[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Unaudited Q2 2025 financials show total revenue at $477.3 million, net income at $48.0 million, and operating cash flow at $269.7 million [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Balance Sheet Highlights (In thousands) | June 30, 2025 (unaudited) | March 31, 2025 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $1,247,381 | $1,017,039 | | Total current assets | $1,851,819 | $1,931,461 | | Goodwill | $1,343,839 | $1,336,435 | | **Total assets** | **$4,080,935** | **$4,139,678** | | **Liabilities & Equity** | | | | Deferred revenue, current | $1,002,189 | $1,087,518 | | Total current liabilities | $1,232,517 | $1,381,286 | | **Total liabilities** | **$1,382,649** | **$1,518,530** | | **Total shareholders' equity** | **$2,698,286** | **$2,621,148** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Income Statement Highlights (In thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Subscription Revenue | $457,507 | $381,576 | | **Total revenue** | **$477,349** | **$399,220** | | Gross profit | $392,140 | $324,467 | | Income from operations | $62,338 | $42,029 | | **Net income** | **$47,955** | **$38,620** | | Diluted net income per share | $0.16 | $0.13 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Highlights (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $269,692 | $230,741 | | Net cash used in investing activities | ($8,448) | ($35,595) | | Net cash used in financing activities | ($43,854) | ($42,810) | | **Net increase in cash and cash equivalents** | **$230,342** | **$151,332** | | Cash and cash equivalents, end of period | $1,247,381 | $930,315 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - As of June 30, 2025, the company had remaining performance obligations of **$2,918.9 million**, of which **53%** is expected to be recognized as revenue over the next 12 months[36](index=36&type=chunk) - The effective tax rate for the three months ended June 30, 2025, was **41.1%**, a significant increase from **26.8%** in the prior-year period, primarily due to the intra-entity IP transfer to Switzerland which impacted the GILTI inclusion[46](index=46&type=chunk) - In May 2024, the company announced a share repurchase program for up to **$500 million**; during the quarter ended June 30, 2025, **0.9 million shares** were repurchased for **$45.0 million**, with **$282.4 million** remaining available for future repurchases[57](index=57&type=chunk)[58](index=58&type=chunk) - Total share-based compensation expense increased to **$71.9 million** for the quarter, up from **$57.7 million** in the same period last year[59](index=59&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reports strong Q1 FY2026 results with ARR growing 18% to $1.82 billion and total revenue up 20% to $477 million, driven by technology leadership and customer expansion [Key Metrics and Financial Highlights](index=22&type=section&id=Key%20Metrics%20and%20Financial%20Highlights) | Key Metric | As of/For Quarter Ended June 30, 2025 | As of/For Quarter Ended June 30, 2024 | | :--- | :--- | :--- | | Total ARR | $1,822.2 million | $1,540.6 million | | ARR Year-over-year increase | 18% | 19% | | Dollar-based net retention rate | 111% | 112% | | Non-GAAP income from operations | $143.1 million | $114.3 million | | Free cash flow | $262.0 million | $227.4 million | - The company's strategy focuses on extending its technology leadership, expanding relationships with existing customers, growing its customer base among the largest 15,000 global enterprises, and leveraging its strategic partner ecosystem[90](index=90&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) | Revenue Component (In thousands) | Q1 FY2026 (Ended June 30, 2025) | Q1 FY2025 (Ended June 30, 2024) | Change (%) | | :--- | :--- | :--- | :--- | | Subscription | $457,507 | $381,576 | +20% | | Service | $19,842 | $17,644 | +12% | | **Total Revenue** | **$477,349** | **$399,220** | **+20%** | - The **20%** increase in subscription revenue was driven by existing customers expanding their use of the platform and adoption by new customers, with variable on-demand consumption revenue also increasing by **$9.1 million**[122](index=122&type=chunk) | Expense Component (In thousands) | Q1 FY2026 (Ended June 30, 2025) | Q1 FY2025 (Ended June 30, 2024) | Change (%) | | :--- | :--- | :--- | :--- | | Cost of subscription | $65,018 | $53,572 | +21% | | Research and development | $108,172 | $87,578 | +24% | | Sales and marketing | $165,314 | $145,106 | +14% | | General and administrative | $56,304 | $44,978 | +25% | - Operating expenses increased primarily due to higher personnel costs, including share-based compensation, from headcount growth across R&D, sales, and G&A to support business expansion[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) - Amortization of acquired technology and other intangibles decreased significantly by **$3.5 million** and **$4.8 million** respectively, as certain assets became fully amortized during fiscal 2025[127](index=127&type=chunk)[135](index=135&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, the company's principal sources of liquidity included **$1.25 billion** in cash and cash equivalents, **$149.7 million** in investments, and **$399.0 million** available under its credit facility[140](index=140&type=chunk) - Net cash provided by operating activities increased by **$39.0 million** to **$269.7 million** for the quarter, primarily driven by higher collections from revenue growth[150](index=150&type=chunk) - The company repurchased **$45.0 million** of its common stock during the quarter under its **$500 million** share repurchase program[147](index=147&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency and interest rate fluctuations, with significant international operations and cash holdings, but expects no material impact from a 10% rate change - **Foreign Currency Risk:** The company has significant international operations, exposing it to both translation risk (converting foreign subsidiary financials to USD) and transaction risk (transactions in non-functional currencies), with the Euro being a particularly significant currency[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk) - **Interest Rate Risk:** Risk stems from interest-earning assets (**$1.25 billion** in cash/equivalents and **$149.7 million** in investments) and potential borrowings under