Dynatrace on Thursday reported fiscal third-quarter earnings and revenue that topped Wall Street targets. Subscription-based annual recurring revenue for DT stock edged by views.
ARR is a key financial metric for many software companies. Dynatrace slightly lowered its March quarter ARR guidance. On the stock market today, DT stock tumbled 6.3% to 56.81 in afternoon trades.
Waltham-Mass.-based Dynatrace reported earnings before the market open. For the quarter ending Dec. 31, Dynatrace earnings were 32 cents on an adjusted basis, up 28% from a year earlier. Revenue climbed 23% to $365 million, the company said.
DT Stock: More Large Deals In Pipeline
Analysts had estimated profit of 28 cents on revenue of $357.6 million. Annual recurring revenue rose 23% to $1.425 billion, edging by estimates for $1.41 billion.
"Management attributed the (ARR) guidance reduction to incremental prudence related to the timing of the large deals in its pipeline that may take longer to close," William Blair analyst Jake Roberge said in a note to clients. "While pipeline activity for these deals is strong, Dynatrace is building an extra buffer into its guidance plan to account for the variability in deal closure times."
At BMO Capital Markets, analyst Keith Bachman said in his note: "We think large deals are growing faster than small deals and large deals typically have slower close rates. We think mix (more large deals) and close rates are impacting Dynatrace's ARR growth. However, with both mix and close rates likely impacting ARR growth for the next few quarters, we think stock upside could be limited until fiscal 2025 guidance is provided."
Dynatrace Stock: Revenue Guidance
For the current quarter ending in March, Dynatrace predicted earnings of 27 cents vs. estimates of 25 cents. The software maker forecast revenue in a range of $372 million to $377 million vs. estimates of $372.7 million.
Heading into the Dynatrace earnings report, the software stock had gained 9% in 2024 and 24% over the past year.
The software maker's computer network monitoring tools measure and analyze the performance of business-critical applications. In the "observability" market, Dynatrace and others also monitor application performance over cloud-computing infrastructure.
Also, Dynatrace owned a Relative Strength Rating of 89 out of a best-possible 99, according to IBD Stock Check-up.
Further, Dynatrace competes with Datadog and others. Earnings for DDOG stock are due on Feb. 15.
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