Dynatrace Stock Sees Rising Composite Ratings
On Wednesday, Dynatrace stock got an upgrade for its IBD SmartSelect Composite Rating from 93 to 96. Lean How — And When — To Sell Stocks The revised score means the stock currently tops 96% of all other stocks in terms of key performance metrics and technical strength.
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DT Q1 Earnings Call: Dynatrace Misses Revenue Expectations but Raises Guidance on AI and Log Management Momentum
Application performance monitoring software provider Dynatrace (NYSE:DT) missed Wall Street's revenue expectations in Q1 CY2025, but sales rose 16.9% year on year to $445.2 million. Its non-GAAP EPS of $0.33 per share was 9.1% above analysts' consensus estimates. Is now the time to buy DT? Find out in our full research report (it's free). Revenue: $445.2 million (16.9% year-on-year growth) Adjusted EPS: $0.33 vs analyst estimates of $0.30 (9.1% beat) Revenue Guidance for Q2 CY2025 is $467.5 million at the midpoint, above analyst estimates of $453.7 million Adjusted EPS guidance for the upcoming financial year 2026 is $1.58 at the midpoint, beating analyst estimates by 2.7% Operating Margin: 9.6%, up from 6.1% in the same quarter last year Annual Recurring Revenue: $1.73 billion at quarter end, up 15.3% year on year Billings: $715.8 million at quarter end, up 12.6% year on year Market Capitalization: $16.25 billion Dynatrace's first quarter results reflected growing customer adoption of its AI-powered observability platform and continued expansion into enterprise accounts. CEO Rick McConnell highlighted the increasing role of large deal closures and noted that over 80% of annual contract value closed in the quarter was partner-influenced, particularly through global system integrators and hyperscalers. Management attributed incremental growth to the broader adoption of the Dynatrace Platform Subscription (DPS) licensing model, which allows customers to utilize a wider array of platform features. CFO James Benson emphasized the rising average annual recurring revenue per customer, now well over $400,000, as evidence of the platform's expanding footprint within client environments. New product traction in log management and ongoing investments in sales productivity and partner enablement were also cited as key contributors to the quarter's performance. Looking ahead, Dynatrace's guidance for the next quarter and the upcoming year is grounded in expectations of continued growth in AI-driven observability and broader platform adoption. Management sees the market's shift toward cloud-native and AI-native workloads as central to future expansion, with McConnell stating, "As organizations accelerate cloud and AI native initiatives, the need for AI-powered observability at scale has never been greater." CFO James Benson pointed to the company's evolving focus on consumption-based growth, driven by dedicated teams aimed at increasing product adoption. While management remains optimistic about the secular trends supporting demand, they are also cautious, acknowledging the potential for extended sales cycles and heightened budget scrutiny among enterprise customers. Investments in R&D, sales capacity, and partnership programs are expected to support long-term profitability and top-line growth. Management attributed the quarter's revenue shortfall to a mix of uncommitted on-demand consumption patterns and longer enterprise sales cycles, but emphasized notable progress in platform adoption and AI product expansion. DPS Licensing Adoption: The Dynatrace Platform Subscription (DPS) model continued to gain traction, now accounting for over 40% of the customer base and more than 60% of annual recurring revenue. Management reported that DPS customers adopt significantly more features and exhibit higher consumption rates, which they believe will drive future expansion revenue. Log Management Acceleration: Dynatrace's log management solution saw rapid uptake, with over one-third of customers now using the product—an 18% increase over the prior quarter. Nearly half of new customers implemented log management at the outset, and management expects this business to grow by over 100% in the coming year, underpinned by the Grail data lakehouse technology. Partner-Driven Sales Expansion: Over 80% of closed contract value was influenced by partners, notably global system integrators and hyperscalers. Management highlighted that these relationships provide greater reach and are crucial as workloads shift to cloud environments, with strategic accounts showing a 45% pipeline increase year over year. AI and Agentic Observability: The company outlined its continued investment in agentic AI, aiming to enable autonomous system remediation and optimization without human intervention. CEO Rick McConnell described advances in AI-native platform capabilities as a key differentiator, especially as enterprise customers seek to automate more operational workflows. Go-to-Market Enhancements: Dynatrace introduced 'strike teams' focused on driving adoption in key areas such as logs, application security, and digital experience monitoring. These dedicated teams are measured on consumption and are intended to support the company's transition toward a more usage-based revenue