its **$400 million** variable-rate credit facility, though a hypothetical **10%** change in interest rates is not expected to have a material impact[162](index=162&type=chunk)[163](index=163&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective in ensuring that information required to be disclosed is recorded, processed, and reported in a timely manner[165](index=165&type=chunk) - No changes occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[166](index=166&type=chunk) [PART II - OTHER INFORMATION](index=37&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings but does not anticipate a material adverse effect on its business or financial condition - The company states that it is not currently party to any legal proceedings that it believes would have a material adverse effect on its business[169](index=169&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) The company faces various risks including growth volatility, intense competition, innovation demands, cybersecurity threats, reliance on cloud infrastructure, and global legal and macroeconomic uncertainties [Risks Related to Our Business and Industry](index=37&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) - Recent rapid revenue growth may not be indicative of future performance, and operating results can fluctuate significantly due to factors like customer demand, sales cycles, and economic conditions[171](index=171&type=chunk)[173](index=173&type=chunk) - The business faces significant competition from a variety of vendors, including those with greater brand recognition, larger customer bases, and more substantial financial resources[193](index=193&type=chunk)[197](index=197&type=chunk) - Success depends on the ability to innovate and respond to rapidly changing customer needs and technologies, including AI, and failure to do so could harm the company's competitive position[181](index=181&type=chunk)[182](index=182&type=chunk) - The business relies on maintaining successful relationships with partners, including global system integrators (GSIs) and hyperscalers (AWS, Azure, GCP), for sales and distribution[202](index=202&type=chunk) [Risks Related to Information Technology, IP, and Data Security and Privacy](index=49&type=section&id=Risks%20Related%20to%20Information%20Technology%2C%20IP%2C%20and%20Data%20Security%20and%20Privacy) - The company is a target for cybersecurity attacks, and any security breaches or compromises could harm its reputation, brand, and operating results, and lead to significant financial exposure[216](index=216&type=chunk)[218](index=218&type=chunk) - The business depends on third-party cloud infrastructure providers (hyperscalers like AWS, Azure, GCP), and any service disruptions or outages from these providers could adversely affect the delivery of its SaaS solutions[225](index=225&type=chunk)[226](index=226&type=chunk) - The company faces risks of IP infringement claims from third parties, which could result in significant costs, and must also protect its own proprietary technology and IP rights to maintain its competitive advantage[228](index=228&type=chunk)[232](index=232&type=chunk) - Failure to comply with evolving and stringent global privacy laws (such as GDPR and CCPA) and regulations concerning AI could result in significant penalties, proceedings, and damage to the company's reputation[240](index=240&type=chunk)[241](index=241&type=chunk) [Risks Related to Legal, Regulatory, Accounting, and Tax Matters](index=56&type=section&id=Risks%20Related%20to%20Legal%2C%20Regulatory%2C%20Accounting%2C%20and%20Tax%20Matters) - As a multinational corporation, the company is subject to complex tax laws in numerous jurisdictions; changes in these laws, such as the OECD's Pillar Two minimum tax, or adverse audit outcomes could impact its effective tax rate and financial results[245](index=245&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk) - Global sales and operations expose the company to risks including foreign currency fluctuations, geopolitical instability (e.g., conflicts in Ukraine and Israel), trade restrictions, and compliance with laws like the FCPA[252](index=252&type=chunk)[254](index=254&type=chunk) - The company's solutions are subject to U.S. and international export/import controls and economic sanctions, which could impair its ability to compete in international markets if not properly managed[274](index=274&type=chunk) [Risks Related to Our Common Stock](index=66&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) - The trading price of the company's common stock has been and may continue to be volatile due to market conditions, operating results, and other factors[280](index=280&type=chunk) - The share repurchase program is not guaranteed to be fully consummated or enhance stockholder value and could increase stock price volatility while diminishing cash reserves[287](index=287&type=chunk) - The company does not intend to pay dividends, so a return on investment depends entirely on the appreciation of the stock price[288](index=288&type=chunk) - Anti-takeover provisions in the company's charter and bylaws, such as a classified board and supermajority voting requirements, could discourage or delay a change in control[289](index=289&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=70&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **904,609 shares** at an average price of **$49.76** under its publicly announced program during Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 334,468 | $44.11 | | May 2025 | 291,210 | $51.61 | | June 2025 | 278,931 | $54.60 | | **Total** | **904,609** | **$49.76** | - On May 15, 2024, the company announced a share repurchase program for up to **$500 million** of its common stock, which does not have a time limit[299](index=299&type=chunk) [Item 5. Other Information](index=70&type=section&id=Item%205.%20Other%20Information) Three company insiders, including the CEO, adopted Rule 10b5-1 trading arrangements for future share sales during the quarter - CEO Rick McConnell adopted a Rule 10b5-1 trading plan on June 12, 2025, for the sale of **90,000 shares**, with transactions scheduled from September 11, 2025, through July 31, 2026[303](index=303&type=chunk) [Item 6. Exhibits](index=71&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with or incorporated by reference into the Form 10-Q, including corporate documents and officer certifications

