Raymond James has retained its Market Perform rating on Dynatrace Inc. (NYSE:DT) after the software company released results for the fiscal third quarter ending in December. The brokerage noted that Dynatrace’s Annual Recurring Revenue - the metric it considers most important - came in above expectations, while revenue and margin outcomes were in line with investor targets.
At present, Dynatrace shares are trading at $36.53, a level that InvestingPro data indicates sits well below the company’s Fair Value estimate. That pricing disconnect suggests the stock may be undervalued on a fundamental basis, even as market sentiment has been cautious.
Key financial indicators in the quarter reinforced areas of strength for the company. Gross profit margins remain high at 81.84%, and the company has recorded 18.5% revenue growth over the last twelve months. The results also marked Dynatrace’s third straight quarter of double-digit constant currency Net New ARR growth. Raymond James said the Net New ARR metric will become the company’s official external key performance indicator going forward, a move expected to simplify how Dynatrace communicates progress to investors.
Balance-sheet characteristics also appeared favorable in the eyes of analysts. InvestingPro data shows Dynatrace carries more cash than debt, and consensus forecasts anticipate the company will be profitable this year, with analysts projecting earnings per share of $1.66 for fiscal 2026.
Despite those positives, Raymond James cautioned that the stock could remain range-bound until the market’s concerns are resolved. The firm pointed to anxiety that accelerating adoption of artificial intelligence could exert headwinds on Dynatrace’s business model, a factor that investors will be watching closely. Separately, the brokerage noted pressure on net new logo growth, saying stronger customer acquisition trends would help bolster investor sentiment amid the broader worry that AI proliferation might cap spending in certain software models that rely on expanding customer footprints.
Dynatrace’s own reported results for the third quarter of fiscal 2026 provided additional context for analysts’ reactions. The company posted earnings per share of $0.44, beating the consensus estimate of $0.41. Revenue arrived at $515 million, ahead of the $505.8 million analysts had expected.
Market reactions from other brokerages included TD Cowen raising its price target on Dynatrace to $60 from $55 while maintaining a Buy rating. TD Cowen cited the company’s performance in net new annual recurring revenue, which reached $75 million in the quarter. That figure topped expectations in the low-$70 million range and represented 11% year-over-year growth.
Overall, the mix of outperformance on ARR and healthy margins contrasted with lingering investor concerns about customer acquisition trends and the extent to which AI-related dynamics could influence enterprise spending. Analysts and investors will be watching subsequent quarters to see whether improved logo growth and clearer signals on AI-related impacts emerge.
Summary
Raymond James reaffirmed a Market Perform rating on Dynatrace following fiscal Q3 results that included stronger-than-expected ARR and robust margins, while flagging net new logo pressure and AI-related spending concerns as potential restraints on the stock.