Activist investor Starboard Value has taken a significant stake in AI software maker Dynatrace and is calling on the company to accelerate share buybacks and cut costs, according to The Wall Street Journal, which reviewed a draft of a letter from Starboard managing member Peter Feld expected to be delivered to Dynatrace on Tuesday.
According to the draft letter, the firm quietly built its position while holding private discussions with Dynatrace executives over the past several months, ultimately landing among the company's five largest shareholders. The firm believes Dynatrace could return more than $2.5 billion to shareholders over the next three years — well beyond the $1 billion share-repurchase plan Dynatrace announced in February.
In Feld's letter, slowing top-line growth and a lack of investor confidence in any quick turnaround are cited as the primary reasons the stock has lagged. The stock is off more than 15% in 2025, a decline that has come even after Dynatrace, headquartered in Massachusetts, lifted its fiscal 2026 revenue guidance to a range of $2.005 billion to $2.010 billion from its earlier projection of $1.985 billion to $1.995 billion.
On the cost side, Feld's letter points to the sales and marketing budget as a lever for widening margins. Starboard calculates that free cash flow per share could reach above $3.30 — roughly twice the current level — within a three-year window. The letter also states that Dynatrace's board should be open to all paths to maximize shareholder value.
Starboard argues that Dynatrace is well-positioned to benefit from broader corporate adoption of artificial intelligence. Its core product is an AI-driven observability platform designed to give enterprises visibility into and control over their software environments; TD Bank and Air Canada are among the clients listed on its website. Still, Starboard contends its shares trade at a discount to peers in software infrastructure and cybersecurity.
The sector has seen consolidation in recent years. Recent transactions in the space include Palo Alto Networks $PANW' acquisition of Chronosphere, a Dynatrace competitor, for upward of $3 billion, and Cisco $CSCO's $28 billion purchase of Splunk — a company where Starboard had previously taken a position — which closed in late 2023.
After-hours trading saw Dynatrace shares climb 8% on the report. Neither Starboard nor Dynatrace provided comment when contacted, The Journal noted.