Dynatrace Sees AI Customers Consuming Its Platform at Twice the Rate, Fueling Growth Hopes

Key Points

• AI workloads are driving heavier platform use: Dynatrace says customers using its platform for large language models or agentic workflows consume it at twice the rate of other customers. Consumption growth is around 20%, ahead of ARR growth of approximately 16%, with a lag between the two.
• Growth hinges on expanding existing accounts: Organic net new ARR growth accelerated to 12% in fiscal 2026, and Dynatrace sees further gains from customer expansions and underused products such as logs. Executives said net revenue retention could rise above roughly 109%–110%, depending on execution.
• Near-term deal timing remains a factor: Some second-quarter deals slipped, which the CFO described as a timing issue rather than a demand problem; 70% of annual renewals fall in the fiscal second half, most in the fourth quarter. Dynatrace is also targeting sales of acquired AI observability products to its customer base.

Dynatrace NYSE: DT executives said growing artificial intelligence workloads are increasing consumption of its observability platform, creating an opportunity to accelerate annual recurring revenue growth as customers expand their use of the company’s products.

CEO Rick McConnell said AI is generating more data and workloads while increasing demand for tools that assess whether AI systems deliver accurate answers. CFO James Benson said customers using Dynatrace for large language model workloads or agentic workflows are consuming the platform at twice the rate of customers that are not.

Benson said he expects AI-related consumption to rise significantly in calendar 2027, although he cautioned that there is a lag between consumption growth and annual recurring revenue, or ARR, growth. McConnell put consumption growth in the 20% range and ARR growth at approximately 16%.

Growth depends on customer expansion

Benson said the company’s organic net new ARR growth accelerated from low single digits in fiscal 2025 to 12% in fiscal 2026. Excluding acquisitions, the midpoint of its guidance implies growth in the mid-teens, while the high end suggests growth in the high teens, he said.

About one-third of net new ARR is expected to come from new customers, Benson said, with existing customer expansions providing another important opportunity. He pointed to logs and other products that customers have not yet adopted widely.

Asked whether net revenue retention could rise above the roughly 109% to 110% range cited by interviewer Keith Bachman over the next 12 to 18 months, Benson said it could, but that the outcome depends on execution. He said a risk would be customers renewing agreements with smaller expansions than expected.

McConnell said gross retention was in the mid-90% range and that delivering expansions was a core focus. He also said logs consumption was approaching $250 million, up from $100 million three quarters earlier, with AI workloads contributing to that growth.

Renewals weighted toward fourth quarter

Benson said second-quarter results were lighter than expected because some deals slipped, which he characterized as a timing issue rather than a demand problem. He said 70% of annual renewals are due in the second half of the fiscal year, with 65% of those second-half renewals occurring in the fourth quarter.

That does not mean net new ARR will follow the same quarterly split, Benson cautioned. Some customers could expand early in the third quarter, though he said the company’s guidance did not assume a large amount of early activity. He also said the second-half net new ARR outlook did not require a greater weighting than the company has historically seen.

Arize and CrowdStrike partnerships

McConnell said the company’s initial priority following its acquisition of AI observability provider Arize is selling its products to Dynatrace’s installed customer base. The acquisition also brings a product-led growth approach and access to AI developers, he said.

Benson said Dynatrace inherited $25 million in ARR from Arize. He expects more deals sourced from Dynatrace’s customer base to close in the fourth quarter and for that activity to accelerate into the following fiscal year.

McConnell also discussed a partnership with CrowdStrike that combines Dynatrace’s observability capabilities with CrowdStrike’s security information and event management offering. He said the arrangement could remove a sales obstacle when customers want solutions for both observability and security logs. Dynatrace plans to focus its own security development on areas where observability data provides a meaningful advantage, he said.

About Dynatrace (NYSE:DT)

Dynatrace, Inc. provides a software intelligence platform for monitoring and managing complex digital environments. Its platform helps organizations observe applications, infrastructure, cloud services and user experiences, and analyze performance and operational data. The company's offerings include application and infrastructure monitoring, log management, digital experience monitoring, application security and business analytics. Dynatrace also incorporates artificial intelligence and automation to help identify the causes of problems and support responses to them.

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