Dynatrace on Wednesday reported fiscal fourth-quarter earnings and revenue that handily beat estimates. But DT stock only edged up as analysts mulled slowing customer growth and the software maker's fiscal 2024 outlook.
In the March quarter, Dynatrace earnings were an adjusted 31 cents a share, up 82% from a year earlier. Revenue climbed 27% to $314 million, the company said. That was the third-straight quarter of accelerating earnings growth and the second quarter of slightly faster sales gains.
Analysts had estimated profit of 22 cents a share on revenue of $305.5 million. Also, annual recurring revenue, or ARR, rose 29% to $1.247 billion, topping analyst estimates for $1.215 billion.
But customer growth slowed in the March quarter. Dynatrace added "179 new logos (brands) in the quarter vs. 215 last quarter," said an RBC Capital report.
DT Stock: Outlook Ahead Of Views
For full-year fiscal 2024, Dynatrace predicted earnings of $1 a share at the midpoint of its outlook on revenue of $1.397 billion. Analysts had estimated profit of 97 cents a share on revenue of $1.362 billion.
Also, the software maker said it expects ARR in a range of $1.475 billion to $1.490 billion versus estimates of $1.455 billion.
Waltham-Mass.-based Dynatrace reported earnings before the market open. Meanwhile, DT stock ticked up 0.6% to close at 47.07 on the stock market today.
DT stock owns a Relative Strength Rating of 91 out of a best-possible 99, according to IBD Stock checkup.
Cisco, Datadog, New Relic Are Rivals
Software maker Dynatrace's computer network monitoring tools measure and analyze the performance of business-critical applications.
Dynatrace competes in the application performance monitoring market vs. Cisco Systems, Datadog, New Relic and others. Further, Cisco earnings for its fiscal third quarter are due late Wednesday.
Dynatrace went public Aug. 1, 2019, backed by private equity firm Thoma Bravo, raising $570 million.
Thoma Bravo still owns 29% of Dynatrace stock, said a JPMorgan report.
Here's Why DT Stock Didn't Pop
One reason Dynatrace stock didn't pop on the earnings beat is the remaining Thoma Bravo stake, MoffettNathanson analyst Sterling Auty said in a note to clients.
"Thoma Bravo is the private equity firm behind Dynatrace and it still owns 69.5 million shares," Auty said. "The ownership has come down over 14 million shares as of last report from Bloomberg. There is investor expectation that Thoma Bravo will continue to pare down following this strong quarter."
He added that investors are also concerned about two other issues.
"Half the upside in ARR came from early renewals, or about $13 million," Auty added. "The third thing keeping a lid on shares today is the $60 million net impact to free cash flow in fiscal 2024 coming from taxes. This is a high quality problem to have in that the profitability consistent over time has bled through all the operating losses."
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
