Greetings. Welcome to the Dynatrace Q1 Fiscal 2027 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question- and- answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Noelle Faris, VP of Investor Relations. Thank you. You may begin. Good morning. Thank you for joining Dynatrace's Q1 Fiscal 2027 Earnings Conference Call. Joining me today are Rick McConnell, Chief Executive Officer, and Jim Benson, Chief Financial Officer. Before we get started, please note that today's comments include forward-looking statements such as statements regarding revenue, earnings guidance, and economic conditions. Actual results may differ materially from our expectations due to a number of risks and uncertainties discussed in Dynatrace's SEC filings, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. The forward-looking statements contained in this call represent the company's views on August 5th, 2026. We assume no obligation to update these statements as a result of new information, future events, or circumstances. Unless otherwise noted, the growth rates we discuss today are year-over-year and non-GAAP, reflecting constant currency growth, and per share amounts are on a diluted basis. We will also discuss other non-GAAP financial measures on today's call. To see reconciliations between non-GAAP and GAAP measures, please refer to today's earnings press release and supplemental presentation, which are both posted in the financial results section of our IR website. With that, let me turn the call over to our Chief Executive Officer, Rick McConnell. Thanks, Noelle. Good morning, everyone. Thank you for joining us today. On our last earnings call in May, we expressed confidence that the growth drivers we put in place would drive a year of ARR acceleration in fiscal 2027. The strength we saw across the business in Q1 reinforces our conviction and ability to deliver this outcome. Here are a few of the noteworthy highlights from the quarter. Total ARR grew 17%. Net new ARR was $85 million, growing 66% and 41% organically. We achieved record new logo growth of more than 160%. Both total and subscription revenue exceeded the high end of our guidance. We delivered a non-GAAP operating margin of 29%, reflecting the disciplined investment approach you've come to expect from us. Q1 strength reflected healthy enterprise demand for end-to-end observability, stronger execution, and growing complexity across customer environments. We are seeing AI contribute in three ways, which I will expand upon shortly. Increasing consumption across our platform, creating demand for new AI observability capabilities, and directly monetizing agent usage. This Q1 performance reflects both the significant market opportunity and our strong execution to begin the fiscal year. This morning, I'd like to discuss the observability market, why we believe Dynatrace is built for an AI-first world, and how we expect to drive incremental AI monetization. The observability market has entered a new era. Software that wants months to build now ships in days. AI agents are taking autonomous action across infrastructure. Enterprise customers are now deploying AI rapidly, not because every risk has been resolved, but because standing still means falling behind. In this environment, unified observability matters more than ever. Systems are more interconnected, more autonomous, and more difficult to manage manually than ever before. The enterprises winning in this environment are the ones that can keep complex, fast-moving systems working reliably and quickly understand when they are not. Additionally, AI workloads do not simply add volume. They behave differently. They can operate perfectly and still produce incorrect results. That's a problem observability has never had to solve before, and addressing it represents a significant emerging opportunity. We estimate the AI observability total addressable market will exceed $10 billion by 2030, growing at more than 50% annually. We see AI observability as the next logical evolution of the broader observability market, and that evolution is already underway. What this means in practice is that observability in the age of AI has to answer far more questions than ever before. While the majority of enterprises are still in early phases of their AI journey, the requirements are evolving quickly. Let me walk through three of the questions that matter most today in an AI-first world. The first, is it working? Are applications, infrastructure, and systems working as intended? This question is about business resilience, and it's the same question we ask of traditional workloads. Second is new. Is it accurate? More specifically, is the AI model delivering output that can be trusted and relied upon with confidence? Answering this means evaluating AI systems for accuracy and intended behavior. Determining whether an AI system behaves as intended before it ships is emerging as one of the most important aspects of observability. The third, are my agentic systems delivering the outcomes they were built for? Enterprises are deploying agents to build software at a pace that wasn't possible before. The advantage goes to those who can accelerate the full life cycle and trust the results. Code that's built well, ships safely, and runs reliably. The last question is where our newest offering, Bluebox, comes in. Built for AI-first teams, Bluebox helps development teams and their coding agents bring software into production in a way that customers can trust. It closes the loop between building and running. It gives coding agents live context from running systems before a change is released. Once that change is live, its agentic SRE capability finds root cause and returns an evidence-backed fix, with the developer in control across the entire AI delivery life cycle. This is the moment for which Dynatrace was built. With AI agents increasingly acting alongside humans across development and operations, both need a common source of trusted context. Dynatrace provides that through Grail and Smartscape, giving agents and teams a unified understanding of system relationships and behavior. Dynatrace Intelligence turns that understanding into action, combining deterministic and agentic AI to deliver the precise causal insight that lets both people and agents act with confidence. These core differentiators give customers one operating foundation across both human and autonomous workflows. Our platform has a distinct advantage with this depth of