Dynatrace (DT) reported another quarter of strong subscription revenue growth in its fiscal Q4, increasing 20% year over year, highlighting stable demand heading into fiscal 2026, Morgan Stanley said in a report Thursday.

The company also posted $9 million in on-demand consumption revenue in its fiscal Q4, up from $7 million in the prior quarter, as its Dynatrace Platform Subscription model continued gaining traction. DPS now accounts for 40% of the customer base and 60% of annual recurring revenue, the report said.

Despite the robust subscription performance, overall ARR growth slowed for the third consecutive quarter to 17% year-over-year, with net-new ARR falling 12% YoY. The net retention rate ticked down slightly to 110% from 111%, although management noted the dip was marginal and would have improved if deferred ARR was included, Morgan Stanley said.

Looking forward to fiscal 2026, management provided a cautious forecast of 13% to 14% constant currency ARR growth and 14% to 15% constant currency subscription revenue growth -- somewhat lower than what investors anticipated but considered sensible given the uncertain economic environment, the report said

While management emphasized pipeline growth of 45% entering 2026, the Morgan Stanley analysts remained cautious, maintaining an equal-weight rating and raising their price target to $55 from $50, as they seek more confidence in Dynatrace's ability to consistently deliver 20% subscription revenue growth.

Shares of Dynatrace were down 0.7% in recent Thursday trading.

Price: 52.90, Change: -0.60, Percent Change: -1.12