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 strong subscription revenue growth and industry leadership in observability platforms.

• Q2 FY25 results exceeded guidance across all metrics, driven by platform strength, major strategic deals, and robust customer engagement.

• Non-GAAP operating margin for Q2 was 31%, with trailing 12-month margin at 28%; free cash flow margin reached 28%.

• Recognized as a leader in multiple third-party analyst reports, including the 2024 Gartner Magic Quadrant for Observability Platforms.

• Repurchased 1.9 million shares for $90 million under a $500 million share repurchase program.

Financial highlights

• ARR was $1.62 billion, up $273 million year-over-year; Q2 net new ARR was $61 million, up 3% year-over-year.

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

• Non-GAAP gross margin was 85%; GAAP gross margin was 81%.

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

• Free cash flow for the quarter was $20 million; trailing 12-month free cash flow was $436 million, or 28% of revenue.

Outlook and guidance

• FY25 ARR guidance is $1.72–$1.735 billion, representing 15%–16% year-over-year growth.

• FY25 total revenue guidance raised to $1.665–$1.68 billion; subscription revenue guidance to $1.59–$1.6 billion, both up 16%–18%.

• Non-GAAP operating margin guidance for FY25 is 28%–28.25%; free cash flow margin 23.5%–24%.

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

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