Income Taxes |
9 Months Ended |
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Dec. 31, 2025 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Income Taxes The Company computes its interim provision for income taxes by applying the estimated annual effective tax rate to income from operations and adjusts the provision for discrete tax items occurring in the period. The Company’s effective tax rate for the three months ended December 31, 2025 was 52.6% compared to (533.3)% for the three months ended December 31, 2024. The Company’s effective tax rate for the nine months ended December 31, 2025 was 42.6% compared to (164.9)% for the nine months ended December 31, 2024. The increase in the effective tax rate for both the three months ended December 31, 2025 and the nine months ended December 31, 2025 was primarily due to a $320.9 million discrete tax benefit recognized in fiscal 2025 on the IP Transfer (as defined below) of the global economic rights of the Company’s IP to Switzerland. The IP Transfer also impacted fiscal 2026 resulting in an increase to the global intangible low-taxed income (“GILTI”) inclusion, primarily due to an increase in capitalized foreign research and development expenses within GILTI and a decrease to the foreign-derived intangible income deduction. Dynatrace elects to treat GILTI as a period cost for GAAP purposes. During the three months ended December 31, 2024, the Company completed an intra-entity asset transfer of the global economic rights of Dynatrace IP from a wholly-owned U.S. subsidiary to a wholly-owned Swiss subsidiary, more closely aligning the Company’s IP rights with its business operations (the “IP Transfer”). The transaction is taxable in the U.S. through 2044. In Switzerland, the transaction resulted in a step-up of tax-deductible basis in the transferred assets, and accordingly, created a temporary difference where the tax basis exceeded the financial statement basis of such intangible assets, which resulted in the recognition of a tax benefit and related deferred tax asset of $320.9 million. The Company determined the estimated value of the transferred IP based principally on the present value of projected income related to the IP, requiring management to make significant assumptions related to the discount rate and the forecast of future revenues and expenses. The tax-deductible amortization related to the transferred IP rights will be recognized through 2035. The deferred tax asset and the tax benefit were measured based on the enacted tax rates expected to apply in the years the asset is expected to be realized. The Company expects to realize the deferred tax asset resulting from the IP Transfer. On July 4, 2025, the “One Big Beautiful Bill Act” (the “OBBBA”) was enacted into law. The OBBBA contains a broad range of tax reform provisions including immediate expensing of domestic research and development expenditures, the reinstatement of 100% bonus depreciation, and modifications to the international tax framework. The OBBBA has multiple effective dates, with certain provisions effective in fiscal 2026 and other provisions effective in subsequent years. The OBBBA does not have a material impact on fiscal 2026. The Company is evaluating the potential impact of the provisions effective in future years and does not currently anticipate the OBBBA will have a material impact.
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