Dynatrace, Inc. (DT) November 12, 2026 Conference Transcript

Okay, we are clowning around up here, but we're going to get serious now. It's Keith Bachman. Good to see everybody. We're thrilled to have Dynatrace. Dynatrace. is an important provider to Bank of Montreal. So we've standardized our observability platform. And I think it's safe to conclude that Dynatrace would not be here if it weren't for that, because they actually, you know, wouldn't be here because I asked them otherwise. Okay, so I don't think we would be here. I don't think you guys need an introduction. And I'm sort of stalling because we've been I know personally, I was running around a little bit. So I think people are migrating in to see us. But let's go ahead and get started. With that said, we're going to start a little bit on market growth. And as I think about include Datadog and yourselves and what have you. As you think about the advances in AI, if you look at calendar year 27, and I've been trying to focus all my comments and questions on calendar year 27, how do you think it impacts market growth? The advances in AI on the observability and the markets you serve, how does it impact market growth in calendar year 27?

So let me start with that. Jim can add value. Thanks for joining us this afternoon. Much appreciated. The AI. First, mechanism that's in the environment today is clearly driving an enormous tailwind for observability, without a doubt, and it's doing so in a number of different ways. Number one, it just drives more data, more workloads, more complexity, more data, which results in more logs, more traces, more metrics, more capabilities. So greater consumption of the platform, and that greater consumption of the platform results in higher levels of growth opportunity that we see, and certainly higher levels of growth in the market space overall. The second area, though, is what I would think of as really an evolution of observability overall, which we believe is entering a brand new era. And it isn't just about resilience anymore, which is what observability has been about for the last 20 years. It is expanding to not only include resilience, namely, is your software working, to also include AI observability, evaluations, LLM observability, and other elements, which are more oriented to assessing whether or not the AI workloads are actually delivering accurate answers. And in this environment, it really is about AI reliability. So what used to be only resilience is now resilience, but also reliability. And both of these elements are, in our view, accelerating market growth as we look ahead.

And what I'd offer, Keith, I think, to provide maybe a financial lens to your point around, like, what do you think that's going to mean in calendar 27? I think what we're seeing now is you are seeing the tailwinds of that. As you know, we sell into large enterprises. So we're already seeing that we talked in our last earnings call about our cohort of customers that are leveraging us either for an LLM workload. We're leveraging up for some agentic workflow. They're consuming their platform at a very rapid rate, actually 2x customers that are not. I think in calendar 27, you're going to see that that is going to uptick significantly. So I think consumption of the platform will continue to grow and likely accelerate.

Will that show up, though? In other words, the consumption will translate?

Well, I think this is the $100,000, but you'll see consumption growth. And as you know, the Consumption growth and ARR growth, there's a lag. My expectation is if we continue to see an acceleration in consumption growth, you will see a translation that ARR growth and consumption growth will converge. As you know, for us, there's a lot of mechanisms for the timing of when that happens. But I do believe if we do see an uptick as a result of what Rick outlined, it should manifest itself in more consumption of the platform. More consumption of the platform should yield more expansion activity.

And just to make sure that we're tracking on the numbers, we're in the 20s vis-à-vis consumption growth, but around 16% for ARR growth, and so that really does become the opportunity for us to accelerate ARR growth toward consumption growth.

Right. Okay. We're going to get deeper into that for sure. But if you think about it, I want to back up a step, and we've had this same question slash comment with a number of companies today. Investors are turning the page on calendar year 27. Part of the issue is budget constraints or budget opportunities. Candidly, it's mostly budget constraints. But in other words, there's more demand for dollars than there is availability for dollars. Do you have any early preview on what your sales reps are telling you about budgets in your area for 27?

