITDA of 34.11, Dynatrace's valuation suggests that the market is pricing in significant growth expectations. The company's ROE of 6.81% and ROIC of 5.13% indicate a relatively efficient use of capital. The Free Cash Flow Yield of 4.15% is also attractive, suggesting that the company's shares may be undervalued.

Growth Prospects

Dynatrace's growth prospects appear bright, driven by the increasing demand for end-to-end observability, cloud modernization, and AI workload proliferation. The company's go-to-market strategy is building momentum, with three consecutive quarters of double-digit net new ARR growth. The company's focus on large-scale end-to-end observability deals and its traction with partners are also expected to drive growth.

Competitive Landscape

Dynatrace's CEO, Rick McConnell, discussed the competitive risk from frontier model providers, stating that they are not seen as direct competitors in the market. The company's comprehensive end-to-end observability platform is considered a key differentiator, making it difficult for competitors to replicate. As the company continues to innovate and expand its offerings, it is well-positioned to maintain its market leadership.

3. NewsRoom

Why the Market Dipped But Dynatrace (DT) Gained Today

Apr -28

Source: zacks.com

Dynatrace Acknowledges Shareholder Letter and Highlights Continued Value Creation

Apr -28

Source: businesswire.com

Starboard makes large investment in Dynatrace, sees strategic value

Apr -28

Source: reuters.com

Starboard Delivers Letter to Dynatrace

Apr -28

Source: businesswire.com

Activist Starboard Value takes stake in AI software maker Dynatrace, WSJ reports

Apr -27

Source: reuters.com

Activist Starboard Value Takes Stake in AI Software Maker Dynatrace

Apr -27

Source: wsj.com

AEGON ASSET MANAGEMENT UK Plc Cuts Stock Holdings in Dynatrace, Inc. $DT

Apr -26

Source: defenseworld.net

SNX or DT: Which Is the Better Value Stock Right Now?

Apr -24

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (14.37%)

6. Segments

Subscription

Expected Growth: 14.37%

Dynatrace's subscription growth of 14.37% is driven by increasing adoption of cloud-native applications, digital transformation, and growing demand for AI-powered observability and automation. Additionally, the company's expansion into new markets, strategic partnerships, and strong sales execution also contribute to this growth.

Service

Expected Growth: 14.37%

Dynatrace's 14.37% growth is driven by increasing adoption of its AI-powered observability platform, expansion into new markets, and growing demand for digital transformation solutions. Additionally, the company's strong sales execution, strategic partnerships, and high customer retention rates contribute to its rapid growth.

7. Detailed Products

Dynatrace

An all-in-one observability platform that provides AI-powered application performance monitoring, cloud infrastructure monitoring, and digital experience monitoring.

Dynatrace Application Security

A module that provides runtime vulnerability detection and protection for applications, enabling DevSecOps and reducing the risk of security breaches.

Dynatrace Digital Experience Monitoring

A solution that provides real-time monitoring and analytics of user interactions, enabling organizations to optimize digital experiences and improve customer satisfaction.

Dynatrace Cloud Automation

A module that provides automated cloud infrastructure monitoring, optimization, and cost management, enabling organizations to optimize cloud resources and reduce costs.

Dynatrace Synthetic Monitoring

A solution that provides proactive monitoring of application availability and performance, enabling organizations to identify issues before they impact users.

Dynatrace OpenTelemetry Distribution

A distribution of OpenTelemetry, an open-source observability framework, that provides a standardized way of collecting and sending telemetry data.

8. Dynatrace, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Dynatrace's AI-powered solutions are highly specialized, making it difficult for substitutes to emerge.

Bargaining Power Of Customers

While customers have some bargaining power due to the availability of alternative solutions, Dynatrace's strong brand reputation and high-quality products mitigate this power.

Bargaining Power Of Suppliers

Dynatrace has a diversified supplier base, reducing the bargaining power of individual suppliers.

Threat Of New Entrants

While new entrants may emerge, the high barriers to entry in the AI-powered software industry and Dynatrace's established market position make it challenging for new competitors to gain traction.

Intensity Of Rivalry

The APM and cloud monitoring markets are highly competitive, with several established players, leading to a high intensity of rivalry.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	3.33%
Debt Cost	9.25%
Equity Weight	96.67%
Equity Cost	9.25%
WACC	9.25%
Leverage	3.45%

11. Quality Control: Dynatrace, Inc. passed 6 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Pegasystems

A-Score: 4.9/10

Value: 1.3

Growth: 8.0

Quality: 8.7

Yield: 0.0

Momentum: 8.0

Volatility: 3.3

1-Year Total Return ->

Dynatrace

A-Score: 4.9/10

Value: 1.8

Growth: 8.9

Quality: 8.6

Yield: 0.0

Momentum: 3.0

Volatility: 7.0

1-Year Total Return ->

Paycom Software

A-Score: 4.7/10

Value: 3.1

Growth: 8.9

Quality: 8.4

Yield: 1.0

Momentum: 1.5

Volatility: 5.7

1-Year Total Return ->

Smartsheet

A-Score: 4.6/10

Value: 2.0

Growth: 7.4

Quality: 5.2

Yield: 0.0

Momentum: 7.0

Volatility: 5.7

1-Year Total Return ->

Q2 Holdings

A-Score: 3.4/10

Value: 1.0

Growth: 7.4

Quality: 4.9

Yield: 0.0

Momentum: 2.5

Volatility: 4.7

1-Year Total Return ->

Braze

A-Score: 3.4/10

Value: 4.6

Growth: 6.0

Quality: 4.6

Yield: 0.0

Momentum: 2.0

Volatility: 3.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

8.88%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

9.25%

Dynatrace, Inc. - US2681501092

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on DT

1.c. Company Highlights

Expensive

Higher Growth

Better Quality

Earnings Beats

Revenues Beats

Revenues Miss

Less Volatile

2. Dynatrace's Strong Q3 FY2026 Results: A Deeper Dive

Financial Highlights

Valuation Metrics

Growth Prospects

Competitive Landscape

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (14.37%)

6. Segments

Subscription

Expected Growth: 14.37%

Service

Expected Growth: 14.37%

7. Detailed Products

Dynatrace

Dynatrace Application Security

Dynatrace Digital Experience Monitoring

Dynatrace Cloud Automation

Dynatrace Synthetic Monitoring

Dynatrace OpenTelemetry Distribution

8. Dynatrace, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Dynatrace, Inc. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

36.19$

Current Price

36.2$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA