Dynatrace's (DT) fiscal Q3 results outperformance is a major step in the right direction, with strong Q4 guidance likely viewed positively, Wedbush Securities said in a Wednesday note.

"Despite overall software fears, we believe DT is well-positioned for AI to be a tailwind for the company, not a headwind," it said.

"Enterprises are looking to find the balance between increasing AI adoption while managing risks of runaway costs associated

with increasing adoption of LLMs leading to an acceleration of use cases," the report added.

Among its Q3 beats, the note pointed to its annual recurring revenue growth of 20%, including about $75 million in net new annual recurring revenue.

The growth stemmed from the database performance monitoring segment, as well as new products, which penetrated both existing and new customers, the report said.

Wedbush kept its outperform rating while lowering its price target to $55 from $67 to reflect a lower multiple.

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