I would say the conversation we've actually seen, Keith, relative to the sales organization is that I think you know that our number one sales play has been a sales play around customers considering consolidating fragmented tools. When you do that, to your budget point, you're basically taking fragmented tools and you're consolidating them on one vendor. Here's an economic benefit. You're actually lowering your software costs. And then the premise is you can consolidate, so you get lower software costs. And then, oh, by the way, the belief is that you're going to be able to have your software environment run more efficiently. You're going to need less people chasing alerts. And so in a world where budgets are constrained, I actually believe that you're going to see more of that activity, more consolidation of activity, because it's a place where you can find budget dollars. You're not incrementing budget dollars. You're just kind of share-shifting dollars. You're actually able to lower spend. And this is, and that's notwithstanding, you know, you know, what are the pressures that might exist around, I want to spend more money on cyber, I want to spend more money on AI. I think in general, we're in, we're in actually a good place because of that trend. And then I think there's also things we're doing on for some new capabilities on the log side. Another thing. We can save customers money by going from their legacy logs provider to Dynatrace and get a better outcome. And so I think we're, you know, from a sales perspective, I think they're excited about that. And that's one of the reasons, let's face it, their sales can be coin operated at times. That's the reason why that sales play has been extremely effective. That's why the log sales play has been extremely effective.

I mean, the holy grail, if you will, these days, Keith, is to figure out how you can use observability to drive autonomous operations. And what Autonomous Operations really delivers is sort of self-healing, auto-remediating software ecosystems. And if you can get there, the... The benefits are substantial. Not only are you going to get an environment that works dramatically better, but you're also going to be able to manage that with dramatically lower cost. And so as I talk to CXOs around the planet, which is a privilege that we have at Dynatrace to be able to do, the feedback is all the same, which is how do I save people cost and consumption, deliver better outcomes from better software or software that works better in my environment? And the way to do that is autonomous operation. What you need to be able to do that is you need the observability capabilities that are delivering deterministic inputs to give you the answers that then become actionable by agents. And this is the environment that's evolving.

Okay. Well, let's go to, I think the number one question I get on Dynatrace is about acceleration. Right? And so my numbers are a little bit different than what you just described. But I think if we took out your M&A on ARR, both deals this year, you're about 15%. And we take it out for the whole period until your anniversary. But regardless of whether it's 15% or 16%, what investors want to understand is how do you begin to drive acceleration? In an acceleration, there's two parts. There's your NRR and new logos. So open pitch to, you know, it's dramatically different stock if you're accelerating versus neutral versus decelerating, especially with your multiple where it is. So how are you going to potentially accelerate? What's the construct of that?

So let me start, and then Rick can kind of offer some others. I think to start, we laid the framework for this, Keith, two years ago when we made some pretty substantive go-to-market changes, and we talked about the journey of Fiscal 25 being these changes would be modestly disruptive, and you'd probably have a productivity loss relative to sales. And then we said fiscal 26 would be a period where you could stabilize. And then fiscal 27 would be a period you could accelerate. So our net new ARR growth in fiscal 25 was effectively low single digits. And we accelerated that. This is not through acquisitions. We accelerated organically net new ARR growth to 12% in fiscal 26. If you look at our guide and you pull out the acquisitions, the guide at the midpoint suggests that we accelerate to the mid-teens. And so, you know, we are demonstrating acceleration. We need more acceleration because, obviously, the point is you can't grow ARR, which is growing 16%, if you don't have net new ARR growing more than 16%. So I admit we're on a net new ARR acceleration journey. The high end of our guide, it suggests you're going to grow in the high teens. So you will see ARR acceleration with that. And the underpinnings are kind of what you talked about. One of the things we've done, I'd say, particularly well, when you look at the building blocks of new logos and expansions, we've done very well, I'd say, with our segmentation around selling large deals for new logos. And again, it goes back to this value proposition that we bring around end-to-end observability. That has been a very successful sales play. So I'd say it's whale hunting, it's dolphin hunting, and it's actually been successful, and it's been purposeful. I think that's going to continue, and if anything, I think that will accelerate. Now, obviously, the nature of that is you're not going to have transactions like that close every quarter. So you're going to have large transactions like we had in Q1, and then maybe you're going to have quarters like Q2 where you don't have as many of them. But I think... It's going to be a significant source of growth. So call it one-third of our net new ARR is going to come from new logos. And I'd say it's going to be a play on end-to-end observability. It's going to be a play on logs. It's going to be a play with a rise. And then I say on expansions, I think you know now. We're going through a very large renewal cohort here in the back half of the year. It is a significant opportunity for an expansion for customers that either aren't buying some of our offerings today. Logs is probably the most notable one. Are they using logs? Are they using logs to a significant extent? Is that a source of significant expansion opportunity? And so I think those are the attributes that were not nearly penetrated with the product set with these customers in a fulsome way. And I think there's a significant opportunity for acceleration for the company just through execution. This is not like we don't need new products. We don't. This is. Selling what's on the truck today and executing and penetrating further with your customers, both expansions and new logos.

