Dynatrace crashes ~15% after cutting full-year earnings guidance despite Q2 revenue and EPS beat
What happened
Dynatrace beat fiscal Q2 expectations on both lines, reporting adjusted EPS of $0.54 (vs. $0.49 consensus, up 23% YoY) on revenue of $580 million (up 17.4%, vs. $568 million expected), with subscription ARR up 16% to $2.2 billion, in line with estimates. But the company cut its fiscal 2027 adjusted EPS guidance to $1.88-$1.90 from $1.97-$1.99, below the $1.96-$1.98 Street view, and trimmed full-year free cash flow guidance to $600M-$605M from $610M-$615M. It raised the revenue outlook slightly to $2.33-$2.34B. Management attributed the profit cut to the Arize acquisition (closed Oct. 1, cutting core margin ~175 bps) and worsening FX headwinds (~$20M off ARR, ~$6M off revenue). Shares tumbled ~12-15% premarket, heading for the worst post-earnings drop since Aug. 2, 2023, per Dow Jones Market Data.
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Who’s affected
- Dynatrace (DT): tumbled ~12-15% to ~$48 in premarket/early trading, heading for its worst post-earnings performance and largest single-day drop since Aug. 2023; ~$16B market cap observability name.
- Datadog (DDOG): reports earnings Wednesday — the margin-dilution story from the Arize deal and FX headwinds invites direct comparison and sympathy selling.
- Software sector broadly: adds to the post-earnings software de-rating theme (Shopify, Palantir also fell on their prints today) amid the ongoing AI-valuation reset.