EXHIBIT 99.1 First Quarter Fiscal 2026 Financial and Other Recent Business Highlights: All growth rates are compared to the first quarter of fiscal 2025, unless otherwise noted. Exceeds high end of guidance across all metrics Delivers Subscription Revenue growth of 19% on a constant currency basis Achieves GAAP Operating Margin of 13% and Non-GAAP Operating Margin of 30% BOSTON, Mass., August 6, 2025 - Dynatrace (NYSE: DT), the leading AI-powered observability platform, today announced financial results for ...

Core Insights - Dynatrace (DT) is expected to report quarterly earnings of $0.38 per share, reflecting a year-over-year increase of 15.2% [1] - Anticipated revenues are projected to be $466.07 million, showing a 16.7% increase compared to the same quarter last year [1] Earnings Estimates - The consensus EPS estimate has remained unchanged over the past 30 days, indicating analysts have not revised their projections [2] - Revisions to earnings projections are crucial for predicting investor behavior and stock price performance [3] Revenue Projections - Analysts estimate 'Revenues- Services' will reach $19.84 million, representing a year-over-year change of +12.5% [4] - 'Revenues- Subscriptions' are predicted to be $447.92 million, indicating a +17.4% change from the prior-year quarter [5] Key Metrics - 'Annual Recurring Revenue (ARR)- Total' is expected to reach $1.78 billion, up from $1.54 billion reported in the same quarter last year [5] - The 'Dollar-based Net Retention Rate' is projected at 109.9%, down from 112.0% in the same quarter of the previous year [6] - 'Gross profit- Subscriptions' is anticipated to be $390.94 million, compared to $328.00 million reported in the same quarter last year [6] Stock Performance - Dynatrace shares have decreased by -10.7% in the past month, contrasting with a +0.6% change in the Zacks S&P 500 composite [6] - The company holds a Zacks Rank 3 (Hold), suggesting it is expected to perform in line with the overall market in the near future [6]

The market expects Dynatrace (DT) to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended June 2025. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates. The earnings report, which is expected to be released on August 6, might help the stock move higher if these key numbers are better than ...

Company Performance - Dynatrace (DT) closed at $54.71, with a +1.03% change from the previous day, outperforming the S&P 500's daily gain of 0.02% [1] - Over the past month, shares of Dynatrace have decreased by 1.35%, underperforming the Computer and Technology sector's gain of 6.31% and the S&P 500's gain of 4.93% [1] Upcoming Earnings - Dynatrace is set to release its earnings report on August 6, 2025, with projected earnings per share (EPS) of $0.38, indicating a 15.15% increase from the same quarter last year [2] - The consensus estimate for quarterly revenue is $466.07 million, reflecting a 16.75% increase from the year-ago period [2] Fiscal Year Projections - For the entire fiscal year, earnings are projected at $1.58 per share and revenue at $1.95 billion, representing increases of +13.67% and +14.98% respectively from the prior year [3] - Recent modifications to analyst estimates indicate positive sentiment regarding Dynatrace's business and profitability [3] Valuation Metrics - Dynatrace has a Forward P/E ratio of 34.27, which is a premium compared to the industry average Forward P/E of 19.78 [6] - The company has a PEG ratio of 2.72, compared to the Computers - IT Services industry average PEG ratio of 1.95 [7] Industry Context - The Computers - IT Services industry, part of the Computer and Technology sector, holds a Zacks Industry Rank of 161, placing it in the bottom 35% of over 250 industries [8] - The Zacks Industry Rank assesses the strength of industry groups based on the average Zacks Rank of individual stocks, with top-rated industries outperforming lower-rated ones by a factor of 2 to 1 [8]