Okay. So if we look out over the horizon, 12 to 18 months, can the NRR, which is call at 109, 110, somewhere in that neighborhood, can that go higher? Just on what's on the deck today. Yeah, I think it can. I think it can.

I mean, again, I think this is an execution story. This is not a, hey, what's feasible is the market demand there? Do you have the opportunity? I don't think that's the question. The question is, can you go execute against that?

We have a great market, very solid architecture, great set of products. Gross retention is in the mid-'90s, which is very, very strong. What we need to do is we need to be able to deliver those expansions, and that's really our core focus.

Okay. I want to come back. We're going to stay on the theme of NRR for a second, but organic development, and we've had this conversation over the last number of years. Where, you know, I look at the pace of new product intro by Dynatrace versus Datadog, and Datadog candidly has been more effective about promoting incremental products. How do you guys think about your organic dev platform as you look out? I tend to think about it. You've gone very deep in logs. Great product, grail, great product. But the proliferation from there into new solution sets to have more things that the sales force could sell is a little slower than Datadog. How do you think about the next couple of years?

I'll take that one. We have been innovating at an incredible rate, actually. It just isn't as visible as some of our competitors because of DPS, because of our pricing mechanism. I don't think that's a negative of the pricing mechanism because, at least in our customer base, especially Global 2000 and even Global 15,000, they want predictability. They want a single committed spend, and they don't want to have to think about chunking it out into SKUs. They don't want to have to buy this much of SKU A, this much of SKU B. They want to give us a commitment for $1 million or $5 million or whatever the number might be. And they want to be able to draw that down through various different solutions that they're consuming. Logs is a great example of this as a new solution, relatively new solution for us. It was 100 million in consumption three quarters ago. It's rapidly approaching 250 million now, three quarters later. So when Logs was growing north of 100% and it was 20 million in consumption against $2.2 billion in ARR, it didn't have that much impact. But logs now approaching 250 million on an over $2 billion ARR stream, all of a sudden has a lot more impact. So bringing these new capabilities like database monitoring, network monitoring, new other capabilities that we're adding, the feature flagging, these are innovations that are coming out of Dynatrace that we're delivering to market, but they're getting consumed through DPS.

Okay. Because I'm an analyst, I have to explore all range of scenarios, right? And so a year from now, when you guys are at the same conference, and Jim is meaningfully lower index or handicap on the golf course, if you didn't reach an NNR of greater than 110, what's sort of the highest risk that you would think about that could disrupt that natural flow that you see now?

Well, I won't be here, but I think I'll try to answer it, but I understand your range of outcomes, and one, I don't think that's a probable outcome, so I'll start with that. I don't think that's a probable outcome, but you say, what would have to happen? I'd have to say that. You know, that your traction on expansions, customers were, would be more tempered in the volume of their expansions, that they'll do an expansion, but they're more tempered. You do a three-year agreement with them, and they say, well, I'm going to be more modest in my expansion. Maybe I'll consider doing expansion maybe midterm over the next three years. So it's like they don't top up to the level that you expect them to. And they'll say, I'll get another bite at the apple on that. So could that happen? It could. I think there's enough tailwinds, though, Keith, that there's enough. When I look at our segmentation. And you say, we have 4,000 customers. We go after the global 15,000. We're not nearly penetrated in the 4,000 we have. We have a lot more to go after. I don't believe we're, this is like, we're not constrained from a market opportunity perspective. I think there's a lot of tailwinds that are going to drive more AI workloads, are going to increase more telemetry. More telemetry means more consumption and observability. All of that means... More consumption of the platform, which should yield more expansions. I think to me it's a question of you've got to go execute against that, so it's not a given that you can go do that. I think we have the ingredients to be able to do that. As I said from the outset, I do believe that the opportunity is there. I don't think it's a scenario that we're expecting, but that would probably have to play out for it to me on maybe not accelerating beyond the levels you said.

Okay. And I know there were some questions on Q3, Q4 guidance. Maybe you want to step in at this juncture and talk a little bit about the sequential patterns in Q3, Q4.

