Accelerating Growth Outlook + Emerging AI Tailwinds - Assume Coverage at Buy

研报英文原文证据摘录

Accelerating Growth Outlook + Emerging AI Tailwinds - Assume Coverage at Buy

erations in their 03/27E

most recent March/April quarters (to +18-21% y/y growth) and a stable/ From To % ch Cons.

accelerating outlook through year-end. We believe the entire observability market Q1E 0.45 0.45 0 0.45

is seeing a boost as we heard multiple anecdotes of observability being Q2E 0.52 0.52 0 0.49

reprioritized within IT budgets, and both Dynatrace and Datadog came back as the Q3E 0.53 0.53 0 0.51

biggest net beneficiaries (but we heard little direct overlap between the two). Q4E 0.51 0.51 0 0.51

03/27E 2.00 2.00 0 1.95

AI Tailwinds—Early But Emerging, Mostly An FY28+ Lift: Our checks mostly 03/28E 2.38 2.44 2 2.27

characterized Dynatrace as an AI beneficiary with some customers already 03/29E 2.74 2.95 8 2.71

attributing a modest uplift in spend growth to AI. Key growth vectors were: AI-

enabling accelerated software development, adoption of Dynatrace's AI Radi Sultan, CFA

capabilities and emerging demand for LLM + agent observability (still nascent). Analyst

radi.sultan@ubs.com

Our checks sized the potential AI spend uplift at +10-20% over the next 2-3 years,

+1-212-882 0094

a ~3-5 point lift to growth, with most of this expected to occur in FY28+.

AI Disruption Risk—Low In The Medium-Term: Our checks cited a long list of

technical reasons why creating a replacement to Dynatrace would be difficult.

While we heard of a few areas of the observability workflow that could be

replicated with AI, we didn't hear any customers even considering replacing

Dynatrace as most cited already solid ROIs + no real catalyst for replacement.

Valuation:

Our $60 price target is based on ~24x our CY27e FCF estimate and is based on an in-line

EV/FCF/G multiple (of 1.4x) vs the peer group average.