Dynatrace (DT) Q2 2025 earnings summary

Executive summary

• Achieved annual recurring revenue (ARR) of $1.62 billion as of Q2 FY25, up 19–20% year-over-year, with subscription revenue up 20% and strong industry leadership in observability platforms.

• Q2 FY25 results exceeded guidance across all top-line and profitability metrics, with robust customer engagement and platform innovation.

• Net retention rate was 112%, and gross retention rate remained in the mid-90s percentile.

• Non-GAAP operating margin for Q2 was 31%, with a trailing 12-month margin of 28%; pre-tax free cash flow margin was 34%.

• Free cash flow for the quarter was $20 million, with $248–$254 million generated in the first half of FY25.

Financial highlights

• Total Q2 revenue was $418 million, up 19% year-over-year; subscription revenue was $400 million, up 20%.

• Q2 net new ARR was $61 million, up 3% year-over-year; first half net new ARR was $106 million, up 10%.

• Non-GAAP net income was $113 million ($0.37 per diluted share); GAAP net income was $44 million ($0.15 per diluted share).

• Gross margin was 81% GAAP and 85% non-GAAP for the quarter; subscription gross margin was 86%.

• Cash and cash equivalents totaled $907 million at quarter-end.

Outlook and guidance

• FY25 ARR guidance is $1.72–$1.735 billion (15–16% growth); full-year revenue guidance raised to $1.665–$1.68 billion (16–18% growth).

• Subscription revenue guidance is $1.59–$1.6 billion (17–18% growth); non-GAAP operating margin expected at 28–28.25%.

• Free cash flow guidance for FY25 is $393–$404 million (23.5–24% of revenue); pre-tax free cash flow margin 30–30.5%.

• Q3 FY25 revenue expected at $425–$428 million; subscription revenue at $407–$410 million.

• Foreign exchange expected to be a headwind of $11 million on ARR and $7 million on revenue for FY25.