Dynatrace, the Boston software observability company listed on the New York Stock Exchange, agreed on August 13, 2026 to acquire Arize AI, a San Francisco startup whose platform evaluates and monitors AI models and agents. The price is $915 million, subject to customary adjustments.
About $815 million will be paid in cash, which Dynatrace plans to fund from cash on hand, its existing credit facility, or both. The remainder takes the form of replacement equity awards for Arize employees who join Dynatrace. The companies expect the deal to close late in Dynatrace's current fiscal quarter or early in its third quarter, after regulatory reviews and other customary conditions.
Arize's co-founders, chief executive Jason Lopatecki and Aparna Dhinakaran, will both join Dynatrace at closing. Lopatecki will continue to run the Arize team and will report directly to Dynatrace chief executive Rick McConnell.
What Arize built
Arize sells a platform for AI observability and evaluation of large language models. Teams use it to spot problems in AI systems as they appear, trace why they happened and improve results, for both traditional machine learning models and generative AI applications. Dynatrace said the platform is used to catch hallucinations, measure the quality of model output and keep checking how AI behaves after release.
The company also has a large open-source following. Its open-source tool, Phoenix, launched in 2023 and had more than two million monthly downloads by early 2025, according to Arize. Dynatrace said Arize works across all major AI frameworks and model providers, and that it is used by Fortune 500 companies as well as AI-native startups. In 2022, TechCrunch listed customers including Uber, Spotify, eBay, Etsy, Instacart and Procter & Gamble.
“We founded Arize because AI teams needed a way to know their agents were actually working correctly, not just running.”
Why Dynatrace is buying
Dynatrace argues that AI software delivery is split in two. Engineers who build AI features test model and agent behaviour in one set of tools, while the teams that run the applications and infrastructure underneath use different ones. When an answer degrades or a customer transaction fails, the cause could be anywhere from the prompt to the hardware, and the two groups have no shared view. Dynatrace says combining Arize's evaluation tools with its own monitoring of applications, GPU use and infrastructure will cover an AI application from development through production.
The company described AI observability as one of the fastest-growing parts of the observability market and cited projections that it will exceed $10 billion by 2030. McConnell said the deal speeds up Dynatrace's roadmap, extends its reach with developers and brings in an AI-focused team. Because many AI tooling decisions now start with developers, Dynatrace expects Arize's standing in the open-source community to open doors for its enterprise products.
Dynatrace expects the deal to add about 200 basis points to its annual recurring revenue growth in fiscal 2027 and to reduce its non-GAAP operating margin by about 175 basis points that year, with margins expanding again from fiscal 2028. It said the purchase will not materially affect its second-quarter guidance or its share buyback.
The founders and the funding
Lopatecki previously co-founded TubeMogul, a video advertising software company that Adobe bought for about $550 million, and Dhinakaran worked at TubeMogul as a data scientist before building machine learning infrastructure at Uber, according to TechCrunch. Arize gives 2020 as its founding year; TechCrunch reported 2019.
In September 2022, Arize raised a $38 million Series B led by TCV with Battery Ventures and Foundation Capital, bringing its total to $62 million. At that point it had about 50 employees. In February 2025 it raised a $70 million Series C led by Adams Street Partners, with new investors M12, Sinewave Ventures, OMERS Ventures, Datadog, PagerDuty, Industry Ventures and Archerman Capital, and with Foundation Capital, Battery Ventures, TCV and Swift VC returning. Together those rounds put its funding at about $132 million, which means the purchase price is roughly seven times what investors put in.
Qatalyst Partners was Arize's exclusive financial adviser and DLA Piper its legal counsel. J.P. Morgan Securities advised Dynatrace, with Goodwin Procter as its lawyers.
