Dynatrace, Inc.: Q2 FY2026 earnings call

What management said about Q2 FY2026, from the documents filed with the SEC on 5 November 2025: press release. Guidance figures: 9 raised, 1 lowered, 7 new, 3 kept. The quarter’s numbers.

Read the filing

Key takeaways

• ARR and revenue grew 17% to 18%: Total ARR rose 17% to $1,899 million, or 16% in constant currency. Total revenue grew 18% to $494 million, and subscription revenue grew 18% to $473 million. Source
• Operating income compared with prior year: GAAP income from operations was $73 million, a 15% margin, against $47 million a year earlier. Non-GAAP income from operations was $153 million, a 31% margin. Source
• Seven-figure deal value up 53%: Annual contract value from seven-figure deals closed in the quarter grew 53% year over year. All of these deals were with partners, and nearly all used end-to-end observability. Source
• Platform subscription licensing reached more customers: Platform Subscription licensing now covers 50% of the customer base and 70% of ARR, up from over 45% and over 65% in the prior quarter. Source

“Our strong second quarter results were fueled by the growing demand for end-to-end observability driven by large-scale tool consolidations,”

Rick McConnell, CEO of Dynatrace

Guidance

What changed from last quarter

• Guidance raised: Full-year ARR, revenue, subscription revenue, non-GAAP operating income, non-GAAP net income and non-GAAP diluted EPS guidance raised. Source
• Guidance lowered: Full-year diluted weighted average share count guidance lowered to 307 to 308 million from 309 to 310 million. Source
• New guidance: Third-quarter guidance issued for total revenue, subscription revenue, non-GAAP operating income, margin, net income, EPS and share count. Source
• Guidance kept: Full-year free cash flow and free cash flow margin guidance unchanged, as is the full-year non-GAAP operating margin. Source
• New: Announced a multi-year strategic collaboration with ServiceNow on autonomous IT operations; this item does not appear in the prior quarter's release. Source
• New: Announced an integration with Atlassian that embeds real-time production insights into incident management processes. Source

Results and growth drivers

• ARR and revenue grew 17% to 18%: Total ARR rose 17% to $1,899 million, or 16% in constant currency. Total revenue grew 18% to $494 million, and subscription revenue grew 18% to $473 million. Source
• Operating income compared with prior year: GAAP income from operations was $73 million, a 15% margin, against $47 million a year earlier. Non-GAAP income from operations was $153 million, a 31% margin. Source
• Diluted EPS compared with prior year: GAAP diluted EPS was $0.19 against $0.15 a year earlier. Non-GAAP diluted EPS was $0.44 against $0.37. Source
• Operating cash flow and free cash flow: Net cash from operations was $32,017 thousand, or 6% of revenue. Free cash flow was $27,830 thousand, a 6% margin. Six-month free cash flow was $289,846 thousand. Source

Go-to-market and partner-led deals

• Seven-figure deal value up 53%: Annual contract value from seven-figure deals closed in the quarter grew 53% year over year. All of these deals were with partners, and nearly all used end-to-end observability. Source
• Platform subscription licensing reached more customers: Platform Subscription licensing now covers 50% of the customer base and 70% of ARR, up from over 45% and over 65% in the prior quarter. Source

“We believe Dynatrace's precise answers, advanced analytics, and deep intelligence uniquely position us to capitalize on the market opportunity ahead.”

Rick McConnell, CEO of Dynatrace

Products and ecosystem partnerships

• ServiceNow collaboration for autonomous IT: The multi-year collaboration with ServiceNow targets autonomous IT operations, with stated aims of better service outcomes and customer and employee satisfaction. Source
• Atlassian incident management integration: The Atlassian integration places real-time production insights inside incident management workflows. Source
• Analyst recognition for vision: Named a Leader in the 2025 Gartner Magic Quadrant for Digital Experience Monitoring, positioned furthest for Completeness of Vision. Source

Costs and margins

• Research and development expense rose: GAAP research and development expense was $114,992 thousand, against $95,366 thousand a year earlier. Source
• Sales and marketing and G&A expense: Sales and marketing expense was $167,675 thousand, against $144,224 thousand. General and administrative expense was $48,437 thousand, against $48,953 thousand. Source
• Gross margin on both bases: GAAP gross margin was 82%, against 81% a year earlier. Non-GAAP gross margin was 84%, against 85%. Source
• Share-based compensation excluded from non-GAAP: Share-based compensation was $76,814 thousand, against $71,703 thousand. Non-GAAP results exclude it along with employer payroll taxes on stock transactions and intangible amortization. Source
• Income tax expense higher: Income tax expense was $29,862 thousand for the quarter, against $13,830 thousand a year earlier, on pre-tax income of $87,105 thousand. Source

Demand and balance sheet

• Current deferred revenue below March level: Current deferred revenue was $889,957 thousand at September 30, against $1,087,518 thousand at March 31. Source
• Receivables down from March year-end: Accounts receivable, net, was $315,044 thousand at September 30, against $624,437 thousand at March 31. Source

Capital and shareholder returns

• Second-quarter buybacks of $50 million: Dynatrace spent $50 million to repurchase 994,000 shares at an average price of $50.27 under its $500 million program. Source
• Cumulative buybacks since May 2024: Since the program began in May 2024, the company has repurchased 5.3 million shares for $268 million, at an average price of $50.05. Source
• Cash balance higher than March: Cash and cash equivalents were $1,225,023 thousand at September 30, against $1,017,039 thousand at March 31. Source

Strategy and AI platform

• AI workloads raise platform need: Management said cloud and AI workload growth makes an AI-powered observability platform necessary for managing complexity and scale. Source
• Joined GitHub MCP Registry: Dynatrace joined the GitHub Model Context Protocol Registry, to help developers find and integrate AI-ready services. Source
• AWS generative AI competency achieved: The company achieved the AWS Generative AI Competency, covering monitoring and governance of generative AI applications in production. Source

Coming up, as management said on 5 November 2025

• Future buybacks excluded from guidance: The guidance excludes the impact of any share repurchases made after September 30, 2025. Source

Figures management reported

Risks management discussed

• Financial: Management expects the variability of share-based compensation, payroll taxes and similar charges to affect future GAAP results significantly and unpredictably. Source

Earlier plans management reported on

• Ahead: Results were reported as exceeding the high end of the second-quarter guidance on all metrics. Source

Other quarters

• Q1 FY2027 earnings call
• Q4 FY2026 earnings call
• Q3 FY2026 earnings call
• Q1 FY2026 results

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.