Shares of Dynatrace fell after the IT infrastructure software company cut its fiscal-year guidance for constant-currency annual recurring revenue.
The stock fell more than 7% to $56.20 on Thursday. Shares are still up almost 28% over the past 12 months.
The “observability” software company’s trimmed ARR guidance reflects a shift in mix of new contracts, Chief Executive Rick McConnell said in an interview. The tech company is getting more interest from big companies looking to consolidate various tech services under Dynatrace, he said, leading to bigger contracts that take longer to close.
“More tools lead to more costs with less efficiency and less productivity,” he said. Customers are looking to tech vendors in a bid to trim costs.
That trend is driving more deals valued at $1 million or more, which take longer to close and can be a short-term challenge to ARR. For the fiscal year, Dynatrace is now targeting 18% to 19% constant-currency ARR growth, down from 19% to 20%.
The company’s third-quarter sales and adjusted earnings both topped Wall Street analysts’ expectations. Dynatrace also raised its fiscal-year sales and adjusted earnings outlook.