insight. As agents become a larger part of enterprise operations, that distinction becomes even more important. Additionally, we are purposefully building for an open, interoperable ecosystem. Our newly acquired BindPlane supports the open standard for OpenTelemetry data collection. DevCycle, acquired earlier this year, supports the open standard for feature flags. These acquisitions aren't coincidental. They reflect a deliberate commitment to open standards and interoperability. Customers are not locked into proprietary pipelines. Our platform is built to work alongside the tools enterprises already use, including partners such as ServiceNow, and to operate natively in MCP environments as the AI ecosystem evolves. We believe openness is a competitive advantage. It is one of the reasons enterprises trust Dynatrace as the intelligent foundation for AI-powered businesses, both powered by AI and built for AI. Our unified architecture becomes more valuable as AI increases complexity, and that growing value is reflected in higher consumption, broader platform adoption, and the following three new monetization opportunities. First, AI workloads are similar to core observability workloads in that they leverage the same types of data such as logs, traces, and metrics. AI workloads generate dramatically more telemetry than the systems that came before them. This is one of the reasons why log management remains our fastest-growing product category, with consumption nearly doubling since surpassing the $100 million milestone just two quarters ago. BindPlane facilitates easier data ingestion, and it is already performing ahead of plan. Second, as I mentioned earlier, AI observability is an incremental monetization driver. It increases consumption of the platform as it validates whether the AI workloads are producing accurate results, behaving as intended, and operating safely and efficiently. This is the newest capability of the platform, and adoption is expanding quickly. Third, beyond AI workloads and the data they generate, we monetize our own AI and agents. Every time a customer uses Dynatrace Intelligence to get answers through AI function calls or MCP integrations, or when one of our agents, like the SRE or Assist agent, takes autonomous action to resolve an issue, it drives DPS usage. As agents increasingly become consumers of observability, this represents a growing opportunity that didn't exist two years ago. Today, more than 1,000 customers use Dynatrace to observe AI and LLM workloads in production, up from roughly 850 last quarter. More than 800 are running operations autonomously with Dynatrace's agentic capabilities, up from roughly 500 last quarter. Additionally, consumption growth for customers in these AI cohorts is 1.5x higher than that of non-AI cohort customers. Our platform integrates natively with Claude Code, ServiceNow, GitHub Copilot, Atlassian, and the major hyperscalers, AWS, Azure, and GCP, enabling autonomous action across development and operations at scale. Here are several examples of how. More than doubling ACV with a top global financial institution. This customer is using Dynatrace to validate model consumption, control costs, and maintain full data lineage from prompt to response, helping it deploy AI with greater confidence while reducing compliance and audit risk. We secured a six-figure ACV expansion, also nearly doubling ACV with a leading recreational vehicle retailer. This customer used Dynatrace as their operational system of record while building a custom CRM application through AI-assisted development, generating approximately seven figures of savings and expanding usage of our platform. A leading digital insurance provider used Dynatrace AI observability to reduce onboarding time from days to minutes and identified an outdated model version that was driving unnecessary token consumption and costs. Finally, we secured an eight-figure ACV new logo win with one of Latin America's largest financial institutions. In a highly competitive sales process, the customer selected Dynatrace to consolidate a fragmented multi-vendor observability stack across a complex environment supporting mission-critical citizen-facing services. Our differentiation continues to be recognized by independent analysts. Gartner named Dynatrace a leader in the Gartner Magic Quadrant for Observability Platforms for the 16th consecutive year. Gartner describes Smartscape and Dynatrace Intelligence as the gold standard for real-time high-fidelity dependence mapping to automate root cause with Dynatrace and third-party agents. We believe this recognition validates both the strength of our architecture and our ability to help customers confidently scale AI and agentic workloads. Finally, as many of you have seen, Jim plans to retire from Dynatrace by the end of the fiscal year. We will conduct a thorough search for a successor over the coming months, and I'm confident we will have a smooth transition. Jim has been an exceptional partner, playing a critical role in scaling the business, strengthening our financial profile, and positioning Dynatrace for its next phase of growth. I am deeply grateful for his leadership and many contributions, and we will miss his valuable insights and guidance when he retires. To wrap up, Q1 was a tremendous start to FY 2027 and a powerful reflection of the momentum we are seeing across the business. Organizations are increasingly looking to consolidate on platforms that can help them manage growing complexity, unlock greater productivity, and realize the full potential of AI. As enterprises accelerate their AI initiatives, we believe Dynatrace is uniquely positioned to help them innovate faster, operate more efficiently, and maximize the return on their technology investments. In an AI-first world in which observability and autonomous operations become more critical day by day, we are more enthusiastic than ever about the opportunity at hand. Jim, over to you. Thank you for the kind words, Rick, and good morning, everyone. Q1 was an exceptional start to the fiscal year. Once again, we exceeded the high end of all our top-line growth and profitability guidance metrics, fueled by record new logo ARR growth, expanding traction in logs, and continued robust consumption of the platform. These results reflect broad-based momentum across the business and reinforce our conviction that we are on the path to ARR acceleration this fiscal year. Let me review our Q1 results in more