Dynatrace (DT)·Q3 2026 Earnings Summary
Dynatrace Beats, Raises, and Launches $1B Buyback — Stock Jumps 11%
February 9, 2026 · by Fintool AI Agent
Dynatrace delivered a clean beat across all metrics in Q3 FY2026, exceeding the high end of guidance for the third consecutive quarter. Revenue of $515M topped consensus by 5.8%, non-GAAP EPS of $0.44 beat by 7.3%, and ARR growth remained healthy at 16% in constant currency. The company raised full-year guidance, announced a new $1 billion share repurchase program, and crossed the $100 million milestone in log management—sending shares up 10.6% to $37.30 in after-hours trading.
Did Dynatrace Beat Earnings?
Yes — convincingly. Dynatrace exceeded the high end of guidance on every metric:
This represents Dynatrace's 8th consecutive quarter of beats and the 3rd straight quarter exceeding the high end of guidance. Net new ARR on a constant currency basis was $75 million, up 11% year-over-year—marking the third consecutive quarter of double-digit net new ARR growth.
What Did Management Guide?
Full-year guidance raised across the board. The company increased FY2026 expectations by $40M on ARR, $18M on revenue, and $0.05 on EPS:
Q4 FY2026 guidance calls for revenue of $518-$523M (+13-14% CC YoY), subscription revenue of $493-$498M, and non-GAAP EPS of $0.38-$0.39.
Ask Fintool AI AgentHow Did the Stock React?
DT shares surged 10.6% in after-hours trading to $37.30, recovering from recent weakness. The stock had been under pressure, trading near 52-week lows around $33 heading into the print.
The strong reaction reflects relief after a challenging period for the stock, which had declined ~46% from its 52-week high. The combination of the beat, guidance raise, and new $1B buyback authorization provided multiple catalysts.
What Changed From Last Quarter?
Several notable developments versus Q2 FY2026:
1. Log Management Crosses $100M Milestone
Dynatrace announced log management surpassed $100 million in annualized consumption revenue, becoming the company's fastest-growing major product category and growing well over 100% year-over-year. CFO Jim Benson noted: "With our log strike team in place now for nine months and our selling motion continuing to mature, we expect logs to be an ongoing source of significant ARR growth."
2. New $1 Billion Share Repurchase Program
The Board authorized a new $1B buyback program—double the size of the inaugural program—after substantially completing the $500M program. In Q3 alone, the company repurchased 3.5 million shares for $160 million at an average price of just over $45 per share. CFO Benson stated the company intends "to be active buyers in the market at current levels."
3. Dynatrace Intelligence Launched at PERFORM
The company introduced "Dynatrace Intelligence"—described as "one of the biggest innovations in our history" and "the industry's first agentic operations system built for modern software ecosystems." It fuses deterministic AI with agentic AI to enable auto-prevention, auto-remediation, and auto-optimization. Importantly, it's embedded in the platform (not sold as a separate SKU) and available to every customer today.
4. DevCycle Acquisition
Dynatrace acquired DevCycle last month—a feature management platform built on OpenFeature (an open-source initiative originally created by Dynatrace). This extends the company's strategy "left to developers" with progressive delivery for AI-native applications.
5. Deeper Hyperscaler Partnerships
New technical engagements announced with all major hyperscalers: integrating with Amazon Bedrock Agent Core, embedding with Azure's SRE agent, and serving as launch partner for GCP Gemini CLI extensions and Gemini Enterprise.
6. Record New Logo Performance
Q3 added 164 new logos with average land size over $200K—particularly robust versus historical $160K+ average. Five new logos were over $1 million, and new logo ARR grew 21% YoY off a strong Q3 FY2025.
Key Metrics Deep Dive
Profitability remained best-in-class:
What Did Management Say?
CEO Rick McConnell highlighted three themes:
"Our third quarter results surpassed the high end of our guidance across all top line growth and profitability metrics. Notably, we've generated double-digit net new ARR growth for three consecutive quarters, which reflects the growing number of enterprises adopting Dynatrace as their end-to-end observability platform."
"As organizations broadly deploy AI, observability is mission critical to managing the reliability and performance of those workloads. The Dynatrace platform combines the strengths of deterministic and agentic AI to deliver trustworthy insights that drive optimal business outcomes."
CFO Jim Benson on capital return:
"In the last four months, we repurchased over $200 million of Dynatrace stock, significantly accelerating the pace of our repurchases and nearly completing our inaugural $500 million buyback program. This new $1 billion authorization reflects our conviction in the underlying strength of the business and commitment to driving shareholder value."
