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    Dynatrace (DT)

    DT Q2 2025: 2x DPS Consumption Growth, ARR Guidance Unchanged

    Reported on Jun 20, 2025
    Pre-Earnings PriceN/ADate unavailable
    Post-Earnings PriceN/ADate unavailable
    Price ChangeN/A

    What went well

    • Strong DPS adoption: The DPS model is delivering 2x consumption growth compared to the legacy pricing model, with about 70% of new logos landing on DPS and higher expansion rates, which drives robust organic growth.
    • Refined sales segmentation and compensation structure: Adjustments—including lowering the accounts per rep from roughly 8-10 to 4-5 for strategic accounts and implementing 6‑month compensation cycles—are expected to deepen account penetration and smooth seasonality, positioning the firm for stronger long‑term revenue momentum.
    • Enhanced partner engagement: With partners now influencing around 75% of deals and an increase in partner-sourced transactions, the integrated partner strategy is accelerating deal flow and broadening market reach.

    What went wrong

    • Cautious Guidance Due to Sales Adjustments: Management expressed caution about raising ARR guidance despite a strong Q2, highlighting the uncertainty of fully maturing new go-to-market changes and the potential for slowed sales productivity with many new, less-tenured reps ( , ).
    • Light New Logo Momentum: Executives noted that new logo deals were "a little bit light," implying potential challenges in expanding the customer base, which could affect long‑term revenue growth ( ).
    • Uncertainty Around Pipeline Conversion: The sales team’s recent compensation and segmentation changes appear to have shifted deal timing, with some deals accelerated into the first half; however, there is concern that this could lead to a weaker or more variable pipeline in the back half of the year ( ).

    Q&A Summary

    1. ARR Guidance
      Q: Why maintain ARR guidance unchanged?
      A: Management noted a strong first half but cautioned due to new rep transitions and sales cycle adjustments, deciding to stay prudent with ARR guidance.

    2. DPS Feedback
      Q: How is DPS perceived by large customers?
      A: They reported that DPS is well received, with 2x consumption growth and high landing rates showing its flexibility and positive feedback from larger spenders.

    3. DPS Renewals
      Q: What trends are seen in DPS renewals?
      A: DPS customers are renewing with higher expansion rates, reflecting healthy, organic growth and stronger overall consumption.

    4. Back Half Consumption
      Q: Is consumption influencing back half guidance?
      A: While consumption is robust with modest NRR uplift, management remains cautious owing to sales cycle maturity, thus maintaining a conservative outlook.

    5. Log Momentum
      Q: What’s the traction on log solutions?
      A: Strong log adoption is noted, driven by predictable pricing and integrated AI analytics that enhance its value, indicating growing momentum.

    6. Partner Deals
      Q: How are partner-sourced deals progressing?
      A: Partners now drive close to 75% of deals, evidencing an effective go-to-market strategy and deepening market penetration.

    7. Sales Segmentation
      Q: What are the new rep-to-account ratios?
      A: Focusing on high-tier accounts, ratios have shifted from 8–10 to roughly 4–5 accounts per rep, aiming for deeper customer penetration.

    8. Compensation Impact
      Q: Did the 6-month comp plans affect the pipeline?
      A: The new compensation structure improved seasonality by accelerating some deals into the first half, without hurting overall pipeline levels.

    9. Grail Usage
      Q: Is Grail aiding operational analytics expansion?
      A: Grail is being used organically across all cloud customers, broadening access to analytics without a targeted sales push.

    10. New Logos
      Q: What’s the new logo trend this quarter?
      A: New logo counts were somewhat light but focused on high-quality accounts with greater expansion potential for the future.

    11. Sales/Marketing Expense
      Q: How have new reps impacted expenses?
      A: Despite a less tenured sales force, sales and marketing expense declined seasonally, consistent with normal Q1-to-Q2 trends.

    12. Budget Flush
      Q: What’s expected on the enterprise budget flush?
      A: No material budget flush is anticipated in December; guidance assumes a muted cycle similar to last year.

    13. Deal Quality Outlook
      Q: How does H1 deal quality compare historically?
      A: H1 deals are in line with past performance, with expectations of more strategic, high-value observability deals as the sales model matures.

    14. DPS Growth Sources
      Q: How balanced is DPS growth across segments?
      A: DPS growth is coming equally from organic expansion and migration, with similar deal size trends across both areas.

    15. Sales Staffing
      Q: Is the sales organization fully staffed?
      A: The team is adequately staffed for H1 with the option to add capacity as opportunities arise later in the year.

    16. DPS Adoption Curve
      Q: How does DPS adoption perform in logs and AppSec?
      A: DPS adoption is strong, with consumption in logs and AppSec outpacing traditional models, showing healthy, broad-based uptake.

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