detail. Unless otherwise noted, all growth rates are year-over-year and in constant currency. Starting with ARR, we ended the quarter at $2.14 billion, up 17% year-over-year. Q1 net new ARR was $85 million, adjusted for foreign exchange movements, growing 66% from a strong Q1 last year. Excluding the $13 million ARR contribution from our BindPlane acquisition, Q1 net new ARR was $73 million, or 41% organic growth. This strong performance was driven primarily by record new logo ARR growth and our continued success in winning large end-to-end platform consolidation opportunities, including an eight-figure ACV land. The maturation of our go-to-market transformation, which began in FY 2025, is clearly reflected in improving net new ARR productivity. To help illustrate the momentum in the business, we believe trailing 12-month net new ARR is a useful metric because it smooths the quarter-to-quarter impact of large enterprise transactions. Viewed through that lens, we have now delivered four consecutive quarters of acceleration in trailing 12-month organic net new ARR growth. Growth reached 17% on an organic basis in Q1, up from 12% in Q4, demonstrating continued momentum. In Q1, we added 122 new logos to the Dynatrace platform. The average land size continues to build and was nearly $285,000, contributing to record new logo ARR growth of more than 160%. We remain focused on landing with high-quality customers with strong expansion potential. Our value proposition continues to resonate with enterprise customers that are outgrowing DIY or commercial point solutions, and AI-driven complexity is only increasing the need for a unified platform. Customers are seeking business value through tool consolidation and are turning to Dynatrace for the depth, breadth, and automation of our unified AI-powered observability platform. Simply put, we believe the Dynatrace platform was built for the AI era. Once customers experience the benefits of the Dynatrace platform, they often expand quickly. Average ARR per customer continues to increase, and is now well over $500,000, reflecting broader adoption and the value we deliver. As we have shared in the past, given the significant cross-sell and up-sell opportunities within our enterprise customer base, we believe the average ARR per customer can exceed $1 million or more over the medium to long term. Gross retention rate in Q1 remained in the mid-90s, underscoring the strategic importance of Dynatrace as a mission-critical component of our customers' operations. Net retention rate, or NRR, was 110% on a trailing 12-month basis. We continue to see broader usage and deeper adoption across the platform, particularly in log management. Logs remains our fastest-growing product category, continuing to grow well above 100% and reaching nearly $200 million in annualized consumption. As a reminder, we crossed the $100 million milestone just two quarters ago. We expect logs to remain a powerful growth driver, accelerating consumption while providing a path to future ARR expansion as customers consume their commitments and move into larger contracts. Turning to revenue. Total revenue was $555 million, and subscription revenue was $530 million, both up 15% and 100 basis points above the high end of guidance, driven by strong net new ARR performance. Moving to profitability. Non-GAAP operating margin was 29%, exceeding the high end of guidance by 100 basis points, driven by revenue upside flowing through to the bottom line and some expense timing between quarters. Non-GAAP net income was $140 million, or $0.48 per diluted share, $0.03 above the high end of our guidance. Now turning to free cash flow. We have updated our free cash flow definition to adjusted free cash flow, which excludes the impact of restructuring, acquisition-related, and other non-recurring cash expenses. This better aligns the metric with our non-GAAP operating income definition and provides investors with a clearer view of cash generation from ongoing operations of the business. We generated $309 million of adjusted free cash flow in the Q1. Given seasonality and quarterly variability in billings, we believe this metric is best evaluated on a trailing 12-month basis. Adjusted free cash flow over the trailing 12 months was $579 million, or 28% of revenue. This includes 500 basis points of impact from cash taxes. On a pre-tax basis, adjusted free cash flow was 32% of revenue. Turning to capital allocation. We increased the pace of our share repurchases in Q1, buying back 7.1 million shares for $275 million, compared to $224 million in Q4. This increased level of repurchases reflects our confidence in the company's operational momentum, long-term growth, and cash flow trajectory, and our view that the shares remain undervalued. We will continue to take a disciplined approach to capital allocation, balancing investment in innovation and growth, while also returning capital to shareholders. Moving now to guidance. Our confidence in accelerating ARR growth in FY 2027 has strengthened following our Q1 performance. Demand for observability remains robust. The growth drivers we outlined in May continue to trend positively, and our teams are executing well. That said, we are still early in the fiscal year, and consistent with our historical approach, we will remain prudent in our guidance. Lastly, with nearly 40% of our business denominated in foreign currency, the strength of the U.S. dollar since our last call creates a sizable headwind. We now expect FX to be a headwind of $14 million to ARR and $4 million to revenue. This represents an incremental headwind of $23 million to ARR and $19 million to revenue. With that as context, let me summarize our updated full-year outlook that we detailed in this morning's press release. ARR, we are maintaining our constant currency ARR growth guidance of 15.5%-16.5%. As usual, we plan to revisit our full-year ARR growth guidance at the midpoint of the fiscal year. For revenue, we are raising our constant currency total revenue and subscription revenue outlook by 25 basis points at the midpoint, reflecting the operational outperformance in Q1. We now expect total revenue and subscription revenue growth of 14.5%-15% year-over-year. Turning to profitability, we are increasing the high end of our full-year non-GAAP operating margin guidance by 25 basis points to 29.75%, while continuing to balance top-line growth acceleration with margin expansion. We are also raising non-GAAP EPS guidance to a