Dynatrace, Inc.

Q1 fiscal 2027 results were strong across the board: ARR was $2.14 billion, up 17% year over year; net new ARR was $85 million, up 66% year over year and $73 million or 41% organic excluding the $13 million Bindplane contribution; revenue was $555 million, up 15%; subscription revenue was $530 million, up 15%; non-GAAP operating margin was 29%; and non-GAAP net income was $140 million, or $0.48 per diluted share. Adjusted free cash flow was $309 million in the quarter, and trailing 12-month adjusted free cash flow was $579 million, or 28% of revenue. For the full year, Dynatrace kept constant-currency ARR growth guidance at 15.5% to 16.5%, raised total revenue and subscription revenue growth guidance to 14.5% to 15%, increased the high end of non-GAAP operating margin guidance to 29.75%, raised non-GAAP EPS guidance to $1.97 to $1.99, and maintained adjusted free cash flow margin guidance at 26.5%. Q2 guidance calls for revenue growth of 15% to 16%, non-GAAP operating margin of 29.5% to 30%, and non-GAAP EPS of $0.48 to $0.49; FX is now expected to be a $14 million headwind to ARR and a $4 million headwind to revenue.

Rick McConnell framed the quarter as evidence that Dynatrace is entering fiscal 2027 with momentum and that the company is positioned for an AI-first observability market. He emphasized three monetization vectors from AI: more telemetry consumption, incremental AI observability demand, and direct usage monetization from Dynatrace’s own agents. His tone was upbeat and confident, repeatedly stressing unified observability, openness/interoperability, and the company’s ability to help customers manage growing complexity and autonomous workflows.

Jim Benson highlighted that Q1 exceeded the high end of all top-line growth and profitability guidance, driven by record new logo ARR growth, stronger logs traction, and robust platform consumption. He cited 4 consecutive quarters of improvement in trailing 12-month organic net new ARR growth, mid-90s gross retention, 110% trailing-12-month net retention, and logs consumption nearing $200 million; he also said Bindplane’s $13 million ARR contribution was ahead of expectations and should accelerate the logs business. On capital allocation, he noted $275 million of share repurchases in Q1 for 7.1 million shares, and he maintained a disciplined stance balancing investment and buybacks. He also said adjusted free cash flow was 28% of revenue over the trailing 12 months, with 500 basis points of cash tax impact.

Analysts pressed on whether Q1’s 41% organic net new ARR growth was sustainable, and management said the quarter was stronger than expected but reiterated that large enterprise deals create timing variability; they expect high-teens growth rates in the remaining quarters at the high end of the full-year guide. Questions also focused on renewals and NRR, where Benson said Q1 and Q2 are light renewal periods and 70% of renewal activity occurs in the back half, so NRR improvement should show later in the year if consumption stays strong. On pricing, Benson said Dynatrace has not decided to change its on-demand consumption pricing and that no such change is assumed in guidance. Management also said the sales force is being steered toward AI workloads and that AI observability and agent usage are becoming explicit sales plays.