Core Insights - Dynatrace (DT) is positioned to potentially continue its earnings-beat streak in upcoming reports, having surpassed earnings estimates by an average of 11.06% in the last two quarters [1][5]. Earnings Performance - In the most recent quarter, Dynatrace reported earnings of $0.30 per share against an expectation of $0.33 per share, resulting in a surprise of 10.00% [2]. - For the previous quarter, the company exceeded the consensus estimate of $0.33 per share by reporting $0.37 per share, achieving a surprise of 12.12% [2]. Earnings Estimates and Predictions - Estimates for Dynatrace have been trending higher, influenced by its history of earnings surprises, and the stock currently has a positive Zacks Earnings ESP of +1.33%, indicating bullish sentiment among analysts [5][8]. - The combination of a positive Earnings ESP and a Zacks Rank of 2 (Buy) suggests a strong possibility of another earnings beat [8]. Statistical Insights - Research indicates that stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a nearly 70% chance of producing a positive surprise [6]. - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate reflecting the latest analyst revisions [7].

Investors with an interest in Computers - IT Services stocks have likely encountered both Leidos (LDOS) and Dynatrace (DT) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate ...

Investors looking for stocks in the Computers - IT Services sector might want to consider either Leidos (LDOS) or Dynatrace (DT) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings ...

Summary of Dynatrace Conference Call Company Overview - **Company**: Dynatrace - **Industry**: Observability Software - **Key Executives Present**: Rick McConnell (CEO), Jim Benson (CFO) [1][2] Core Points and Arguments 1. **Market Size and Growth**: The observability market is valued at over $50 billion, with application security contributing around $14 billion, totaling approximately $65 billion [9] 2. **Evolution of Observability**: The transition from basic monitoring (dashboards) to advanced observability using AI, which provides precise insights and auto-remediation capabilities [8][9] 3. **Challenges in Software Management**: Increasing complexity in software environments due to cloud adoption, leading to a need for sophisticated observability solutions [10][14] 4. **Business Observability**: A shift towards understanding not just software performance but overall business performance, indicating a broader application of observability tools [16][17] 5. **Integrated Platform**: Dynatrace offers a unified observability platform that consolidates various monitoring tools, enhancing efficiency and insights [18][19] 6. **AI Capabilities**: The platform utilizes causal, predictive, and generative AI to provide actionable insights and improve user experience [21][22][23] 7. **Customer Success Stories**: A case study with British Telecom showed a 50% reduction in incidents and a 90% reduction in mean time to respond, translating to significant cost savings [24][25] 8. **Market Position**: Dynatrace is recognized as a leader in the observability space, consistently ranking in the upper right quadrant of industry reports [26] 9. **Financial Performance**: The company reported an annual recurring revenue (ARR) of approximately $1.7 billion, with a 20% growth in subscription revenue and a 29% operating margin [27][28] Additional Important Insights 1. **Competitive Landscape**: The presence of multiple players in the observability market is seen as beneficial, as it drives consolidation and simplification of tools for customers [31][32] 2. **Impact of Generative AI**: The rise of AI is creating more software workloads, increasing the demand for observability solutions [35][37] 3. **Macro Environment Resilience**: Despite a volatile macroeconomic environment, the observability market remains resilient, with companies seeking cost-saving solutions [41][42] 4. **Guidance Philosophy**: The company maintains a cautious approach to guidance, factoring in potential elongation of deal cycles while noting strong pipeline health [44][48] 5. **DPS Transition**: The new pricing model (DPS) has led to higher customer engagement, with customers leveraging more capabilities compared to the previous SKU-based model [51][53] This summary encapsulates the key points discussed during the Dynatrace conference call, highlighting the company's strategic direction, market position, and financial health.

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1][2]. Company Analysis: Dynatrace (DT) - Dynatrace currently holds a Momentum Style Score of A, indicating strong momentum characteristics [3]. - The company has a Zacks Rank of 2 (Buy), suggesting it is positioned for potential outperformance in the market [4]. - Over the past week, DT shares increased by 1.39%, outperforming the Zacks Computers - IT Services industry, which rose by 0.32% [6]. - In a longer timeframe, DT shares have risen by 10.52% over the past quarter and 18.34% over the last year, while the S&P 500 only moved 0.05% and 13.85%, respectively [7]. - The average 20-day trading volume for DT is 2,942,191 shares, indicating a bullish sign with rising stock prices [8]. Earnings Outlook - In the last two months, 8 earnings estimates for DT have been revised upwards, while 3 have been revised downwards, leading to an increase in the consensus estimate from $1.54 to $1.58 [10]. - For the next fiscal year, there have been 3 upward revisions and 5 downward revisions in earnings estimates [10]. Conclusion - Given the strong momentum indicators and positive earnings outlook, Dynatrace is recommended as a stock to consider for near-term investment opportunities [11].