range of $1.97-$1.99 per diluted share, an increase of $0.04 at the midpoint. This outlook assumes a diluted share count of 295 million to 297 million shares and an effective cash tax rate of 18.5%. Finally, we are maintaining our adjusted free cash flow margin guidance of 26.5%. Our prior guidance was based on our current free cash flow definition, which didn't reflect the new adjustments. As a reminder, for your cash flow models, seasonality and billing patterns historically result in higher cash flow in the Q1 and Q4, and significantly lower cash flow in the Q2 and Q3. As such, we believe trailing 12-month performance remains the most meaningful way to evaluate this metric throughout the year. Looking at Q2, we expect total revenue and subscription revenue growth of 15%-16%, non-GAAP operating margin of 29.5%-30%, and non-GAAP EPS of $0.48-$0.49 per diluted share. In summary, we are pleased with our strong start to fiscal 2027 and remain confident that we are on the right track to accelerate ARR growth. We are focused on executing against a significant opportunity ahead in a rapidly growing observability market. We have a proven track record of consistent execution and remain committed to delivering a balanced combination of strong growth and profitability while continuing to invest in opportunities that will drive long-term value. With that, we will open the line for questions. Operator? Thank you. We will now be conducting a question- and- answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We kindly ask that you please limit yourself to one question. Our first question comes from the line of Brent Thill with Jefferies. Please proceed with your questions. Thank you. Good morning. Just on the net new adds, you mentioned the overwhelming strength. Maybe if you can just drive into what you're seeing in terms of the success with those new logos, where you're finding them. Any more color would be helpful. Sure, Brent. This is Jim. Again, I think what you're seeing, this is not the Q1 that we've seen strength in new logos. I think this is the fifth consecutive quarter that the average land size has continued to build. This quarter alone was almost $285,000 on average land size. It is a function of some of the go-to-market changes that we made two years ago, where we weighted investments in strategic and enterprise accounts. What you're seeing is growing traction. Specifically, what I talked about roughly two years ago about this emerging trend of customers looking for platform consolidation, tool consolidation, and going from fragmented tools to one vendor, we are benefiting significantly from that. That's been our number one sales play, and we expect it to continue. Even in this environment where people are evaluating where budgets go, consolidation actually is an economic benefit to customers, because when they consolidate fragmented tools and they go to one vendor, they can get better economics and a better outcome from Dynatrace. Those are really the reasons why we're benefiting and continue to benefit from new logo lands at a very large size. Thank you. Our next question comes from the line of Gray Powell with BTIG. Please proceed with your question. Great. Thanks for taking the question and congratulations on the really strong results. I'm just looking at the numbers, and I just want to make sure that I understand everything correctly, but if I back out BindPlane, it looks like you need to grow net new ARR by about 17% to hit your FY 2027 guidance. I know it's only one quarter, that you're going to wait till Q2 to update, but you just posted 40% growth in net new ARR. It sounds like there are a lot of tailwinds out there, particularly log monitoring. Can you maybe just help us rank the upside drivers that you saw in Q1? How should we think about the sustainability of those drivers? Gray, that's a great question. Actually, your math is right. The math would suggest for Q2 through Q4, at the high end of our guide, that you're at the high teens growth rates. We're coming off a quarter, obviously organically, where we grew 41%. You're not going to see that every quarter. We've talked about that in the past, that the nature of an enterprise sales motion, in particular where we are, going after large strategic accounts, is your land sizes are going to be very big, both for new logos and for expansions. It is a bit of the nature of the business, you're going to see timing. We had an exceptional start to the year, actually stronger than we expected. We knew the first half would be strong. To your point about tailwinds, we expect the tailwinds to continue. I expect we will continue to be able to land large with new logos. I expect that in the back half of the year, where we have a significant increase in our DPS contracts that are coming up for renewal, that you're going to have an opportunity for expansions. Consumption is continuing to grow at a robust rate. Logs, as we mentioned, is nearly $200 million. There's just a lot of momentum building in the business. We have a lot of confidence that we can continue that. I'd say one of the questions that I got from last quarter's earnings call was, "Hey, this guide looks a bit ambitious, Jim." Hopefully, what this demonstrates is that there is building momentum in the business. This is the Q4 in a row that we've had trailing 12-month improvement in net new ARR growth. That smooths out variability quarter to quarter. 17% in the Q1 on a trailing 12-month basis organically. This business is showing significant momentum, we expect that that will continue. I think Jim definitely covered the highlights great. It's about consumption, it's about logs, it's about those elements. One element that I'd love to add in is just the notion that AI is driving even greater consumption on the platform. We talked about some of the metrics in the prepared remarks, those workloads are driving increased consumption. It's also shifting the market mindset to one of AI observability, which we also referenced. That's an incremental driver to some of the other ones that Jim already mentioned. Thank you. Our next question comes from the line of Will Power with Baird. Please proceed with your question. Okay, great. Thanks. I guess, first, to you, Jim, just congratulations on your retirement and thanks for all the help here over the years. Rick, you made the comment that you're seeing organizations increasingly run autonomous operations. I think you said just sequentially, the number of