Yeah, so... One of the things that we provided some color on, just to make sure everyone's all on the same page, is we certainly said, hey, Q2 was a little, we were very open, Q2 was a little bit lighter than we expected from some deals that slipped. Not a demand-oriented issue, just kind of slipped deals. And I think everything else being equal, people were like, well, if that's the case, I would expect. And one of the things I wanted to make sure that investors understood is that the large expansion activity that we expect in the back half of the year is weighted. Those renewals are weighted in the fourth quarter. So 70% of our annual renewals are going to happen in the back half. 65% of that back half happens in the fourth quarter, 35% in the third. So there is a, you know, you can't take the net new AR and say, okay, well, I'll take 65% in the fourth quarter and 35% in the third. It won't work out like that. But we said we will be modestly more Q4 weighted than we've been seasonally. And so I think our normal seasonality is like 4852. Now, this is excluding, as you know, we're inheriting $25 million worth of ARR from Arise. So put that aside. Then you adjust for a foreign exchange, because what I'm talking about is constant currency, and I think that's about $18 or $19 million, which is going to affect Q3 primarily. You're talking about, okay, maybe it's more like a 50-50, you know, or a second.

Yes, yes. So basically, 70% maybe of the second half comes in Q4. We'll see.

One of the things I'd say, Keith, is the optionality for that is that some customers do expand early. So some of those Q4 expansions could happen in Q3. I'd say in the way we guided, we thought that we were, I would say, balanced about it. We said we don't want to assume a lot of that happens, but it could happen. So could there be a surprise to the upside in Q3? There could be. Okay.

Yeah, I think I mentioned to you one of the biggest questions we get is ACDC, acceleration versus deceleration. But the second is I think investors were a little disappointed in Q2. Stock reflected that. Is a concern that that big Q4 ramp, maybe you get some in Q3, how do you know there aren't pushouts that, similar to what happened in Q2, that show up in Q4?

I mean, it is a bit of the nature of large enterprise selling that you're having deals that fall in a quarter earlier, fall outside of a quarter. I'd say probably what gives me confidence is, you know, I had a very, an analyst that covers us with a company that begins with a B and ends with an O and said, Hey, Jim, you're setting yourself up for a long putt. And this was a couple of years ago where I was talking about our net new era, our seasonality being more weighted to have to. And that comment sat with me. I certainly remembered it. And we did deliver against it, Keith, and overachieved it, by the way, just to – but if you look at what we're – It's as a result of that that he's now retired. Sorry, no. Go back to the golf course, I'm pretty sure. But if you look at what we're looking for, Keith, for net new ARR, this is not like I'm weighted to have to any more than I've been – we historically have a – you know, 48% of your net new ARR happens in the first half, 52% happens in the second half. This is not like a... Like I have to do something incremental to what I've historically done.

It's not an aberration.

It is. And oh, by the way, what are the reasons to believe? And I've not had periods where 70% of my annual renewals happen in a half like this. And so there's a lot of reasons to believe that there's significant opportunity in the second half. And, oh, by the way, I've not waited. Like, I need more than that in the guidance that I provided.

So what you told me before, to repeat here, is you didn't leave a long putt, you don't think, for the second half. I don't think we did. I do not think we did. Okay. All right, we're going to... By the way, I'm a good putter. We'll see. OK, why don't we take a break and see if there's any questions from the field. If not, I can continue on. I think we have a mic runner. Okay. All right, I'm going to continue on AI and Arise, which for whatever reason, I sometimes call Arise. Let's focus on that. I thought it was a really interesting acquisition. I actually thought it was a really sound strategic acquisition. How do you see the growth opportunities between your existing enterprise customers and sort of the SMB AI Native Cohort. How do you think about the opportunities there for Arise specifically, but then translating that into greater opportunity for Dynatrace? Sure.

The way we're thinking about the Arise acquisition is it is multifaceted in its benefits. The first is just cross-sell. Because while the persona of the buyer for Arise tends to be an AI developer, as opposed to IT ops, the CIO, the CTO, which is more traditional for Dynatrace. It is absolutely the case that our customers of Dynatrace need, want, and are rapidly exploring AI observability and evaluations, which is the business of Arise. And the result of that is, first priority is cross-sell. Take the Dynatrace install base of over 4,000 customers. You bring Arise to them. We already have well more than 100 accepted registrations, a couple hundred underway. And it's, are those deals going to close immediately? No, but those deals are coming into the pipeline very rapidly. So that's really number one. Number two is, in addition to the product capabilities of Arise to deal with this AI reliability question that I talked about earlier, they bring a PLG motion, a product-led growth motion focused on the AI developer, and this brings Dynatrace closer to the developer, and that is really a key aspect or a second key aspect of why we bought them. And then third and finally is just product capabilities. We saw them as a category leader in the space, and we believe that the combination of Arise's portfolio with Dynatrace's portfolio is incredibly compelling and driving overall end-to-end observability architectures, and that's what we're focused on.

