Dynatrace outperforms profit expectations, purchases a company, and wholeheartedly embraces Generative AI

**Dynatrace: An Overview of Recent Developments in Observability and AI**

**Dynatrace Momentum**

Dynatrace, a leader in unified observability and security, has been experiencing significant success. The company recently announced its fourth consecutive earnings beat, with earnings of $0.27 per share on revenue of $332.9M. It currently has an annual recurring revenue of approximately $1.3B. Despite the challenging macro-economic environment, Dynatrace is projecting revenue growth of 24-25% in the current quarter. Compared to its competitors, Dynatrace has outperformed the market, growing almost 23% in 2023.

**Dynatrace’s Intelligent Observability Stack**

Dynatrace offers a comprehensive solution stack for enterprise observability. Its platform includes real-time application performance monitoring, root cause analysis, and automated problem resolution capabilities. By providing insights into application behavior and user experience, Dynatrace helps businesses identify and resolve performance issues before they become significant problems. Key components of the Dynatrace platform include dynamic topology mapping, data lakehouse and analytics, AI for automation and predictive analytics, application runtime and automation technologies.

**Davis AI Goes Hyper-Modal**

Dynatrace’s AI engine, Davis, is a feature-rich platform that combines predictive and causal AI to enhance observability. The predictive AI features of Davis use machine learning to anticipate future behavior based on historical data and collected observations. The causal AI features analyze dependencies across observability, security, and business data to deliver fact-based, deterministic answers. Now, Dynatrace is introducing generative AI capabilities to Davis with its new Davis CoPilot features. This addition allows users to interact with the system using natural language to explore, solve, and complete tasks. Davis CoPilot also provides suggestions for code to accelerate workflow automation. These generative AI features make Davis AI the industry’s first hyper-modal AI, increasing productivity across operations, security, DevOps, and business teams.

**Rookout Acquisition**

Although not historically focused on acquisitions, Dynatrace recently announced its planned acquisition of Rookout, an Israeli tech-company. Rookout delivers code-level observability solutions that provide real-time data from production environments, reducing fix times for customer issues up to 5x. With Rookout’s capabilities, Dynatrace will extend its application performance monitoring (APM) capabilities to allow full-stack observability. This integration will enable development teams to collaborate seamlessly with DevOps, IT, and security teams, enhancing overall productivity.

**Analyst’s Take**

Dynatrace has established itself as a leader in the observability space with its steady growth and strong earnings. The acquisition of Rookout presents new revenue opportunities and expands Dynatrace’s capabilities into full-stack application observability. The addition of generative AI features to the Davis AI engine further solidifies Dynatrace’s position as an industry leader. In an austerity-driven IT spending climate, Dynatrace’s execution and product decisions have been commendable. Meanwhile, competitors like Datadog are struggling to keep up. Dynatrace’s continued value delivery to shareholders and customers showcases the company’s strong leadership and market resonance.

*Disclosure: Steve McDowell is an industry analyst, and NAND Research an industry analyst firm, that engages in, or has engaged in, research, analysis, and advisory services with many technology companies, which may include those mentioned in this article. Mr. McDowell does not hold any equity positions with any company mentioned in this article.*