Dynatrace’s DT shares have gained 16.3% over the past three months, outperforming the Zacks Computer & Technology sector’s return of 11.5% and the Zacks Computers - IT Services industry’s growth of 12.1%.

DT’s positive share price movement has been driven by revenue growth, which increased 19% year over year to $418.1 million in the second quarter of fiscal 2025. The top-line growth reflects the success of its enhanced go-to-market strategy, strong bookings performance and product advancements.

Factors Favoring DT Stock

Dynatrace's Annual Recurring Revenue (ARR) reached $1.62 billion in the second quarter of fiscal 2025, up 19% year over year. This was driven by solid expansion bookings, especially in Europe, and improved booking seasonality due to a shift to six-month sales compensation cycles.

Subscription revenues of $400 million increased 20% both on as-reported and constant currency basis.

Net Retention Rate reached 112% in the fiscal second quarter, slightly surpassing expectations, driven by early customer expansions and the company's shift to a six-month sales compensation cycle.

The Dynatrace Platform Subscription (DPS) licensing model is growing, with 250 deals closed in the second quarter. DPS customers now comprise 30% of the customer base and 15% of ARR. The company believes that full platform access is expected to drive broader adoption across IT environments.

DT Rides on AI-Based Portfolio and PartnerBase

Global enterprises trust Dynatrace for reliable operations. Its AI-powered platform provides deep insights, automates operations and optimizes performance at scale.

Dynatrace has used causal and predictive AI for more than a decade, continuously enhancing value for all its customers.

Causal AI examines billions of data points to identify exact issues in software and systems. It doesn’t rely on guesses from related data but looks at data in context to find the actual cause and provide clear solutions.

Predictive AI improves on causal AI by using machine learning to monitor software changes, predict trends and spot problems early. This helps keep systems running smoothly and prevents issues from affecting the business.

Finally, Generative AI makes the Dynatrace platform accessible to more users. It allows anyone, not just experts, to get insights using natural language, which taps into precise answers provided by causal and predictive AI. This seamless combination of AI techniques, powered by Dynatrace’s architecture, makes the platform so effective.

The company’s strong network of partners has played a crucial role in driving its growth. Key partners like DXC Technology DXC, BT Group, Deutsche Telekom IT, Alphabet’s GOOGL cloud business Google Cloud, Amazon’s (AMZN) cloud arm, Amazon Web Services (“AWS”) and Lloyds Banking Group LYG have helped expand the reach of Dynatrace's platform.

Dynatrace highlighted several important customer wins in the past quarter, including expansions with a leading U.K. bank and a major U.S. airline. These deals emphasize how the company’s platform is gaining popularity among large enterprises.

The company has broadened its go-to-market strategy to include end-to-end observability and cloud modernization, thereby attracting new customers. Dynatrace continues to support its go-to-market initiatives by boosting awareness and creating more customer engagement opportunities across various platforms.

Dynatrace Raises 2025 Outlook

For the third quarter of fiscal 2025, Dynatrace expects revenues to be in the range of $425-$428 million. 

The Zacks Consensus Estimate for revenues is pegged at $426.5 million, indicating 16.82% growth from the figure reported in the year-ago quarter.

The consensus mark for fiscal third-quarter earnings is pegged at 33 cents per share, which has moved up a couple of cents over the past 30 days. The estimate indicates a year-over-year increase of 3.13%.

For 2025, Dynatrace expects total revenues to be in the range of $1.665-$1.675 billion. The Zacks Consensus Estimate for revenues is pegged at $1.67 billion, indicating year-over-year growth of 16.84%.

The consensus mark for fiscal 2025 earnings is pegged at $1.32 per share, which has risen 4 cents in the past 30 days. This also indicates a year-over-year rise of 10%.

Overvaluation of DT’s Shares

Dynatrace’s shares are trading at a premium, as indicated by its Value Score of F.

DT’s Zacks Rank

Dynatrace currently carries a Zacks Rank #3 (Hold), indicating that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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