• Revenue: $738 million, up 25% year over year.
• Free Cash Flow: $241 million with a free cash flow margin of 33%.
• Customer Growth: Approximately 30,000 customers, up from about 27,300 a year ago.
• Large Customers: 3,610 customers with an ARR of $100,000 or more, up from 3,190 a year ago.
• ARR Milestone: Total ARR exceeds $3 billion.
• Infrastructure Monitoring ARR: Over $1.25 billion.
• Log Management ARR: Over $750 million.
• APM Products ARR: Exceeds $750 million.
• Gross Margin: 81.7%.
• Operating Income: $179 million with a 24% operating margin.
• Cash and Equivalents: $4.2 billion.
• Billings: $908 million, up 26% year over year.
• RPO: $2.27 billion, up 24% year over year.
• Net Revenue Retention: High 110s percentage.
• Gross Revenue Retention: Stable in the mid to high 90s.

• Warning! GuruFocus has detected 3 Warning Sign with DDOG.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Datadog Inc (NASDAQ:DDOG) reported a strong Q4 2024 with revenue of $738 million, a 25% increase year over year, exceeding the high end of their guidance range.
• The company achieved significant customer growth, ending the year with approximately 30,000 customers, up from 27,300 the previous year.
• Datadog Inc (NASDAQ:DDOG) saw a record in bookings for Q4, marking their first-ever quarter with over $1 billion in bookings.
• The company continues to expand its platform adoption, with 83% of customers using two or more products and 50% using four or more products.
• Datadog Inc (NASDAQ:DDOG) achieved a milestone with their total ARR exceeding $3 billion, driven by growth in infrastructure monitoring, log management, and APM products.

Negative Points

• Despite strong revenue growth, Datadog Inc (NASDAQ:DDOG) experienced some optimization and volume discounts related to contract renewals in Q4.
• The company's operating margin decreased to 24% in Q4 from 28% in the year-ago quarter, indicating increased operational expenses.
• Datadog Inc (NASDAQ:DDOG) noted that some customers remain cost-conscious, impacting their cloud usage growth.
• The company faces challenges in converting bookings into immediate revenue growth, as bookings do not translate directly into revenue.
• There is potential volatility in revenue growth due to the backdrop of long-term volume growth and customer renewals on different terms.

Q & A Highlights

Q: How is Datadog feeling about the book of business for AI native customers, and are there any changes in AI usage and commitments? A: Olivier Pomel, CEO, explained that the developments in AI usage and commitments were as expected. They saw renewals with higher commitments and better terms, alongside usage optimization. While some large customers might consider handling observability in-house, it's often not economically rational unless certain conditions are met. The AI cohort remains stable and is growing, with broader AI adoption being the key interest for Datadog.

Q: Did the timing of the holidays or AI capacity constraints impact Datadog's performance in December? A: Olivier Pomel noted that while it's hard to pinpoint the exact impact of capacity constraints, Datadog is growing faster than cloud providers, even without monetizing GPU sales. The company is outgrowing the non-AI part of cloud providers' businesses, driven by digital and cloud transformation trends.

Q: What are Datadog's plans for sales and marketing investments in 2025? A: Olivier Pomel stated that Datadog plans to grow sales capacity, focusing on segments with potential for acceleration. They are pushing products like Flex Logs and OnCall, and expanding sales capacity, which was slower in the first half of the previous year but accelerated in the second half. The impact of these investments is expected in one to two years.

Q: What is driving the renewed interest in logs and cloud SIM, and how is Datadog positioned in this space? A: Olivier Pomel highlighted that new technologies and economics make data retention more cost-effective, and modernizing the stack for cloud-first environments is appealing. There is also demand for unifying operational and security aspects. Datadog sees opportunities in Flex Logs and cloud SIM, driven by these factors.

Q: How does Datadog view the potential for infrastructure monitoring growth, and what triggers could accelerate it? A: Olivier Pomel mentioned that new use cases related to infrastructure, such as GPU management, could drive growth. There are also opportunities in IoT fleets and on-prem environments. Despite being a leader in infrastructure monitoring, Datadog still has a small market share, and efforts are focused on landing the right customers and expanding within their environments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.