organizations moving to autonomous operations had gone from 500 to 800. Maybe just talk about kind of the key drivers of that. AI obviously feeds into that. Yeah, any color you can share on kind of what's driving that, and then just anything you can drill down in terms of how you monetize that. I know DPS is the contracting vehicle, I guess, but any other color on that front would be great. Sure. Great question as well. To start, we absolutely see agentic evolution both in our traditional workloads as well as AI workloads. For example, perhaps a couple of quarters ago, I mentioned the evolution of traditional observability in moving from reactive to proactive to predictive on to autonomous. It is in this autonomous environment where you get the benefit of using Dynatrace's deterministic AI to provide causal interpretation and insights as to what's going on in that environment. That deterministic AI enables agents to then take action in an autonomous way, and those agents can actually provide then results to allow for elements such as auto remediation. That's in traditional workloads, and that's where agents can actually take action. On the AI observability front, you're adding incremental questions like, for example, is the information coming out of LLMs accurate? Again, agents are then helping you build and run code. In both areas, you have agents that are increasingly operationalizing your observability systems, and in both cases, we expect to monetize those agents directly to enable us to benefit from that agentic usage. It is, as you mentioned, these 800 customers using our agentic capabilities up from roughly 500 last quarter that we like to see because it's increased agent usage. One thing that I'd add to that, Will, I think to your point, is while enterprises are still early in their adoption of AI, I think to Rick's point, it's building. I think what we outlined there is consumption is growing at a very robust rate for the company in total, customers that are leveraging AI grow at 1.5x that rate. They have significant volume increase in consumption that again, with the nature of the DPS contract, you don't have to purchase something. You have access to full capabilities of the platform. You will burn down your commitments earlier, our expectation is if this continues, that that should lead to a source of future expansion. Perhaps just to put a pin in it, I did cover this in the prepared remarks, but just to highlight it because I really do think it is important. We're thinking very acutely as to how we monetize an evolving AI space. Number one is just around increased consumption of AI workloads. They consume way more telemetry. Number two is that you've got incremental workloads that require AI observability. Namely, are they delivering accurate responses coming out of LLMs? Finally, we're monetizing, as I mentioned earlier, the agents themselves. Three different, very discrete methods of monetization of AI workloads and agentic work models as we look at. Thank you. Our next question comes from the line of Keith Bachman with BMO Capital Markets. Please proceed with your question. Hi. Good morning. Thank you. I wanted to ask about the renewal install base, if you could just provide a little bit of context on how that installed base looks over the next three quarters versus what it was in the June quarter. Frankly, is it a greater target-rich audience when you think about that installed base? Any nuances that you want us to consider as we look out over the next three quarters? Additionally any update on how that installed base when the renewals unfold, the behavior? In other words, what's the ratio that you're picking up as those customers in fact renew their DPS contracts? Any change in behavior, upsell rates associated with those DPS renewals, in particular as we think about what that installed base may do? I'm going to try to sneak in. Jim, any comments on what BindPlane will grow over? You mentioned $13 million, which was ahead of our number, but any comments on how that will grow and contribute to the ARR? That's it for me. Many thanks. Okay. A couple of questions in there. As we've shared before, Keith, the weighting of our renewals, DPS and just other non-DPS renewals, are very weighted to the back half of the year. Q1 and Q2 are light renewal quarters. I think the statistic is for DPS, 70% of our renewal activity or annual resets actually occur in the back half of the year. I shared before that if consumption continues to grow at the rates we're expecting, we believe that you should see NRR inflection in the back half of the year. I don't think you're going to see it in the first half of the year just because it's a light renewal period. As I shared before, your DPS contracts this year, you're having all three cohort classes come up for the first time. If consumption continues to grow at that rate, we do expect to see an improvement in expansion activity. I'd say what we saw in Q1, very consistent. Some customers go on-demand and some customers do expansions. Again, because it's a light renewal period, you're not notably seeing an uplift in NRR yet, but our expectation is you will in the back half. Relative to BindPlane, you're right. BindPlane, I think we used big, grand numbers when we said $10 million. What we inherited was $13 million. We are very pleased with BindPlane. It's exceeded our expectations, and you should expect that that will be a contributing source to aid our logs business to continue to accelerate at the rates that it's done, because BindPlane will be an accelerant to logs. We expect that to be an additive source. We haven't necessarily outlined a specific growth target for it, you can expect that it's going to grow at a robust rate. Thank you. Our next question comes from the line of Andrew Sherman with TD Cowen. Please proceed with your question. Great. Thanks, guys. Jim, congrats on your retirement. It has been great working with you. Is it fair to think that the deals that slipped into EMEA last quarter closed? How did that region perform in the quarter? Globally, how is the pipeline of big deals in Q2 and for the second half? Thanks. First, thank you. I will just remind you, I am not going anywhere yet, you guys are stuck with me for a while. Thank you for the kind words. Relative to EMEA, you are right. We saw a little bit of softness in EMEA in the Q4. EMEA actually had a very strong start to the year. EMEA had a good Q1. They were not the primary source of the