QS Research · Michael Burry's Scion Capital analyst template · 2006
Dynatrace, Inc. (DT)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $43.49 (close 2026-11-10)
Conclusion: WATCH
Conviction low · base case +6% · downside -23% · upside +159%
Dynatrace is a scaled, cash-generative observability platform (TTM to Sep 30, 2026 revenue $2.18B, EBIT $277.2M, FCF $578.7M, net cash $2.13B) but the stock at $43.49 still trades at 4.74x EV/Sales, 34.0x EV/EBITDA (GAAP, TTM) and 57.0x operating P/E, and the independent peer-median P/E anchor of 27.8x puts the base case at $46.00, +5.8%. The 2026-11-03 FY2027 guidance reset cut non-GAAP operating margin 150 bps to 28%-28.25% and EPS to $1.88-$1.90 on Arize dilution, the second trim in two quarters, so the de-rating is about margins and decelerating ARR growth (+16% in Q2 FY2027 vs +17% in Q1), not a temporary glitch. The downside at 38.5x P/E is $33.48 (-23.0%; PagerDuty comparison) and the upside at 13.83x EV/Sales (Datadog) is $112.50 (+158.7%), but the base case is +5.8% above today and reward/risk is 6.9, so the rule gives watch with low conviction rather than long. SBC at $302.7M TTM is 52% of FCF, so the 4.6% FCF yield and 17.9x EV/FCF overstate owner earnings, and buybacks of $906.5M TTM exceed FCF by $327.8M.
Key numbers
- Share price: $43.49
- Market cap: $12.48B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $2.18B
- EV / EBITDA (TTM): 34.0x
- P/E (TTM): 77.1x
- FCF yield: 4.6%
- Price / book: 5.49x
- P/E, operating (tax-normalized) (TTM): 57.0x
- EV / FCF (TTM): 17.9x
- Revenue growth (latest fiscal year): +18.8%
- ROIC (TTM): 74.3%
- WACC: 10.5%
- Economic profit spread: +63.7 pts
The 15 boxes
- ✓ 1. Long-form business notes
Dynatrace sells subscription access to a unified observability, application security, and agentic AI operations platform, mainly as SaaS with a DPS minimum-spend-plus-usage model, sold through direct sales and partners. Revenue rose from $703.5M in FY2021 to $2.02B in FY2026, with operating income up from $91.9M to $245.4M and TTM to September 30, 2026 revenue of $2.18B and operating income of $277.2M. Customers grew from 2,936 at March 31, 2021 to approximately 4,100 at March 31, 2026, while the platform expanded from the FY2021 software intelligence positioning to FY2026 AI observability, log management, security, and agentic AI operations.
- ✓ 2. Competitive advantage
The sources show a scaled, cash-generative observability platform with positive operating income, but they do not prove a durable moat. The FY2026 10-K names Cisco/Splunk, Datadog, Elastic, Grafana and New Relic as principal competitors and says many rivals have greater brand, bundling and financial resources; it also flags low barriers in some segments, in-house/open-source builds and new AI/LLM competition. Retention is called historically strong but is unquantified, so I would value DT on TTM to 2026-09-30 operating income ($277.2M) and TTM operating cash flow ($607.5M), not on TTM net income ($161.9M), which is below operating income.
- ✓ 3. 10-Q takeaways
Q2 FY2027 (three months ended Sep 30, 2026) showed total revenue of $579.9M, up 17% year-over-year, ARR of $2,207M, up 16%, and subscription revenue of $553.1M, up 17%. Gross margin slipped to 81% from 82%, but GAAP operating margin was 16% and non-GAAP 32%; Q2 operating cash flow was $41.1M and adjusted free cash flow $42.3M. The company repurchased $246M of stock in the quarter and added $1B to its buyback authorization, while FY2027 guidance raises ARR/revenue but cuts non-GAAP operating margin to 28%-28.25% on Arize dilution. The 10-Q risk factors focus on competition/AI and macro/geopolitical risks; the only computed risk-factor diff in the sources is for the 10-K filed 2026-05-20, not the 10-Q.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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