DT Q4 2025: Logs Growth Tops 100%, On Track for $100M+ Revenue
- Accelerating Logs Growth: Q&A discussions highlighted that logs remain the fastest-growing product category, with over one‐third of customers now leveraging log solutions and expectations to exceed $100 million in consumption revenue in fiscal '26 at growth rates well over 100%.
- Strong Go-to-Market via DPS & Partners: Executives emphasized robust adoption of the DPS licensing model—backed by dedicated strike teams and strategic hyperscaler partnerships—which is driving deeper platform consumption and expanding the customer base.
- Transition to Consumption-Driven Revenue: The company’s strategic focus on shifting towards a consumption-based model, evidenced by rising on-demand revenues and accelerated contract renewals, is setting the stage for sustainable long-term subscription growth.
- Uncertainty in on-demand consumption revenue: ODC is uncommitted and its variability creates challenges in reliably forecasting revenue, potentially distorting net retention trends ( ).
- Extended sales cycles and slower close rates: Large strategic deals are taking longer in a cautious macro environment, which may delay converting a robust pipeline into booked revenue ( ).
- Risks from transitioning to new go-to-market models: The heavy reliance on DPS and associated strike teams to drive deeper platform adoption may backfire if customers resist increased consumption or delay expansion in a tight economic setting ( ).
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | 17% increase | Total Revenue grew by 17% YoY to $445.16 million, driven by robust underlying subscription revenue growth and strategic market initiatives seen in previous periods, where subscription revenue has consistently been the key driver of overall revenue. |
Subscription Revenue | 18% increase | Subscription Revenue climbed 18% YoY to $423.56 million, leveraging continued on-demand consumption, tool consolidation, and strategic deals like those observed in Q3 2025; this reinforcement of the subscription model aligns with the strong trends noted in previous quarters. |
Service Revenue | 4% increase | Service Revenue saw a modest 4% YoY growth to $21.60 million, reflecting a stable yet limited contribution amid a strategic shift toward SaaS migration and subscription focus, consistent with the minimal service revenue changes noted in earlier quarters. |
Geographic Revenue – North America | 22% increase | North America’s revenue improved by 22% YoY to $277.25 million, bolstered by strong regional market demand and customer acquisition efforts that mirror earlier trends, reinforcing the region’s importance to overall business performance. |
Operating Income | 85% increase | Operating Income surged 85% YoY to $42,914 thousand due to disciplined cost management, improved non-GAAP margins, and operational efficiencies that built on the revenue growth and margin improvements seen in Q3 2025. |
Net Income | 3.6% increase | Net Income grew modestly by about 3.6% YoY to $39,304 thousand, reflecting that while top-line revenues and operating income expanded considerably, offsetting factors such as tax adjustments and non-cash items limited net income growth compared to earlier larger gains in operating performance. |
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Logs Growth
Q: Logs target and progress?
A: Management noted that over 1/3 of customers now use the log management solution, with logs being the fastest-growing category and on track to exceed the $100 million consumption target in fiscal '26 through more than 100% growth. -
DPS & Expansion
Q: DPS uptake and portfolio growth?
A: They expect DPS adoption to continue rising, aiming for 75-85% of customers long term, which drives broader portfolio adoption across capabilities such as logs, AppSec, and more. -
Hyperscaler Trends
Q: What fuels hyperscaler optimism?
A: Management is confident due to strong momentum in hyperscaler workloads and robust co-sell partnerships—including a recent AWS alliance—positioning them to capture the majority of observability growth. -
Strategic Pipeline
Q: How strong is the strategic pipeline?
A: The pipeline in strategic accounts surged by 45%, although larger deals may take longer to close amid current macro uncertainty. -
Go-to-Market Productivity
Q: How are sales productivity changes working?
A: Adjustments like new quotas and territory realignment are paying off, with over 75% of deals leveraging channel partnerships, showing improved overall productivity. -
ODC & Incentives
Q: How balance on-demand vs. contracted revenue?
A: Focused strike teams and dedicated customer success efforts are driving consumption, effectively balancing uncommitted on-demand revenue with predictable contract renewals. -
AI Automation
Q: Are autonomous AI agents gaining traction?
A: Customers are increasingly embracing agentic AI for observability, leveraging integrated causal, predictive, and generative capabilities to automate remediation, which enhances overall platform value. -
ODC Customer Behavior
Q: What’s observed in ODC behavior?
A: Management sees varied ODC consumption across customer cohorts and has applied conservatism in guidance, emphasizing that flexibility helps drive deeper platform adoption. -
Net Retention Dynamics
Q: How is net retention trending?
A: The reported net retention rate is around 110% based on contracted revenue; when adding on-demand consumption, the overall retention shows modest improvement, reflecting steady customer expansion. -
DPS Cohort Trends
Q: Are all DPS cohorts expanding similarly?
A: Both legacy and new DPS customers are now showing strong and consistent expansion in capability adoption, with early biases leveling out across the broader base. -
ODC Revenue Guidance
Q: How was ODC guidance derived?
A: Guidance is based on a detailed analysis of customer annual resets and cohort attach rates, integrating conservatism due to the uncommitted nature of on-demand revenue. -
Security Growth
Q: How to unlock security opportunity?
A: By enhancing product depth with offerings like vulnerability analytics, CADR, and cloud security posture management, coupled with focused go-to-market efforts, management expects further security market expansion.
Research analysts covering Dynatrace.