growth for the quarter, but they had a rebound from Q4 to Q1. Your second question was on. Pipeline The pipeline. Pipeline, again, pipeline, it continued to be weighted to large deals. That is not new. It is the nature of our sales motion. Which is why we mentioned that having a trailing 12-month metric to look at net new ARR is a good lens because it smooths out the timing that you will see with large deals like that. The pipeline continues to be robust. Thank you. Our next question comes from the line of Fatima Boolani with Citi. Please proceed with your question. Oh, good morning. Thank you so much for taking my questions. Jim, I wanted to follow up with you on something that you were potentially ideating on last quarter. Because you have started the new fiscal year, it behooves me to ask you. There was some consideration around potentially having more, let's just say, elastic or more premium skewing pricing on on-demand consumption behavior. Knowing what you know, seeing what you're seeing in the pipeline as it relates to the renewals cohort, their behaviors, their consumption patterns, I'm wondering if you maybe have an update or a finer point you could put on the decision around more premium pricing elasticity on ODC, and how that factors or doesn't factor into your guidance for the remainder of the year. Thank you. The short answer to that question, Fatima, is that we've not made any decisions to change our pricing mechanism for on-demand consumption. As you mentioned, we do not charge a premium. It is something that we've evaluated, and continue to evaluate internally. Within my guidance does not assume any change in that. That's not to suggest that we wouldn't make a change. It's just not something that we've contemplated yet. Obviously, when you make a change like that, you'd have to roll that out over a period. You could do that for new customers. You'd have to figure out the timing of doing it for existing customers. So even doing it would not have a material impact on the fiscal year. Thank you. Our next question comes from the line of Sanjit Singh with Morgan Stanley. Please proceed with your question. Yeah, thank you for taking the questions. Congrats on the strong net new ARR performance in Q1. It seems like this quarter, sort of strength across the business, but really the story is the new logo performance, I think kind of more than doubling the size of the average lands. When I think about that NRR, and I think about just the momentum that you guys are seeing, explosive momentum you're seeing on the logs side of the equation, I guess the question is why isn't logs driving that improvement in NRR that you said? I know we have the renewal cohort in the back half, why isn't logs a bigger driver for an NRR improvement? I think it will be. I think it's all timing, Sanjit, as we've said. Everything is dependent upon who are the customers that are driving significant logs consumption. It's a bit of the nature of when do those customers fall into their renewal cycle. Again, as I mentioned, Q1 and Q2 are light renewal quarters. We're already seeing some of it, they just happen to be quarters where you're not going to see the same level of expansion activity. Trust me, they are going to be, and we expect to be, a future source of expansion activity. As we mentioned, just two quarters ago, we talked about the business being $100 million, and now it's nearly $200 million. You should expect that in the back half of the year, if this consumption growth continues, that we should see an inflection in NRR. Thank you. Our next question comes from the line of Matt Hedberg with RBC Capital Markets. Please proceed with your question. Great. Thanks for taking my question, guys. Really a strong set of results here, I'm still kind of curious. When I look at the 41% constant currency of organic net new ARR growth, I'm curious, did you see any pull forward from Q2? I guess where my question is going, you haven't changed the full-year ARR guide, but following such strong Q1 results, does it change how you think about that first half, second half split? I think our initial assumption was something like maybe 44%-47% of net new ARR in the first half. Any commentary on sort of like the linearity of the results? It seems strong really across the board. Thanks for the question, Matt. You're right. We did say in our last call that we thought that the first half seasonally, relative to what historically is, would be a little bit more weighted. We certainly had a better start than we expected. Relative to pull forward, you're always going to have deals that push, you're going to have deals that you're able to close, that is going to continue to be the nature of the business, especially with our pipeline weight is a very large deal. The timing of those are always going to be a bit variable. I would say an exceptional start. I expect a very strong half one. I do expect that net new ARR, even though we don't guide quarterly, is going to be in the double digits every quarter. Timing of how much more it will contribute, I'd say, is going to depend on the nature of when these deals land. We are very confident that the momentum in the business is building, I think we're just trying to be prudent. As you know, we don't historically change the guide after the Q1 results. Don't misunderstand that to mean that we don't believe that the business momentum is growing. One of the things I said in the prepared remarks, Rick, we are quite confident that we are on track to accelerate ARR growth for the year. This is a really critical point that I want to highlight as well. Our focus is ARR acceleration for the year. That's what the drivers are suggesting, that's what we're promoting with regard to strong consumption, log management and log growth, the evolution of AI workloads, the increase in consumption overall of the platform relative to ARR, back half renewals coming up. There is a large set of drivers that we believe deliver confidence in the overall outlook for the year. Thank you. Our next question comes from the line of Koji Ikeda with Bank of America. Please proceed with your question. Yeah. Hey, guys. Thanks so much for taking the question. I wanted to ask about logs, and it's very clear that your log strategy is working with log consumption over $200 million. As I think further out, if log growth starts to slow, you did lay out three monetization levers for AI. That's higher telemetry, AI observability, and then monetization