Dynatrace, Inc.

Welcome to Dynatrace's fiscal third quarter 2026 earnings call. At this time, all participants will be in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. At this time, I'll turn the conference over to Noelle Farris, Vice President, Investor Relations. Thank you, Noelle. You may now begin.

Good morning. Good morning. and thank you for joining Dynatrace's third quarter fiscal 2026 earnings conference call. Joining me today are Rick McConnell, Chief Executive Officer, and Jim Benson, Chief Financial Officer. Before we get started, please note that today's comments include forward-looking statements, such as statements regarding revenue, earnings guidance, and economic conditions. Actual results may differ materially from our expectations due to a number of risks and uncertainties discussed in Dynatrace's SEC filings including our most recent quarterly report on Form 10-Q and annual report on Form 10-K. The forward-looking statements contained in this call represent the company's views on February 9, 2026. We assume no obligation to update these statements as a result of new information, future events, or circumstances. Unless otherwise noted, the growth rates we discuss today are year-over-year and non-GAAP, reflecting constant currency growth. and per share amounts are on a diluted basis. We will also discuss other non-GAAP financial measures on today's call. To see reconciliations between non-GAAP and GAAP measures, please refer to today's earnings press release and supplemental presentation, which are both posted in the financial results section of our IR website. And with that, let me turn the call over to our Chief Executive Officer, Rick McConnell.

