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Investing.com - Guggenheim raised its price target on Dynatrace Inc. (NYSE:DT) to $68.00 from $66.00 on Thursday, while maintaining a Buy rating following the company’s strong quarterly performance. Currently trading at $50.53 with a market cap of $15.25 billion, the software intelligence company has attracted positive attention from analysts, with consensus targets ranging from $55 to $70.
The software intelligence firm posted its best net new annual recurring revenue (NNARR) growth in four quarters, with subscription revenue growth exceeding expectations even after adjusting for a one-time $7 million ODC true-up in the first fiscal quarter. InvestingPro data shows impressive revenue growth of 18.7% and industry-leading gross margins of 81.94%.
Dynatrace maintained its fiscal year 2026 subscription and total revenue guidance at 14-15% constant currency growth, excluding the one-time ODC flow through, as well as its Total (EPA:TTEF) ARR guidance of 13-14% constant currency growth, which Guggenheim attributes to conservatism.
The quarter’s strength was driven by strong customer expansions reflecting demand for consolidation onto Dynatrace for end-to-end observability, according to Guggenheim’s analysis, which expects subscription revenue to ultimately grow 17.5% coupled with high 20% free cash flow margin.
Guggenheim believes early renewals are starting to happen in earnest and should be a material catalyst in the second half of the fiscal year, supported by channel checks, while viewing the ODC accounting adjustment as "just noise" that doesn’t reflect any demand pull-forward from fiscal year 2027. According to InvestingPro’s Fair Value analysis, Dynatrace appears undervalued at current levels. Get access to 10+ additional ProTips and comprehensive financial analysis with an InvestingPro subscription.
In other recent news, Dynatrace Inc. reported its financial results for the first quarter of fiscal year 2026, exceeding both earnings and revenue projections. The company achieved an earnings per share of $0.42, surpassing the forecast of $0.38. Revenue for the quarter reached $477.3 million, which was higher than the anticipated $466.99 million. These results highlight the company’s strong performance in the quarter. Additionally, Dynatrace reported a constant currency annual recurring revenue growth of 16.5%, which was approximately 100 basis points above expectations. This growth is attributed to the company’s increased focus on strategic accounts, driving robust expansion bookings. In response to these strong results, Stifel raised its price target for Dynatrace to $63.00 from $62.00, maintaining a Buy rating. These developments underscore the company’s positive momentum and strategic execution.
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