of Dynatrace agents as a whole. Is there enough there with the AI to realistically become large enough to replace any sort of slowdown in logs? Or does the medium-term growth algorithm still primarily depend on logs growing nice and durably over the next several years? Thank you. Let me start with that. While we do think logs will continue to be a huge source of consumption growth outside of logs is growing at a very rapid rate as well. Infrastructure monitoring is growing at a very healthy rate. Full stack is growing at a very healthy rate. Consumption of the platform beyond logs is growing at a very robust rate. I don't expect that that's going to change. Your point about if log slows. First, we don't think logs is going to slow. We think that at $200 million, when you look at the size of this opportunity and the differentiation that you have with Dynatrace, we think we're going to be a huge gainer of share in that space. I don't think log is going to slow. I think outside of logs, the rest of the business is growing at a very rapid rate. I think between logs, customers continuing to move more workloads, and the AI monetization attributes that Rick said, I think all three of them are going to be sources of growth for acceleration in ARR. Yeah, Koji, I would just say that whether you're looking at the evolution of traditional workloads to include autonomous operations, or you're looking at the evolution of workloads altogether to include AI observability, it is critical to have an underlying foundation that begins with end-to-end observability. Essentially, every customer event that I do, every customer meeting that I manage, every customer with whom I engage, it's got to start with end-to-end observability, because that's what gives you the underlying insights, the underlying analytics to be able to operate in an environment in a more autonomous way. You have to have logs, traces, metrics. You have to have application monitoring, infrastructure monitoring, log management, all in a consistent, integrated platform in order to avoid manual oversight. If you're looking for AI oversight of that platform, which you can get through Dynatrace vis-a-vis these causal insights coming out of deterministic AI, that begins with end-to-end observability as a foundation for everything else. The reason I wanted to insert that into the answer to the question is because that is, in many ways, the core driver of the Dynatrace business before you get to any of these other elements. You look at log management growth as a component of that. You look at AI observability as an evolution of that. All of these elements are based on the foundation of end-to-end observability growth that is really the core business. Thank you. Our next question comes from the line of Samik Chatterjee with JP Morgan. Please proceed with your question. Hi. Thanks for taking my question. If I could just follow up on Koji's question. On the last monetization driver that you mentioned, Dynatrace agents, and just curious to hear your thoughts about how you think about the sizing of that opportunity longer term relative to AI observability. I think you mentioned like a $10 billion incremental TAM, but just wanted to hear how you're thinking about size or sizing of the agent sort of opportunity overall, maybe a bit more longer term, and any thoughts on sort of timing of seeing that sort of evolution. Thank you. It's going to evolve in a measured way over the course of time. We're certainly not expecting any radical shift in mix from our core end-to-end observability capabilities relative to AI observability in the near term. We do view that as a catalyst because the more AI observability you're doing, the more you're going to use us for end-to-end observability as well for traditional workloads. I really see them growing in concert. We do believe that that $10 billion TAM, as we look out over the balance of the decade, represents a significant increase in the addressable market that we can go after with Dynatrace systems. We wouldn't provide a specific percentage, but we would say that that is going to evolve over the course of time in a meaningful way. Thank you. Our next question comes from the line of Ryan MacWilliams with Wells Fargo. Please proceed with your question. Hey, guys. Thanks for taking the question. Two-part question here. Just love to hear how consumption is trending overall in the business compared to the quarter before. On the AI workloads requiring more telemetry, would love to dig into that. I know it's early, but how does the observability required for AI agent activity compare for the observability required for traditional software applications? Thanks. Well, let me take the second one on the AI agents and AI agent usage. I think this is where it really comes back to the three questions that we ask. We look at traditional observability, traditional workloads as really largely addressing the first question that I indicated, which is it working? Is it working is really all about business resilience. Business resilience is indicating whether a mobile app is working, whether infrastructure is operating as expected, et cetera. The AI workloads and the agentic flows are adding these couple of additional questions. For example, is it right or is it accurate? That really is assessing whether the LLMs are producing the right data. Can that data be relied upon to provide to our customers and users as a mechanism for action? That is really the AI observability piece. Lastly, increasingly what we are seeing is we are seeing that individuals or individual developers are really, over the course of time, no longer going to be writing code themselves. It is agents that are going to be writing the code, and individuals or humans are going to be overseeing that environment. This is why we have a lot of confidence in the evolution of this business in the AI observability space, because we have all three of these questions at action. Number 1, is it working? Number 2, is it accurate? Number 3, are my models delivering as expected? If you put all three of those together, this is what is creating the increased telemetry coming from AI systems. Thank you. Our next question comes from the line of Ittai Kidron with Oppenheimer. Please proceed with your question. Thanks. Rick, I wanted to go back to the comments around the 1,000 customers that are using you excuse me, to monitor AI. Can you talk about the visibility that you have into your customer base? Kind