Dynatrace (NYSE:DT) Surprises With Q4 Sales, Provides Optimistic Full Year Guidance

Kayode Omotosho /
2023/05/17 6:37 am EDT

Application performance monitoring software provider Dynatrace (NYSE:DT) beat analyst expectations in Q4 FY2023 quarter, with revenue up 24.5% year on year to $314.5 million. Guidance for next quarter's revenue was $326.5 million at the midpoint, 2.43% above the average of analyst estimates. Dynatrace made a GAAP profit of $80.3 million, improving on its profit of $929 thousand, in the same quarter last year.

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Dynatrace (DT) Q4 FY2023 Highlights:

  • Revenue: $314.5 million vs analyst estimates of $304.6 million (3.23% beat)
  • EPS (non-GAAP): $0.31 vs analyst estimates of $0.22 (40% beat)
  • Revenue guidance for Q1 2024 is $326.5 million at the midpoint, above analyst estimates of $318.7 million
  • Management's revenue guidance for upcoming financial year 2024 is $1.4 billion at the midpoint, beating analyst estimates by 2.54% and predicting 20.6% growth (vs 24.7% in FY2023)
  • Free cash flow of $114.5 million, up 98.9% from previous quarter
  • Gross Margin (GAAP): 81.1%, down from 82.6% same quarter last year

“Dynatrace delivered a great finish to the year with strong fourth quarter results that exceeded expectations across the board, demonstrating the durability of our business model,” said Rick McConnell, Chief Executive Officer.

Founded in Austria in 2005, Dynatrace (NYSE:DT) provides companies with software that allows them to monitor the performance of their full technology stack, from software applications to the infrastructure they run on.

Software is eating the world, increasing organizations’ reliance on digital-only solutions. As more workloads and applications move to the cloud, the reliability of the underlying cloud infrastructure becomes ever more critical, and ever more complex. To solve the challenge, companies and their engineering teams have turned to a range of cloud monitoring tools that provide them with visibility to troubleshoot the issues in real time.

Sales Growth

As you can see below, Dynatrace's revenue growth has been strong over the last two years, growing from quarterly revenue of $196.5 million in Q4 FY2021, to $314.5 million.

Dynatrace Total Revenue

This quarter, Dynatrace's quarterly revenue was once again up a very solid 24.5% year on year. Quarter on quarter the revenue increased by $17 million in Q4, which was in line with Q3 2023. This steady quarter-on-quarter growth shows the company is able to maintain its steady growth trajectory.

Guidance for the next quarter indicates Dynatrace is expecting revenue to grow 22.2% year on year to $326.5 million, slowing down from the 27.4% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $1.4 billion at the midpoint, growing 20.6% compared to 24.6% increase in FY2023.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Dynatrace's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 81.1% in Q4.

Dynatrace Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.81 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite the recent drop that is still a great gross margin, that allows companies like Dynatrace to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Key Takeaways from Dynatrace's Q4 Results

Sporting a market capitalization of $13.5 billion, more than $555.3 million in cash and with positive free cash flow over the last twelve months, we're confident that Dynatrace has the resources it needs to pursue a high growth business strategy.

It was positive to see Dynatrace's solid revenue guidance for the full year. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. On the other hand, there was a deterioration in gross margin. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 4.63% on the results and currently trades at $49 per share.

Should you invest in Dynatrace right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.