Dynatrace Earnings: A Balance of Strong Growth and Improved Profitability Marks the Quarter

We are raising our fair value estimate for narrow-moat Dynatrace to $50 from $44 after the firm reported fiscal third-quarter financial results and provided fiscal fourth-quarter guidance ahead of our prior estimates on sales and profitability. Dynatrace’s fiscal 2024 has been marred by macroeconomic pressures that have resulted in elongated sales cycles as customers have dialed back some of their IT spending. We expect fiscal 2025 to offer some reprieve, as macro conditions normalize. From a longer-term perspective, we reiterate our confidence in Dynatrace as a leader in the observability space and continue to have a positive outlook on the firm’s financial prospects. Shares traded down after the earnings report, and we view them as fairly valued.