of how do you know what you're being used for, what kind of applications, use cases? Number 1 and Number 2, perhaps more importantly, how are you reorienting the sales force to make sure that they try and capture those types of use cases and workload of customers? Yeah, thanks. Thanks for the question. Absolutely. We can understand how they're using the AI workloads based on the telemetry that we can capture through the Dynatrace platform. That's how we can accrue the numbers that you see here, that we have 1,000 customers now. Now observing the AI and LLM workloads, we have that capability in the system. With regard to the sales force, the expectation is that we are driving a sales play regarding AI utilization and AI workloads to go after those workloads because of all the reasons we've been describing. It drives increased telemetry, it drives the increased usage of agents, it enables greater monetization. We are absolutely very visible in pushing our sales force to be not just looking for traditional observability workloads, but rather AI workloads that are evolving. It's a key sales play. Thank you. Our next question comes from the line of Matthew Martino with Goldman Sachs. Please proceed with your question. Yeah, good morning. Thanks for the question. Rick or Jim, on go-to-market, I know you're extending the strategic account coverage model beyond the top 500 customers. What are you seeing in those newly covered accounts in the early going? What's the realistic timeframe for that cohort to become a more visible contributor to the net new ARR? Great question. You're right, we were wildly successful with focusing on the Global 500. Huge source of ARR growth over the last year. Continues to build as we extend down. We're already beginning to see traction in that. The good news is we're already seeing building go-to-market productivity. Go-to-market productivity continues to improve every quarter. Kind of go back to my point about this building momentum, looking at trailing 12-month net new ARR, the function of the go-to-market changes that we've made, and admittedly that productivity improvement is coming from both what we call strategic accounts and the enterprise accounts. This is not we're going to have to wait 12 months for that. We're already starting to see that. We're inserting that into the go-to-market equation. The changes that we made two years ago, our expectation is that productivity will continue to build. One key element also, Matthew, that you described is that you have to think about it not just in terms of the ICP or the intended customer being in the strategic segment, for example. It's all around who is the buyer. It's also about who is the buyer within those accounts. This is where we have traditionally sold to CXOs, we've sold to ITOps. We absolutely do expect an expansion in an AI world toward SRE, toward platform engineering, toward developers themselves. We are shifting left in the platform, and our third-gen capabilities in our new platform have the capabilities needed for developers to access the platform and to be able to use it in free trial mode and other elements to incorporate it much, much earlier in the development process. This is going to be a key aspect of us winning in the AI space. Thank you. Our next question comes from the line of Radi Sultan with UBS. Please proceed with your question. Awesome. Yeah, thank you. Just wanted to double-click on the DPS renewal cohorts. I know the renewals are more back half weighted, but I guess, is there any trend you're noticing in those renewal conversations for the three-year DPS renewal customers compared to the one- and two-year annual reset cohorts? I'm just curious how different the upsell opportunity is shaping up to be for the three-year DPS renewals versus the one- and two-year annual reset cohorts. Thanks. Yeah, I'd say there's no real difference in the trend. Again, I'd say the general nature of what you see is that when a customer is in, call it, the first year of their three-year DPS contract, they're more inclined to maybe go on demand if they are exceeding their commitment. As they're in year 2 and year 3, they're more inclined to do an expansion. That behavior has not fundamentally changed. Again, Q1, because it's a light renewal quarter is, I'd say the body of renewals is not substantive enough that there is any change in that trend other than it continues. Our expectation is if that continues and consumption continues to build, that we have a source of upsell opportunity in the back half of the year. As I mentioned, we have a significant amount of ARR coming up for renewal or going through an annual reset in the back half of the year, our expectation is it's a source of expansion opportunity. Thank you. Our final question will come from the line of Eric Heath with KeyBanc Capital Markets. Please proceed with your question. Awesome. Thank you. Rick, Jim, just coming back to logs, I guess one more time. I'm curious to drill in further on where that strength is coming from, whether it's new customers or ramping of existing customers. Also curious to hear maybe how monitoring AI apps might be contributing to the logs consumption figure. Jim, if I could just, housekeeping question here, but BindPlane, is that part of the $200 million consumption figure you guys are citing? Thanks. What I would say simply on logs is it's effectively all of the above. We're seeing traction in lands with logs because I'd say we have a very unique, differentiated set of capabilities. Obviously, the consumption growth that you're seeing is both from new customers and existing customers. We're seeing that cohort class continuing to build from starting maybe smaller with us and continuing to expand their log journey. We continue to have a building number of customers that started smaller, getting bigger. Quite a few million-dollar-plus logs customers. Your housekeeping question on BindPlane. Yes, BindPlane is included in our logs consumption. All right. Well, thank you all for your engagement, ongoing support. As usual, thanks for your questions during the call. We had a very strong Q1. We believe it reinforces our conviction in the path to ARR acceleration for this fiscal year. We are, as you can tell, very enthusiastic about the opportunities ahead. We look forward to connecting with you at upcoming IR events. Thank you. Have a great day. Ladies and gentlemen, thank you so much. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.