Thanks, Noelle, and good morning, everyone. Thank you for joining today's call. Dynatrace delivered very strong third quarter fiscal 2026 results, exceeding our guidance across every metric. Through this fiscal year, we've driven a stabilization of ARR growth at 16%, three quarters of consistent double digit net new ARR growth, annualized large consumption that has now surpassed $100 million, a strong balance sheet and healthy cash flow generation, that have allowed us to double the size of our share repurchase program while still investing aggressively in innovation. And finally, an increased ARR guide of 125 basis points at the midpoint that puts us on track to achieve $2 billion in ARR by the end of fiscal 26. Our sustained strength underscores the increasing criticality of observability to the software ecosystem accelerated demand for our end-to-end observability platform, and successful execution of our go-to-market strategy. Jim will share more details about our Q3 financial performance and guidance in a moment. In the meantime, I'd like to start with some highlights from our annual customer conference, Perform, illustrating the substantial evolution and differentiation of the Dynatrace platform in capturing the AI opportunity, along with several customer and partner advancements. Perform 2026, which took place just two weeks ago, was an invigorating event where we hosted roughly 2,000 people in person, including customers, prospects, and partners, plus thousands more virtually. If you weren't able to join us, I encourage you to watch the replay of our main stage presentations. Each year, Perform offers the opportunity to examine the larger forces shaping our industry, And this year, the shift is more profound than ever. I shared two primary takeaways from my opening keynote. First, observability is entering a new era, one in which it is foundational to resilient software and dependable AI environments. Second, Dynatrace is unique in its ability to combine trustworthy deterministic AI with agentic AI to deliver reliable autonomous outcomes. And this is why we see Dynatrace as the AI-powered observability platform for autonomous operations. Let's unpack this a bit. To start, in 2023, the AI market was estimated to be less than $200 billion, and it is now on a path to be nearly $5 trillion in the next seven years. Meanwhile, Cloud and AI native workloads are exploding. Hyperscaler growth continues to climb, now approaching $300 billion in annualized revenue from AWS, Azure, and GCP alone, growing in the high 20s. That level of growth at this kind of scale is simply unprecedented. But this astonishing scale and growth are also accelerating the challenges our customers face every day. As we have often stated in the past, workloads and data are exploding along with a massive increase in their complexity. Tools are fragmented and it's often difficult to know whether AI results can be trusted. And without trustworthy insights, organizations understandably are hesitant to automate. One ramification of all this has become abundantly clear AI-powered observability has become essential in an AI-first world. The question then becomes, how do organizations harness the value of observability to help deliver on the promise of AI? Dynatrace exists for this moment. We are already helping organizations realize increased value from AI. We have been driving to this point for many years from initially enabling organizations to be reactive to issues to proactive through automated root cause analysis to predictive by adding machine learning and anomaly detection, allowing customers to anticipate and resolve issues before they become customer impacting. This is our quest to help customers deliver software that works perfectly. Our third generation platform is fully available and built for the complexity and incredible scale of modern cloud and AI native environments. Its advancements allow us to look ahead, predict issues, and build resilience directly into the fabric of an organization. So what makes Dynatrace unique? Our differentiation is integrated deeply into the platform's architecture. And it comes down to three things, rail, smartscape, and AI. First is Grail, our massively parallel processing data lake house and the only analytics engine purpose-built to process exabytes of observability and security data in real time while preserving full context. This isn't a general purpose data store retrofitted for observability. Grail was architected from the ground up for modern software, where a single transaction can reverse hundreds of services across multiple clouds. In the agentic era, where every AI-driven transaction can be unique and unpredictable, real-time contextual processing is essential. Logs are a great example of why this architecture matters. When logs are unified with traces, metrics, events, sessions, and other telemetry in the same platform, they don't just add volume, they add decisive context. Once customers experience the increased value and lower cost of having logs in context with other data types, they are eager to replace their legacy logs tooling. That's why we're delighted to have exceeded the $100 million logs consumption threshold. with current growth of over 100% year over year. Our second major differentiator is SmartScape, our real-time dependency graph that continuously maps the entire technology stack. SmartScape builds a living topology model that understands not just what exists, but how everything connects and impacts everything else. So the platform always has the current context of the environment itself. And third is AI, and this is where the first two converge. GRAIL provides unified data at scale, and SmartScape provides the topology and context. Together, they enable our causal and predictive AI, proven in the most demanding enterprise environments and continuously evolving to deliver optimal outcomes. This leads to our announcement and perform of Dynatrace Intelligence, one of the biggest innovations in our history. Dynatrace Intelligence is the industry's first agentic operation system built for modern software ecosystems. By fusing our deterministic AI foundation with agentic AI across an ecosystem of agents, Dynatrace Intelligence delivers AI-powered observability that organizations can trust. With Dynatrace Intelligence at its core, our platform is purpose-built for the agentic era, enabling a future where AI-powered observability can help customers auto-prevent, auto-remediate, and auto-optimize. Similar to Grail, Dynatrace Intelligence is embedded in the platform and is not sold as a separate SKU. It is available to every customer today. We expect to monetize it in two ways. First, through increased platform usage as customers adopt AI assistance across teams, driving greater use of Grail. And second, through usage-based agentic execution where AI-driven actions are delivered through workflows and ecosystem integrations. The durability of infrastructure software comes from deeply engineered data planes and AI control planes that operate in highly dynamic production environments. Dynatrace has developed broad domain expertise and is uniquely positioned with Grail, SmartScape, and Dynatrace Intelligence that is built directly into the backbone of the platform. Each of these capabilities is complex in its own right, but magnified in the Dynatrace platform as they're designed to operate as one system, applying AI to deliver answers and automation in environments that constantly shift in composition and workflow. This foundation has been built over years of operating at scale in real-world production environments, making the Dynatrace platform both highly differentiated and difficult to reproduce quickly or safely. We therefore strongly view broad-based AI expansion as a tailwind for Dynatrace. AI-assisted development, whether by coding, code co-pilots, or AI-driven software delivery, compresses release cycles and increases the rate of change across already complex enterprise stacks. That raises operational risk unless teams have an observability control plane with closed-loop feedback to protect reliability and user experience. And as AI-driven systems become more probabilistic, outputs vary and issues can be harder to reproduce. AI doesn't reduce the need for observability. Rather, it makes observability essential for trusted insights and automation so organizations can operate with confidence. I'd like to turn next to our customers, At Perform, more than 70 customers shared how the Dynatrace platform has become an indispensable component of their software environments. Here are just a few of their incredible stories. One of the largest airlines shared how they're using Dynatrace to help them deliver 31% better reliability, 75% fewer incidents, and a 10% reduction in mean time to resolutions. leading the industry in on-time departures and arrivals for two years in a row. Canadian communications giant Telus shared how they're using AI to move from firefighting to proactive reliability, reducing the average time to resolve issues from 40 minutes to five minutes. Vodafone shared how they're using AI to modernize operations at massive scale, migrating more than 2,500 users 8,500 dashboards, and 8 terabytes of daily log ingest from their legacy logging provider to Dynatrace in just two months. And nationwide share how Dynatrace has helped them reduce priority one incidents by 74%. In addition, customers expressed very strong interest in our strategic collaboration with ServiceNow to advance autonomous IT operations and scale intelligent automation. At Perform, ServiceNow's EVP and GM of technology workflow products reinforced our Better Together vision, highlighting use cases of how customers can integrate with Dynatrace to get greater efficiencies in their teams, accelerate agentic initiatives, and drive automation with confidence. In an agentic world, engaging in and integrating with an ecosystem of partners including our long-standing relationships with global system integrators and hyperscalers, will be mandatory. And we are investing to deepen and broaden those relationships. In Q3, we announced deeper technical engagements with all of the major hyperscalers. We're integrating with Amazon Bedrock Agent Core, embedding Dynatrace with Azure's SRE agent, and serving as the launch partner for GCP Gemini command line interface extensions and Gemini Enterprise. Finally, as the velocity of software development continues to accelerate, we have advanced our strategy to extend left to developers with the acquisition of DevCycle last month. Built on open feature, an open source initiative originally created by Dynatrace DevCycle is a feature management platform that helps developers, SREs, and platform teams bring progressive delivery for AI native applications directly into the Dynatrace platform. This solution will enable customers to accelerate their ability to release features in a controlled manner and remediate issues faster. To wrap up, we've seen impressive customer momentum over the last several quarters with dozens of seven-figure wins, rapid logs expansion, and customer standardizing on our platform for end-to-end observability. And we have delivered extraordinary innovation with Dynatrace Intelligence and the evolution of the Dynatrace platform to deliver significant customer value. This momentum is a testament to our unique ability to provide precise and trustworthy answers that serve as the foundation for autonomous operations in delivering resilient software and reliable AI. As I hope you can tell from my remarks, we are highly enthusiastic about our opportunity ahead. Jim, over to you.