Okay. How do you think about the integration of the portfolios? Does Arise stay separate? I'm not talking about this quarter. I'm talking about the next 12 to 18 months. Or is there greater integration? Or do you think it's just more go-to-market?

No, absolutely. There's integration. If I were to look at chronological sequencing, number one is we are one month into the acquisition. We are already deeply, deeply focused on go-to-market synergies, as I indicated. But what customers really want is they want everything from pre-production to production. They want everything from developers to IT operations, and they want an integrated overall AI workflow. And ultimately, just to digress for a quick moment, where observability, in our view, is headed, is really oriented to an end-to-end workflow. It is everything from agents actually writing code. With observability overseeing that process to make sure that that code has high efficacy, all the way through production and observability overseeing production workloads, to then auto-remediating through agents that are then creating a closed-loop AI development lifecycle. And this becomes really critical. In order to deliver that overall closed-loop life cycle that I just described, you need everything from Arise at the very beginning of the process, working through evaluations, all the way through Dynatrace in production, and then doing the auto-remediation through agents. So this end-to-end architecture that we have in mind that we're now developing with the integration of the two product portfolios is quintessential to the achievement of that life cycle.

That's interesting. On the call, you mentioned a dozen cross-sell opportunities already, and it was only a month into the deal or something. But I'm just wondering, why isn't that hundreds? Because you're selling to 4,000 customers. What do you think about it as the growth rate? And I'll back it up with maybe reversing the numbers. You talked about you inherited 25 million of ARR. It's going to 40. I'm not very good at math, but that's over 100% growth rate if I annualize it. And so what I'm trying to calibrate is how do we model a rise going forward? Any just perspective on how we're thinking about over and above the 25 and 40 data points that you gave us?

I guess I will start, and then Rick can comment that... Uh, I think some of the several dozen is now over 100.

Okay.

Uh, so this, but you also got to remember, Keith, that, uh, they had a pretty rich pipeline to begin with. Uh, and this is, you're fortifying. So this is basically a Dynatrace install-based sales rep saying, I have interest in my account with Arise. They're sending over a lead. Uh, and so the, the, you now have an Arise sales force, which is going to close the deal. They have their own pipeline. They have new pipeline. I would expect. In the early goings, as you know, with pipeline, they're going to close more of their current pipeline, which is more of the Dynatrace, I'm sorry, the Arise-sourced pipeline, and you'll see more of the Dynatrace upsell in the fourth quarter, and I think you're going to see that significantly accelerate going into the next fiscal year. You know, as you can imagine when you acquire a company, first month is you're trying to get your, you know, kind of steady things, make sure people are settled. So I would expect that Q3 will be a source of closure for their existing pipeline. You'll start to see more Dynatrace pipeline close in the fourth quarter. And then collectively, I think you'll see continued acceleration in fiscal 28. And I'd say if that doesn't happen, we will be disappointed.

Yeah. Okay. Let's transition to logs a little bit and just maybe provide a little bit more granularity on how AI is expanding the logs TAM. And give us a little characterization about how the workloads you're winning are different today than what you might have won last year or the year before.

Do you want to start? So the way that I would say it is that for whatever sets of reasons, AI is driving an acceleration of logs as a data type faster than other data types, faster than traces, faster than metrics, as we typically see it. And so the result of it is that the more workloads there are, especially the more AI workloads, we were talking about on the call, the fact that we are now observing for more than 1,100 customers' AI workloads. Those 1,100 customers that have those workloads, for those workloads, are growing consumption at 2x the consumption of non-AI workloads. And so that is resulting directly in some of the logs volume that we're seeing, and that's what's driven this $100 million of logs consumption from three quarters ago that is now, three quarters later, headed to $250 million. That's substantial, substantial growth, and some amount of that is coming from the AI workloads, but we're also monetizing AI in other ways, not just through increased consumption. We're also monetizing AI through Arise with AI observability, specifically. And we are now, as of the beginning of October, also monetizing agents and agent usage. So if you are using a Dynatrace agent in any way, Dynatrace Assist gives you a prompting engine to figure out what's going on in your environment. Our SRE agent is assisting you in things like auto remediation and evaluation of what's happening in your environment. We are now beginning to charge essentially for AI units, and those AI units are allocated based on the type of agent being used. So, I would say three different monetization engines of AI, with logs being, in many ways, the biggest beneficiary of that in terms of growth as a data type.

