Dynatrace’s DT shares have appreciated 16.5% in the trailing six months, outperforming the Zacks Computer & Technology sector’s return of 1.1% and the Zacks Computers - IT Services industry’s growth of 12.5%.

The company has also outperformed industry peers like Clarivate CLVT, which has lost 11.7% during the same period.

The rise in DT's shares is driven by strong performance across key metrics, robust AI-powered platforms and continuous product innovation, leading to consistently impressive quarterly results. Over the past four quarters, the company’s results have beat the Zacks Consensus Estimates for both top and bottom lines.

However, Dynatrace faces several challenges, including slower-than-expected customer growth, highlighting potential gaps in client acquisition strategies. Increased competition in the AI-driven observability market poses risks to maintaining market share and pricing power.

Despite these challenges, Dynatrace remains optimistic about growth, focusing on AI-driven observability, partnerships and advancements in the go-to-market strategies.

DT Strengthens Partner Network for Expansion

Dynatrace has developed a comprehensive Partner Program, combining its observability, application security, and AIOps capabilities with leading partner solutions. This initiative allows partners to integrate DT's platform into their services, delivering enhanced value to customers.

The company has integrated its AI-powered observability platform with Microsoft Azure, a cloud computing platform developed by Microsoft MSFT, facilitating seamless cloud transformation for enterprises. This collaboration empowers organizations to leverage Dynatrace's capabilities within the Azure ecosystem, enhancing their cloud operations.

DT expanded its go-to-market partnership with Alphabet’s GOOGL cloud business, Google Cloud, enabling customers to adopt the Dynatrace platform on Google Cloud. This collaboration supports digital transformation by offering AI-driven analytics and automation.

Dynatrace scored key customer wins last quarter, including an eight-figure TCV expansion deal with a leading U.K. digital bank. In addition, a major US airline signed a seven-figure DPS extension with DT to reduce resolution times from more than an hour to less than five minutes.

AI Platform Drives DT's Strong Growth Prospects

Dynatrace reinforced its focus on AI-driven observability by introducing advanced log management and analytics, and integrated AI to improve platform usability and user experience.

DT leverages three powerful AI techniques — causal AI, predictive AI and generative AI. Causal and predictive AI have been foundational to the platform for over a decade. The company launched AI Observability for Large Language Models and Generative AI, empowering organizations to monitor and optimize AI models for reliable performance in AI-driven applications.

Dynatrace was recognized as a leader in the 2024 Gartner Magic Quadrant for observability platforms, marking the 14th consecutive time, highlighting its strong market position.

However, the company added 143 customers in the second quarter of fiscal 2025, slightly below expectations, indicating challenges in client acquisition.

DT’s higher proportion of less experienced sales representatives may affect short-term sales productivity, requiring focused training and integration efforts to sustain sales momentum.

Dynatrace Gives Positive FY25 Guidance

For 2025, the company expects total revenues of $1.67-$1.68 billion.

The Zacks Consensus Estimate for revenues is pegged at $1.67 billion, indicating year-over-year growth of 16.83%.

The non-GAAP earnings for the year are expected to be $1.31-$1.33 per share. 

The consensus mark for fiscal 2025 earnings is pegged at $1.32 per share, unchanged over the past 30 days. This estimate indicates a year-over-year rise of 10%.

The company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 13.71%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Conclusion

Given Dynatrace’s strong position in AI-driven observability and strong partner base, along with its solid customer base, the company shows promising long-term potential. 

However, short-term challenges related to customer acquisition and sales productivity warrant caution. Investors are advised to wait for a better entry point.

Dynatrace currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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