Cloud observability platform Dynatrace (NYSE:DT) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 18.2% year on year to $515.5 million. Guidance for next quarter’s revenue was better than expected at $520.5 million at the midpoint, 1.2% above analysts’ estimates. Its non-GAAP profit of $0.44 per share was 7.2% above analysts’ consensus estimates.
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Dynatrace (DT) Q4 CY2025 Highlights:
- Revenue: $515.5 million vs analyst estimates of $505.9 million (18.2% year-on-year growth, 1.9% beat)
- Adjusted EPS: $0.44 vs analyst estimates of $0.41 (7.2% beat)
- Adjusted Operating Income: $153.4 million vs analyst estimates of $146.2 million (29.8% margin, 4.9% beat)
- Revenue Guidance for Q1 CY2026 is $520.5 million at the midpoint, above analyst estimates of $514.3 million
- Management raised its full-year Adjusted EPS guidance to $1.68 at the midpoint, a 3.1% increase
- Operating Margin: 14.1%, up from 10.9% in the same quarter last year
- Free Cash Flow Margin: 5.3%, similar to the previous quarter
- Annual Recurring Revenue: $1.97 billion (19.7% year-on-year growth, beat)
- Billings: $560.1 million at quarter end, up 26.4% year on year
- Market Capitalization: $10.16 billion
"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,” said Rick McConnell, CEO of Dynatrace.
Company Overview
With its platform processing over 30 trillion pieces of IT performance data daily, Dynatrace (NYSE:DT) provides an AI-powered platform that helps organizations monitor, secure, and optimize their applications and IT infrastructure across cloud environments.
Revenue Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Dynatrace grew its sales at a solid 24.1% compounded annual growth rate. Its growth beat the average software company and shows its offerings resonate with customers, a helpful starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Dynatrace’s annualized revenue growth of 19% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. 
This quarter, Dynatrace reported year-on-year revenue growth of 18.2%, and its $515.5 million of revenue exceeded Wall Street’s estimates by 1.9%. Company management is currently guiding for a 16.9% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 14% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Annual Recurring Revenue
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
Dynatrace’s ARR punched in at $1.97 billion in Q4, and over the last four quarters, its growth was solid as it averaged 17.7% year-on-year increases. This performance aligned with its total sales growth, reflecting the company’s ability to maintain strong customer relationships and secure longer-term commitments. Its growth also contributes positively to Dynatrace’s predictability and valuation, as investors typically prefer businesses with recurring revenue. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
Dynatrace is efficient at acquiring new customers, and its CAC payback period checked in at 36.8 months this quarter. The company’s relatively fast recovery of its customer acquisition costs gives it the option to accelerate growth by increasing its sales and marketing investments. 
Key Takeaways from Dynatrace’s Q4 Results
It was great to see Dynatrace’s full-year EPS guidance top analysts’ expectations. We were also glad its EPS guidance for next quarter exceeded Wall Street’s estimates. Overall, we think this was a very solid quarter. The stock traded up 10% to $37.09 immediately following the results.
Dynatrace put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).