Now, recently, in the last two weeks, you've announced that you're partnering with CrowdStrike. They'll do the sim. You'll do the front end of that. I guess just more broadly, why not go after the sim?

The biggest challenge that we've faced with candidly over the last several years, Keith, in the application security space is accessing the CISO, accessing the buyer. It is less about our internal ability to develop product and more about the go-to-market shift that is required. So we had a specialist, we have a specialist organization that sells application security and our solutions. But Dynatrace isn't a brand that is known by the CISO. It is a brand that is known by the CIO, the CTO. And so the result of that is oftentimes there's blockage. In the case of the CIM, obviously CrowdStrike has immediate access to the CISO. And the result of this is we felt that we were both coming at the same problem from opposite sides of the equation in a way that could solve the problem immediately for customers. And the problem is with logs, those logs are often split into observability logs and sim logs. Sim logs being for security, observability logs obviously being used by Dynatrace. And since we didn't have a solution for sim logs, only observability, we would get blocked at times in customers. Same thing was true exactly in reverse for CrowdStrike, putting those two solutions together, using our bind plane solution up top. for telemetry routing gives us an incredible solution for customers. You have Bindplane, allocate the observability logs to Dynatrace, SIM logs to CrowdStrike. This is what we announced with them on stage at their Falcon conference last week in Barcelona. And we have very senior leadership support on both sides. So we're very excited about this.

Can this help with revenue growth, do you think, the CrowdStrike partnership? Of course.

Yeah, it removes a blocker that we began to see really last quarter with some larger deals where some incumbent providers were coming back who had both aspects of it, and they would say, terrific, if you want to carve off your observability logs of Dynatrace, no problem, but we're not going to change your pricing for logs overall.

Right.

This gives us an avenue to basically take all of logs and allocate them across NetTrace and CrowdStrike in a productive way that enables those logs to be moved over to the two of us immediately.

Okay. Let's back up to security strategy more broadly. So as you think about your security portfolio, application security is where you've been. How does, and I would think, are you, you know, I think investors look at it as it hasn't been successful as logs. And how do you think about your security strategy more broadly? I mean, where do you want to take this? Do you still need the app security side with Mythos out there for one question within that context?

We are going to be, I'd say, very surgical with regard to application security is the way to think about it, and where we want to play in security is in areas where observability data is differential, and what that essentially means is when you have a security environment like, for example, what we do today with runtime vulnerability analytics, RVA as we call it. And with RVA, you are trying to assess vulnerabilities in your environment. It turns out that in order to be able to do that best, you need observability data. And so this is the kind of security solution that we will deliver to the market in the future as we do today because our observability data that we're providing to customers actually has a very positive impact on the outcome of being able to deliver RVA. And that, in a nutshell, really is the strategy. In the case of a sim, when there are already a number of sims in the market and cloud sims like CrowdStrike, we felt that a partnership strategy was more constructive immediately with instant benefit than for us to spend time developing a sim.

Yeah, okay. Let's talk about competitive dynamics for a second, and maybe talk about how the competitive dynamics with the advent of AI are changing, if at all. And if you can conclude some comments on our friends from Grafana and Chronosphere on how you think AI is impacting competitive dynamics, either giving more opportunities or fewer opportunities to scalability platforms like that.

