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Dynatrace blows the doors off: CEO thanks AI for the tailwind

Downturn? What downturn?

Application performance monitoring (APM) specialist Dynatrace reported a storming close to its financial 2022 this week – with annual recurring revenue climbing by $252 million year-over-year to $1.25 billion.

It ended the year with 3,600 Dynatrace customers representing an increase of 9% over last year.

Net profit was $80 million.

CEO Rick McConnell pointed to an ongoing industry trend for the performance, saying that companies want to “increase productivity and accelerate software delivery through cloud native technologies and processes. We believe the adoption of agile development, continuous deployment and DevOps will drive accelerated demand for automated observability solutions to ensure development teams deliver secure high quality releases faster.”

See also: The Big Interview: Dynatrace CEO Rick McConnell

The rise of AI will be a welcome tailwind, he suggested.

“Generative AI from our point of view is really all about productivity, whether writing text or developing code, whatever it might be, and we see it over the long haul as being upwards of a 10 times multiplier in software development efficiency. So given that, that's going to drive a huge number of additional applications.

"It's going to drive more cloud migration, more workloads, more compute. And the result of that is we see it being a tailwind for observability solutions such as ours, especially those with deep automation analytics."

Gartner's 2022 Application Performance Monitoring and Observability Magic Quadrant.

The earnings were capped by an “exceptional close to Q4 of fiscal 2023, which included roughly $13 million of expansions from early renewals” he added, as a well-established land-and-expand approach bears fruit.

Dynatrace is also benefiting from a broader move by CIOs towards vendor/partner consolidation, with executives noting that 65% of new customers were coming in buying over three modules from it.

The company competes in the APM space with companies like DataDog, Honeycomb, and New Relic.

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Dynatrace has grown to over $1 billion in revenues (hitting that milestone this year) by helping organisations understand such infrastructure bottlenecks or blindspots. The software intelligence firm provides application and infrastructure performance monitoring and observability that spans traditional hosts, virtual machines (VMs), containers, networks, and events. Dynatrace, which runs the majority of its R&D out of Linz, Austria, where CTO Bernd Greifeneder founded the company, is increasingly branching out, including into a log management and analytics world more typically populated by security companies, in October 2022 launching a new product called “Grail” with the aim of being the disruptor in a $50 billion dollar market still widely dominated by DIY dashboards.

Grail uptake remains a work in progress but McConnell told analysts that “we already have a customer doing 100 terabytes or more of storage in real time on Grail. We’ve proven that scale, and we are fusing it broadly. So we now have well over 300 POCs, that's more than double where we were last quarter this time.”

See also: Introducing “Orb”, a new dynamic observability platform