Dynatrace (DT) Q2 2026 earnings summary

Executive summary

• Achieved annual recurring revenue (ARR) of $1.9 billion as of Q2 FY26, up 17% year-over-year, with subscription revenue up 18% to $473 million and total revenue up 18% to $494 million.

• Exceeded guidance across all metrics, raising full-year outlook for ARR, revenue, and operating income.

• Recognized as a leader in observability and AIOps by major analysts, with 15 consecutive years as a Gartner Magic Quadrant Leader.

• Announced strategic collaborations with ServiceNow, Atlassian, and GitHub, and launched innovations in AI, security analytics, and developer observability.

• Maintained strong demand for AI-powered observability, driven by tool consolidation and cloud/AI workload growth.

Financial highlights

• Q2 total revenue: $494 million, up 18% year-over-year; subscription revenue: $473 million, up 18%.

• Non-GAAP operating margin: 31%; GAAP operating margin: 15%.

• Non-GAAP net income: $133 million ($0.44 per diluted share); GAAP net income: $57.2 million ($0.19 per diluted share).

• Free cash flow for the quarter: $27.8 million (6% margin); trailing 12 months: $473 million (26% margin); pre-tax free cash flow: 32% of revenue.

• Gross margin for the quarter: 82% GAAP, 84% non-GAAP; subscription gross margin: 86%.

Outlook and guidance

• FY26 ARR guidance raised to $2,010–$2,025 million (14–17% growth); total revenue guidance increased to $1,985–$1,995 million (15–17.5% growth).

• FY26 non-GAAP operating margin expected at 29%; free cash flow margin at 26%; non-GAAP EPS guidance raised to $1.62–$1.64 per diluted share.

• Q3 FY26 revenue guidance: $503–$508 million; subscription revenue: $481–$486 million.

• Foreign exchange expected to be a $38 million tailwind on ARR and $34 million on revenue for FY26.

• Management plans continued investment in innovation, R&D, and go-to-market strategies.