What I would start with is the old adage that a rising tide floats all boats, which is simply to say that you always, or at least as I think about my own investment portfolio, you start with the market. And observability is a great space to be in. Because in an AI-first world, observability is needed more, not less. So that's part number one. Part number two is, what is the directional heading of the market? And the directional heading that I've tried to unwrap for you all here this afternoon is one in which observability is not static. Observability is moving to an environment where you are wanting to deliver autonomous operations. And if the goal is sort of self-working, self-healing, autonomous AI workflows that are delivering self-regulating and workable software, what you need is you need an observability architecture that can deliver that goal. And we would argue from a competitive point of view that our architecture, by having a completely integrated data lake house, which we call Grail, rather than a very fragmented data structure. Plus what we call Dynatrace Intelligence, which delivers deterministic AI, which gives you actual answers and insights as opposed to guesses or correlations, that we can tell you precisely what's happening in your environment. And by being able to do that, you then can have confidence in having agents take action. By contrast, some of the competitors you mentioned are still more focused, let's say, on dashboard delivery, and dashboards don't deliver autonomous operations. Dashboards deliver you a version of the world that converges data at the UI layer, not at the data layer that enables agentic action. And that's the biggest difference that we see. So you see a Chronosphere, a Garfana, some of the ones that you mentioned, really trying to find a way to... Get into or expand in the observability market, but candidly, we haven't seen for us in our market, in our segment, a drastic change in the overall competitive dynamics.

Interesting. So even amongst your customer base, what we hear that some large enterprise customers, and I think we're using a little bit of Grafana, but they're peeling off some workloads that are isolated to use for scalability requirements that's not impacting your, when you get feedback from the sales rep, not impacting your demand profile, you don't think?

We haven't seen that. Now, I've said that, Keith, as you might imagine, we're focused on how do we capture new workloads. And one of the, and not just new products like logs or database monitoring or network monitoring or others, but brand new workloads. And we do believe that a core part of that equation is the developer. Traditionally, Dynatrace hasn't segmented our environment or personas to go after the developer. And increasingly, developers are having more influence over the observability decision. So the developer becomes more important for us over the course of time, and this is where Arise really comes into play in accelerating that, because they are doing more than 3 million downloads in open source of its Phoenix solution over each month. And so they are accessing in a huge way the AI developer. And by bringing those solutions together over the course of time, that gives us the ability to really integrate the Dynatrace strategy for the developer, and that opens up a new segment for us.

Okay, perfect. I'd be remiss if I didn't open up once before I have my last set of questions. Okay. Any... You're on an FYI mark, so it's a little bit different, but any meaningful go-to-market changes that we should be thinking about as we look over the horizon?

I think the only thing that I would say, Keith, is that one of the things we get with Arise, to Rick's point, we have a really good value motion, and you've seen it in our results around landing large new logos. Continuing large expansion, so we do very well selling the value sale with an enterprise sales motion. One of the things we want to make sure we put in place is an additive, kind of, how do you get a volume motion going? And the benefit of Arise is you have an open source community. That open source community goes into a paid community. And so think of it as that is a motion we want to make sure we can develop. And we think that you have the ingredients of being able to do that with the Arise transaction. So I'd say probably that would be a go-forward change. I would say it's an and. It's not a, like, we're going to move away from what we've done. It's an and. We're going to retain what we have, which we think is working pretty well, and working on how you develop a better volume motion.

Okay. My last question here as we're coming down the home stretch is more of a strategic question. Good morning, everyone. We've observed, and I think we'll continue to see, more convergence between workflow, security, and observability. And indeed, it started, you know, PAL is now with Chronosphere. I think we're just at the start. Datadog's moving more aggressively into security. When you think about those forces of convergence, how do you think DT's position for the next three years?

I like the, well, I mean, you might imagine my biased answer, but I like our positioning on this. From the standpoint of workflow, we really believe, to my earlier points that I've sort of tried to weave throughout this conversation, that observability is really going to be an input to delivering overall AI development workflow. And it is going to be infused, it being observability, really is going to be infused from the first line of code that's written by agents all the way through the running of that code in production and its auto-remediation, correction, and full cycle. So from a workflow perspective to an observability perspective, Dynatrace is very well situated. On the security piece, I like our strategy, which is we're going to be developing in areas of security where observability is differential, as I described earlier, and we're going to be surgical in its evaluation of where we're going to partner instead, a la with CrowdStrike. Okay.

With that, we're going to take a wrap. We're thankful for Rick and Jim attending our conference. And I will say, Jim, I think this is the last conference you're going to attend. Because as many of you know, Jim's last quarter is the March quarter. So we're very grateful for both of you being here. And with that, we're going to take a wrap on this section.

Thanks very much.