Shares in Dynatrace Inc. surged in regular trading today after the software intelligence platform provider delivered a strong beat and outlook in its latest earnings report.

For its third fiscal quarter that ended Dec. 31, Dynatrace reported earnings before costs such as stock compensation of 25 cents a share, up from 18 cents in the same quarter of 2021, on revenue of $297.45 million, up from $240.76 million. Analysts had been expecting adjusted earnings of 21 cents a share and revenue of $284.71 million.

Annual recurring revenue in the quarter rose 29% from a year ago, to $1.163 billion, driven by subscription revenue, which also rose 29%, to $279 million. Adjusted operating income came in at $81 million.

Highlights in the quarter included Dynatrace working closely with 10 strategic global system integrators to help customers digitally transform their businesses and reduce cloud complexity. The company also expanded the Dynatrace Grail data lakehouse to power business analytics to deliver accurate, reliable and cost-effective automation and analytics covering a wide range of business use cases.

“The secular tailwinds of digital transformation and particularly cloud modernization are driving an explosion in data, making observability increasingly mandatory across all industries as companies look to realize greater value from their IT spend,” Rick McConnell, chief executive officer of Dynatrace, said in a statement. “We remain focused on driving innovation to meet customers’ evolving needs, managing the business prudently, and investing thoughtfully in strategic priorities.”

A solid earnings beat was not the only surprise in Dynatrace’s quarterly report, with the company also predicting a better-that-expected outlook amid a sea of companies cutting staff and slashing their outlook.

For its fiscal fourth quarter of 2023, Dynatrace predicts adjusted earnings of 22 to 23 cents a share on revenue of $304 million to $307 million. Analysts had been expecting $292 million in revenue.

In an interview with Barrons, McConnell said that though the company is not immune from the broader macroeconomic forces, Dynatrace is benefiting from observability software going “from option to mandatory.” McConnell added that the increasing complexity of managing corporate information technology infrastructure is working in the company’s favor, noting that “we provide situational awareness as to how the IT ecosystem is running at all times.”

Investors liked the numbers and outlook. Dynatrace shares closed regular trading up 16%, to $44.54.

Image: Dynatrace