Financial Data and Key Metrics Changes - Revenue for Q2 was $827 million, representing a 28% year-over-year increase and exceeding the high end of guidance [7][29] - Free cash flow was $165 million, with a free cash flow margin of 20% [35] - Gross profit was $669 million, resulting in a gross margin of 80.9%, compared to 80.3% in the previous quarter [33] Business Line Data and Key Metrics Changes - The number of customers increased to approximately 31,400, up from about 28,700 a year ago [7] - Customers with an ARR of $100,000 or more rose to about 3,850, generating approximately 89% of ARR [8] - The security suite of products generated over $100 million in ARR, growing at a mid-forties percent year-over-year rate [11] Market Data and Key Metrics Changes - AI native customers contributed about 11% of Q2 revenues, up from 8% in the previous quarter [29] - The twelve-month trailing net retention percentage was about 120, higher than the high 110s last quarter [31] - Billings were $852 million, up 20% year-over-year, and remaining performance obligations (RPO) were $2.43 billion, up 35% year-over-year [32] Company Strategy and Development Direction - The company continues to focus on digital transformation and cloud migration as long-term growth drivers [24] - There is a strong emphasis on AI, with plans to incorporate AI into the platform to deliver more value to customers [26] - The company aims to improve standardized adoption of security products across large enterprises [54] Management's Comments on Operating Environment and Future Outlook - Management sees a solid demand environment with ongoing healthy cloud migration and digital transformation [7] - The company is optimistic about the growth of the AI native customer group and its implications for future revenue [30] - Management acknowledges potential volatility in revenue growth due to customer contract renewals and optimizations [51] Other Important Information - The company launched over 125 new products and features at the Dash user conference [11] - The company has been recognized as a leader in the 2025 Gartner Magic Quadrant for observability platforms for the fifth consecutive year [17] Q&A Session Summary Question: How should the AI contribution be viewed in terms of market opportunity? - Management indicated that AI is a significant opportunity, with many companies needing to enhance observability as they adopt AI technologies [40][41] Question: Can you discuss the ramp-up of the new sales hires? - Management confirmed that the increase in sales personnel is showing positive signs in new logo production and pipeline growth [47] Question: What is the outlook for the AI native cohort and potential volatility? - Management noted that while the AI cohort is growing rapidly, there may be volatility in usage and contract negotiations [51] Question: How is the company addressing security product adoption? - Management expressed satisfaction with the current product set but acknowledged the need for broader enterprise adoption [54] Question: What are the trends between enterprise and SMB customer segments? - Management observed stable growth in enterprise customers, with gradual improvement in SMB usage [58] Question: What is the company's approach to expanding security capabilities? - Management indicated a focus on both organic and inorganic growth strategies in the security space [76]

Financial Data and Key Metrics Changes - Subscription revenue grew 19% year-over-year, reaching $458 million, while Annual Recurring Revenue (ARR) increased by 16% to $1.82 billion [4][28][23] - Total revenue for Q1 was $477 million, exceeding guidance by approximately 200 basis points, and non-GAAP operating margin was 30%, also exceeding guidance by 150 basis points [28][21] - Free cash flow for Q1 was $262 million, with a trailing twelve-month free cash flow of $465 million, representing 26% of revenue [29][30] Business Line Data and Key Metrics Changes - The company added 103 new logos to the Dynatrace platform, with an average ARR per new logo exceeding $130,000 [24] - The average ARR per customer reached nearly $450,000, indicating ongoing adoption of the platform [24] - The logs consumption increased 36% sequentially and over 100% year-over-year, with expectations to achieve $100 million in annualized logs consumption by the end of the fiscal year [15][16] Market Data and Key Metrics Changes - The strategic enterprise pipeline grew nearly 50% year-over-year, with a significant increase in deals greater than $1 million [14][22] - The company was recognized as a leader in the 2025 Gartner Magic Quadrant for observability platforms, marking the fifteenth consecutive year of such recognition [19] Company Strategy and Development Direction - The company is focused on three key approaches to observability: end-to-end observability, AI observability, and business observability, which are seen as durable drivers of growth in the observability market [5][12] - Dynatrace aims to provide a unified platform that integrates various observability domains, allowing customers to optimize their digital services [7][8] - The company is investing in sales and marketing initiatives to capitalize on growth opportunities in observability [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the strong start to fiscal 2026, highlighting robust expansion activity and a healthy pipeline [21][36] - The company is maintaining a prudent approach to guidance due to the early stage of the fiscal year and the variability associated with larger deals [31][40] - Management noted that while demand remains strong, the macroeconomic environment continues to be fluid, impacting outlook considerations [30][36] Other Important Information - The company repurchased 905,000 shares for $45 million during Q1, part of a $500 million share repurchase program [30] - The non-GAAP EPS guidance for the full year was raised to a range of $1.58 to $1.61 per diluted share [34] Q&A Session Summary Question: Why not raise the constant currency guidance? - Management maintained a prudent guide early in the year despite strong Q1 performance due to the uncertainty around large deal closures [39][40] Question: Who are the competitors in the consolidation of log management? - The company is consolidating traditional log vendors, emphasizing the benefits of integrated solutions over isolated log offerings [45][46] Question: How is the expansion activity compared to historical trends? - Expansion activity is significantly above typical trends, driven by changes in go-to-market strategies and a focus on high propensity to spend customers [51][52] Question: What impact has the ODC revenue recognition change had on other metrics? - The ODC revenue recognition change did not impact other metrics such as ARR or NRR, only affecting revenue recognition [60][61] Question: What is the outlook on enterprise AI adoption? - There is an increasing discussion around AI utilization in observability use cases, with the company well-positioned to take advantage of this trend [103][104] Question: How is the competitive landscape evolving? - There has been little to no leakage to open source solutions, and the competitive environment remains stable [109]

AI Workflow Automation & Observability - N8N is an AI workflow builder that allows users to string together nodes into AI agents and set up external triggers for automated execution [1] - Langsmith is an AI observability and evaluation product designed to monitor the performance of AI applications [2] Integration & Setup - Connecting N8N to Langsmith requires generating a Langsmith API key and setting it in the N8N deployment environment [3][8] - Additional environment variables can be set to enable tracing to Langsmith, specify the trace destination, and define the project name [4] Monitoring & Debugging - Langsmith traces provide visibility into the workflow, including requests to OpenAI, model usage, latency, and token consumption [6] - Langsmith offers a monitoring view to track app usage, latency spikes, error rates, and LLM usage/spending [7]