For the recently reported third quarter, Dynatrace’s revenues grew 28% to $182.9 million, ahead of the Street’s forecast of $172.36 million. Subscription and services revenue grew 33% to $170.3 million. License revenues fell 93.4% to $257 million. EPS grew from $0.10 a year ago to $0.17 and was ahead of the Street’s forecast of $0.13 for the quarter.
Among key metrics, Annual Recurring Revenue (ARR) rose 35% to $722 million, ahead of the market’s forecast of $514.5 million.
Dynatrace expects to end the fourth quarter with revenues of $190-$192 million and an adjusted income of $0.13-$0.14 per share. The market was looking for revenues of $191.81 million for the quarter. Dynatrace expects to end the year with revenues of $697-$699 million with an EPS of $0.61-$0.62.
Dynatrace’s Product Growth
During the quarter, Dynatrace announced the expansion of its collaboration with Microsoft. The expanded agreement will allow Dynatrace’s observability platform to be available for purchase through Microsoft’s marketplace. Microsoft customers will also be able to implement Dynatrace’s automatic and intelligent observability for both their Microsoft Azure and hybrid-cloud environments.
Additionally, Dynatrace announced the launch of Software Intelligence Hub. The Hub provides customers with the ability to leverage out-of-the-box integrations as well as create their own custom integrations without the need for coding. It will enable teams to extend Dynatrace’s automation and AI-assistance across environments in addition to simplifying operations.
Last month, Dynatrace also announced the launch of a Cloud Automation Module to its Software Intelligence Platform. This new Module leverages the automation and intelligence of the Dynatrace Platform to manage the application development lifecycle process. The new module automates code tests and quality checks in line with an organization’s service level objectives. Powered by a fully-supported version of Keptn, an open-source project, the enhancement will accelerate DevOps by enabling Site Reliability Engineering teams to develop and manage cloud-native applications.
Within security services, Dynatrace announced new enhancements as well. Security-focused upgrades include extending Dynatrace’s AI-powered risk assessment for applications running on Node.js. Additionally, Dynatrace is extending automatic software vulnerability detection in Kubernetes environments from workloads to the platform itself.
Dynatrace offers its partners access to its developer program. The Dynatrace Developer Program is focused on providing developers with the resources required to support, build, test, and deploy innovative software intelligence solutions using the Dynatrace platform. Developers can create custom monitoring solutions using Dynatrace integration interfaces including the Dynatrace API, OneAgent SDK, OneAgent/ActiveGate Plugins, and OpenKit. Dynatrace does not share detailed metrics on the developers accessing its platform.
Dynatrace’s product has received positive reviews in the industry. Last year, it was ranked among the leader in Gartner’s Magic Quadrant for APM solutions for the tenth time in a row. Gartner recognizes Dynatrace’s combination of platform with AI-assistance and automation that helps reduce wasted effort and time and drives speed and quality of innovation. Dynatrace has stiff competition in the field from big giants like Cisco, which competes with it through its App Dynamics offering and players like New Relic, Splunk, and Datadog that are also operating in the same crowded marketplace.
Its stock is trading at $47.33 with a market capitalization of $13.2 billion. It hit a 52-week high of $56.94 last month and a 52-week low of $19.95 in March last year. Dynatrace had listed in August 2019 at $16 apiece at a valuation of $4.5 billion. Prior to the listing, Dynatrace had raised $21.9 million in funding from investors including Bain Capital Ventures and Bay Partners.
Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.