Dynatrace's (DT) planned acquisition of Arize has the potential to accelerate organic growth and contribute to margins over time, RBC Capital Markets said in a note emailed Friday.

Analysts said the transaction could accelerate Dynatrace's expansion into the AI observability market, adding to the company's organic investments in the past 18 months. While integration risk remains, the acquisition addresses specific needs in the company's roadmap such as large language model evaluation, model drift, and hallucination detection, analysts added.

Arize complements Dynatrace's portfolio as it improves access to AI-native firms, the open source community, and developers, the investment firm said. Management also noted cross-selling and upselling opportunities, including offering Arize products to its enterprise base and Dynatrace's core observability platform to Arize customers, according to the note.

RBC Capital Markets maintained its outperform rating on the stock, with a $59 price target.

Shares of Dynatrace were down 1.9% in Friday trading.

Price: 49.78, Change: -0.97, Percent Change: -1.91