Datadog DDOG reported fourth-quarter 2024 non-GAAP earnings per share (EPS) of 49 cents, which increased 11.4% from the year-ago quarter and beat the Zacks Consensus Estimate by 13.95%.

The company’s net revenues of $737.73 million rose 25.1% year over year and beat the consensus estimate by 3.67%.

Quarter Details

The company ended the fourth quarter with 30,000 customers, up from 27,300 in the prior-year period.

In the fourth quarter of 2024, Datadog had 3,610 customers with an annual run rate (ARR) of $100,000 or more, which increased 13.2% year over year. These customers generated about 88% of the total ARR.

As of the end of the fourth quarter, 83% of customers used two or more products, which is the same as the year-ago quarter. Additionally, 50% of customers utilized four or more products, up from 47% in the year-ago quarter.

Datadog’s net revenue retention was in the high 110s in the fourth quarter as customers increased their usage and adopted more products.

Operating Details

In the fourth quarter, Datadog’s adjusted gross margin contracted by 170 basis points (bps) on a year-over-year basis to 81.7%.

Research & development expenses gained 29.4% on a year-over-year basis to $211.6 million, driven by increased investments in Datadog’s platform. Research & development, as a percentage of revenues, increased 1,000 bps to 28.7%.

Sales and marketing expenses rose 31.3% year over year to $173.3 million. Sales and marketing expenses, as a percentage of revenues, increased 110 bps to 23.5%.

General & administrative expenses increased 29.6% year over year, reaching $38.7 million in the reported quarter. General & administrative expenses, as a percentage of revenues, increased 20 bps to 5.2%.

Datadog reported a non-GAAP operating income of $179.2 million compared with $166.7 million in the year-ago quarter.

Balance Sheet & Cash Flow

As of Dec. 31, 2024, Datadog had cash, cash equivalents, restricted cash and marketable securities of $4.2 billion compared with $3.2 billion as of Sept. 30, 2024.

Operating cash flow was $265 million in the reported quarter, up from $229 million reported in the previous quarter.

Free cash flow during the quarter was $241 million compared with $204 million in the prior quarter.

Guidance

For the first quarter of 2025, Datadog anticipates revenues between $737 million and $741 million. Non-GAAP EPS is expected in the range of 41-43 cents. Non-GAAP operating income is expected in the band of $162-$166 million.

For 2025, Datadog anticipates revenues between $3.175 billion and $3.195 billion. Non-GAAP EPS is projected between $1.65 and $1.70. Non-GAAP operating income is expected in the range of $655-$675 million.

Zacks Rank & Stocks to Consider

Currently, Datadog carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Computer & Technology sector are Akamai Technologies AKAM, Arista Networks ANET and Bandwidth BAND. While Arista Networks sports a Zacks Rank #1 (Strong Buy), Akamai Technologies and Bandwidth carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arista Networks is scheduled to report its fourth-quarter 2024 result on Feb. 18, while Akamai Technologies and Bandwidth are scheduled to report their respective fourth-quarter 2024 results on Feb. 20.

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