Q&A Highlights
On End-to-End Observability Momentum (Raimo Lenschow, Barclays):
"End-to-End Observability is what we're seeing as being very, very strong in terms of the sales play and momentum at the moment. This is where our customers are looking to expand. They are realizing that there is extraordinary tool sprawl, that there is lack of expense management in that, and poor outcomes."
On Agentic AI Timeline (Sanjit Singh, Morgan Stanley): CEO McConnell outlined the three-step journey: (1) end-to-end observability as foundation, (2) deterministic AI to develop understanding of required actions, (3) then agentic AI can take autonomous action—"probably only with a portion of the actions required."
On FY27 Acceleration Potential (Will Power, Baird): CFO Benson: "Our objective is to show an acceleration in ARR. Obviously, we'll have to continue to execute like we have. The go-to-market momentum continues. We continue to benefit from large-scale end-to-end observability deals... We're very optimistic about the momentum in the business."
On Q4 Net New ARR Confidence (Eric Heath, KeyBanc): CFO Benson: "Our visibility of the pipeline here, especially near term, is quite strong... We have a very good line of sight to be able to deliver against this guide." High end of Q4 guide implies another quarter of 10-11% net new ARR growth.
On New Logo vs Expansion Mix (Keith Bachmann, BMO): Near-term expectation is roughly 1/3 new logo, 2/3 expansions. CFO noted: "We are not even close to exhausting our ability to expand within our install base. We almost have $500,000 now per customer... the propensity to expand is still pretty material."
On LLM Competition (Matt Hedberg, RBC): CEO McConnell provided detailed rebuttal: "We really do see observability as the control plane for enterprise AI. We don't believe that you can easily replace observability through vibe coding or an LLM instantiation... We see our focus and our moat, really, as being architectural and not code-based. We have a platform with Smartscape, with Grail, with Dynatrace Intelligence, not just individual point products."
On DPS Renewal Cycles (Mike Cikos, Needham): CFO Benson: "In fiscal 2027 will be kind of your first full three-year cohort classes coming so that you'll have a one-year, two-year, and three-year cohort classes. So there is a building momentum going into fiscal 2027 that, to the extent we can continue to execute, you should see an inflection in that metric."
On Agentic Pricing (Brad Rebeck, Stifel): Management plans to monetize the agentic world two ways: (1) increased workloads and platform usage through Grail, Smartscape, and analytics, and (2) direct monetization of agentic workloads through the agentic workflow layer.
Customer Case Studies (PERFORM 2026)
Customer testimonials from the company's annual conference highlighted platform impact:
What's the Context From Prior Quarters?
The Q3 results build on strong momentum established throughout FY2026:
From the Q2 FY2026 earnings call, management highlighted:
- Strategic account pipeline up 45% year-over-year
- Platform consumption growth exceeding 20%, outpacing subscription revenue growth
- DPS (Dynatrace Platform Subscription) reaching 50% customer penetration and 70% of ARR
- ServiceNow strategic partnership announced for autonomous IT operations
Ask Fintool AI AgentWhat Are the Forward Catalysts?
Near-term (Q4 FY2026):
- Execution on raised guidance expectations
- Continued large deal pipeline conversion (weighted toward Q4)
- Log management approaching sustainable scale
- Impact of ServiceNow partnership
Medium-term (FY2027+):
- Dynatrace Intelligence (agentic operations) adoption
- AI-native workload observability opportunity
- Further DPS penetration (targeting 80-85% of business)
- Margin expansion from operating leverage
Risks and Watch Items
- ARR growth deceleration — Constant currency growth has moderated from 20% to 16% over the past 8 quarters, though management's objective is to show acceleration in FY27
- Large deal timing variability — Pipeline is weighted toward strategic consolidation opportunities with longer close times; management has "improved ability to call the ball" but timing remains a factor
- DPS renewal cohort timing — FY2027 will be the first year with full three-year DPS cohort classes, which should drive NRR improvement but creates execution pressure
- LLM/AI disruption concerns — Management addressed directly: smaller players like Chronosphere "really don't see them in the market very often" at enterprise level; on LLM risk, CEO argues observability is "the control plane for enterprise AI" and moat is "architectural and not code-based"
- Competitive intensity — Datadog, Splunk (Cisco), and cloud providers continue to invest heavily in observability; however, management sees end-to-end platform consolidation as structural tailwind
Bottom Line
Dynatrace delivered exactly what the Street wanted: a clean beat, guidance raise, and shareholder-friendly capital return. The $100M log milestone validates the platform expansion strategy, and the new $1B buyback signals management confidence. While ARR growth has moderated, consumption metrics and large deal pipeline suggest the deceleration may be bottoming. At ~19x FY27E earnings post-move, the stock is no longer at distressed valuations but remains well below peak multiples.
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