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Dynatrace sells software that helps organizations monitor applications, infrastructure and AI systems. A strong September quarter was followed by a lower annual adjusted-profit forecast incorporating the completed Arize acquisition and a new $1 billion buyback authorization.
Dynatrace, Inc. (NYSE: DT) sells software that helps organizations monitor applications, infrastructure and AI systems. Subscription revenue accounts for most sales. Its fiscal year ends on March 31.
Q2 of fiscal 2027 covers July 1 through September 30, 2026. The comparison is the same three months in 2025. USD millions, except per-share figures.
| Metric | 2026 | 2025 |
|---|---|---|
| Revenue, GAAP | 579.9 | 493.8 |
| Subscription revenue, GAAP | 553.1 | 473.1 |
| Operating income, GAAP | 95.6 | 73.0 |
| Net income, GAAP | 67.8 | 57.2 |
| Diluted EPS, GAAP | 0.23 | 0.19 |
| Adjusted operating income | 184.3 | 152.8 |
| Adjusted diluted EPS | 0.54 | 0.44 |
| Operating cash flow, GAAP | 41.1 | 32.0 |
| Adjusted free cash flow | 42.3 | 27.8 |
Adjusted operating income removes share-based compensation, related employer payroll taxes, intangible amortization and acquisition, restructuring and selected other costs. Annual recurring revenue was $2.207 billion at September 30, up 16%.
Actual quarterly revenue exceeded August's $565 million to $570 million forecast. Adjusted operating income exceeded the earlier $166 million to $170 million range.
Fiscal 2027 ends March 31, 2027. The November outlook includes Arize, while the August outlook did not. USD millions, except per-share figures and percentages.
| Annual forecast | November | August |
|---|---|---|
| Revenue | 2,330 to 2,340 | 2,306 to 2,320 |
| Recurring-revenue growth, constant currency | 17.5% to 18.5% | 15.5% to 16.5% |
| Adjusted operating income | 653 to 661 | 682 to 690 |
| Adjusted diluted EPS | 1.88 to 1.90 | 1.97 to 1.99 |
| Adjusted free cash flow | 600 to 605 | 610 to 615 |
| Diluted shares, millions | 306 to 308 | 295 to 297 |
Arize is expected to add about two percentage points of annual recurring revenue growth and dilute adjusted operating margin by about 1.75 percentage points. Currency movements also affect the updated dollar forecasts.
Dynatrace completed its acquisition of Arize on October 1, 2026, adding AI evaluation and model-monitoring tools. It paid $815.9 million in cash at closing.
The transaction also included about 1.8 million restricted shares and units valued at $98.2 million, plus $26 million of additional employee units. These equity awards are recognized as compensation over future service periods. The purchase-price allocation remained in progress.
The September results and balance sheet precede the closing. Arize therefore enters the forecast for the remaining fiscal year.
Cash was $2.076 billion at September 30, before the Arize cash payment. Unrestricted marketable securities added $102.1 million. The new $500 million revolving credit facility was undrawn.
In August, Dynatrace issued $1.4375 billion of zero-coupon exchangeable notes due in 2031. Net proceeds were about $1.412 billion. Related hedges, after warrant proceeds, cost about $167.8 million. The company can elect cash, shares or a combination to settle exchanges.
Quarterly repurchases cost $245.6 million excluding excise tax. The November authorization adds $1 billion, bringing remaining capacity to approximately $1.3 billion. Future repurchases are excluded from the current share-count forecast.
Quarterly adjusted free cash flow was $42.3 million. Operating cash of $41.1 million less $5.1 million of equipment purchases produced $36 million before a $6.3 million addback for acquisition, restructuring and other cash costs. The prior-year adjusted figure was recast to the current definition.
Over the first six months, operating cash flow was $347.3 million and adjusted free cash flow was $351.5 million, including $12.4 million of cash-cost addbacks. These measures precede the acquisition price and share repurchases.
The next results can test whether Arize delivers its expected growth contribution while Dynatrace works toward the revised profit and cash-flow targets.
Analysis DT
Dynatrace beat its quarterly forecast, then lowered its annual adjusted-profit target after buying Arize. Our comparison shows what the new outlook implies for the second half.