Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Datadog Inc (DDOG, Financial) reported a revenue of $645 million for Q2 2024, marking a 27% increase year-over-year, surpassing the high end of their guidance range.
- The company saw strong customer growth, ending the quarter with approximately 28,700 customers, up from about 26,100 a year ago.
- Datadog Inc (DDOG) continues to expand its platform adoption, with 83% of customers using two or more products, and 49% using four or more products.
- The company announced several new products and features at their DASH conference, including LLM Observability and Bits AI, enhancing their AI capabilities.
- Datadog Inc (DDOG) achieved a free cash flow of $144 million with a free cash flow margin of 22%, indicating strong financial health.
Negative Points
- Despite the revenue growth, the sequential revenue growth for Q2 was the lowest in recent years, indicating potential challenges in maintaining momentum.
- Gross margin slightly decreased to 82.1% from 83.3% in the previous quarter, suggesting increased costs or pricing pressures.
- The company's operating margin decreased to 24% from 27% in the previous quarter, reflecting higher operating expenses.
- There is a noted disparity in growth between enterprise and SMB segments, with SMB growth being more stable but not accelerating.
- Datadog Inc (DDOG) faces ongoing competition in the observability market, with no significant changes in competitive dynamics reported.
Q & A Highlights
Q: Can you provide an assessment of the demand environment and usage trends across different markets?
A: David Obstler, CFO: We experienced strength in our enterprise segment and stability in our SMB segment throughout the quarter. Recent trends towards the end of the quarter and into July have been similar, with higher usage growth than in the comparable periods last year.
Q: Has there been any impact from the Crowdstrike outage on Datadog, and how has it affected customer conversations?
A: Olivier Pomel, CEO: The Crowdstrike incident was very visible, but in the grand scheme of observability, it's unremarkable. We deal with similar issues daily, helping customers prevent and remediate such disruptions quickly. The incident highlighted the value we provide in observability.
Q: How do you view the opportunity in the logs market, and has there been a change in the market dynamics?
A: Olivier Pomel, CEO: We see more opportunity in the future, which is why we're investing heavily in scaling and enhancing our log capabilities. Our new Log Workspace feature is particularly well-received by customers who have used other platforms for complex log data processing.
Q: Can you explain how the spending pattern changes as AI models move from training to inferencing, and how does this affect Datadog?
A: Olivier Pomel, CEO: It's still early, but we see customers moving AI applications into production. The growth of AI-native companies is a good proxy for future demand, as they provide AI functionality in production environments.
Q: What are the trends in usage growth between digital natives and enterprises, and how is optimization activity trending?
A: David Obstler, CFO: Usage growth has been stronger in enterprises, with stable growth in SMBs. Digital natives, largely SMB and midmarket, show stable growth, while AI natives are inflecting positively. Enterprises are balancing new deployments with optimization.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
