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Why Dynatrace Stock Was Gaining Today

By Jeremy Bowman - Updated Feb 3, 2021 at 3:46PM

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The cloud stock jumped on a strong quarterly earnings report.

What happened

Shares of Dynatrace (DT 1.57%) were moving higher today after the cloud-based data intelligence platform posted a strong third-quarter earnings report, beating estimates on the top and bottom lines.

As a result, the stock was up 12.1% as of 2:24 p.m. EST.

A digital image of a cloud.

Image source: Getty Images.

So what

Dynatrace, whose tools help companies monitor their software stacks, said revenue in the quarter rose 28% to $182.9 million, topping estimates at $172.3 million. Annual recurring revenue, which is a better representation of cloud-based growth, jumped 35% to $722 million, while subscription revenue in the quarter increased 33% to $170.3 million.

Additionally, Dynatrace's net expansion rate was more than 120%, showing that sales from existing customers grew more than 20%, a promising sign for long-term growth.

Further down the income statement, the company gained operating leverage across several expense items as adjusted operating income rose from $37.7 million to $53.4 million. On the bottom line, adjusted earnings per share rose from $0.10 to $0.17, beating expectations of $0.13.  

CEO John Van Siclen summed up the performance, saying in a statement, "The value of the Dynatrace platform is resonating with customers, evidenced by strong new logo growth and net expansion rate again above 120%."

Dynatrace also entered the cloud application security market in the period, which has an addressable market of $18 billion, and expanded its partnerships with Google Cloud Platform and Microsoft Azure.

Now what

The company sees its momentum continuing into the fourth quarter, calling for revenue growth of 26% to 28%, or $190 million to $192 million, and adjusted EPS of $0.13 to $0.14, both of which were also ahead of analyst forecasts.

Dynatrace doesn't get as much attention as some higher-growth cloud stocks, but the company has been a reliable winner during the pandemic as shares are up 59% over the past year. Given that Dynatrace provides necessary services to major corporations that rely on it to keep mission-critical applications online, the company looks well positioned for continued growth.

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