model. Dynatrace's outlook is shaped by the anticipated expansion of cloud and AI-native workloads, increased product consumption, and ongoing investment in platform innovation. AI-Powered Product Expansion: Management plans to accelerate investment in AI observability and preventive operations, anticipating that these enhancements will drive broader adoption among development teams and differentiate Dynatrace in a rapidly evolving market. Consumption-Focused Growth Model: The company is increasing its emphasis on consumption-based revenue streams, supported by dedicated adoption and customer success teams. Management expects this approach to result in higher usage volumes, though it may introduce variability in short-term revenue recognition as customers shift to on-demand consumption patterns. Enterprise Sales Cycle and Budget Scrutiny: While secular trends remain favorable, management flagged a cautious outlook due to extended sales cycles and increasing budget scrutiny among large enterprise clients. This dynamic may affect the timing of new bookings but is expected to be offset by growing partner influence and expansion within existing accounts. In the coming quarters, the StockStory team will focus on (1) the pace of DPS adoption and its impact on customer expansion rates, (2) the growth trajectory of log management and AI-driven observability solutions, and (3) the effectiveness of partner-led sales motions, particularly with hyperscalers and global system integrators. Progress in application security adoption and continued innovation in AI automation will also be important indicators of Dynatrace's ability to maintain momentum. Dynatrace currently trades at a forward price-to-sales ratio of 8.4×. Should you double down or take your chips? See for yourself in our full research report (it's free). The market surged in 2024 and reached record highs after Donald Trump's presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025. While the crowd speculates what might happen next, we're homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver's seat and build a durable portfolio by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
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Dynatrace (DT) is a Great Momentum Stock: Should You Buy?
Momentum investing revolves around the idea of following a stock's recent trend in either direction. In the 'long' context, investors will be essentially be "buying high, but hoping to sell even higher." With this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving that way. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades. While many investors like to look for momentum in stocks, this can be very tough to define. There is a lot of debate surrounding which metrics are the best to focus on and which are poor quality indicators of future performance. The Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us. Below, we take a look at Dynatrace (DT), which currently has a Momentum Style Score of A. We also discuss some of the main drivers of the Momentum Style Score, like price change and earnings estimate revisions. It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Dynatrace currently has a Zacks Rank of #2 (Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period. You can see the current list of Zacks #1 Rank Stocks here >>> In order to see if DT is a promising momentum pick, let's examine some Momentum Style elements to see if this software intellegence company holds up. A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. It is also useful to compare a security to its industry, as this can help investors pinpoint the top companies in a particular area. For DT, shares are up 1.39% over the past week while the Zacks Computers - IT Services industry is up 0.32% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 13.07% compares favorably with the industry's 0.86% performance as well. Considering longer term price metrics, like performance over the last three months or year, can be advantageous as well. Over the past quarter, shares of Dynatrace have risen 10.52%, and are up 18.34% in the last year. In comparison, the S&P 500 has only moved 0.05% and 13.85%, respectively. Investors should also take note of DT's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. Right now, DT is averaging 2,942,191 shares for the last 20 days. The Zacks Momentum Style Score also takes into account trends in estimate revisions, in addition to price changes. Please note that estimate revision trends remain at the core of Zacks Rank as well. A nice path here can help show promise, and we have recently been seeing that with DT. Over the past two months, 8 earnings estimates moved higher compared to 3 lower for the full year. These revisions helped boost DT's consensus estimate, increasing from $1.54 to $1.58 in the past 60 days. Looking at the next fiscal year, 3 estimates have moved upwards while there have been 5 downward revisions in the same time period. Given these factors, it shouldn't be surprising that DT is a #2 (Buy) stock and boasts a Momentum Score of A. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Dynatrace on your short list. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Dynatrace, Inc. (DT) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
