Datadog, Inc. Q1 FY2025 earnings call

• Q1 financial performance: Revenue $762M, +25% YOY, 30,500 customers, 3,770 customers with ARR >$100k (88% of ARR), free cash flow $244M (32% margin). - Platform adoption: 83% of customers using 2+ products, 51% using 4+ products, 28% using 6+ products, 13% using 8+ products. - Business drivers: Usage growth from existing customers in line with expectations, strong bookings with new logos and larger deals, low churn. - R&D: Over 4,000 customers using Datadog AI integrations (doubled YOY), LLM observability growing, investments in AI initiatives. - Security: Comprehensive security products serving over 7,500 customers, over half Fortune 500 using security products. - Acquisitions: Acquired Eppo (feature management) and Metaplane (data observability). - Sales and marketing: Strong new logo wins and customer expansions, including deals with large U.S. car manufacturers, Latin American bank, etc.

Revenue for Q1 was $762 million, a 25% year-over-year increase. There were about 30,500 customers, with 3,770 customers having an ARR of $100,000 or more, contributing 88% of ARR. Flex Logs has exceeded $50 million in ARR, achieving this in six quarters. Database Monitoring is approaching $50 million in ARR and growing 60% year-over-year, with over 5,000 customers using it.

• Second quarter: Revenue expected $787M-$791M (22%-23% YOY), non-GAAP operating income $148M-$152M (19% margin), DASH conference cost ~$13M reflected. Non-GAAP net income per share $0.40-$0.42. - Fiscal year 2025: Revenue expected $3.215B-$3.235B (20%-21% growth), non-GAAP operating income $625M-$645M (19%-20% margin), raised revenue guidance due to Q1 results and Q2 visibility, gross margin impact addressed by cost efficiencies.

• Market uncertainties and economic conditions could affect results. - Concentration of revenue in AI native cohort may lead to volatility. - Cloud hosting costs rising more than expected in Q1, impacting gross margins.

Q: Mark Murphy asked about AI-generated code and its impact on Datadog.

A: Olivier Pomel said AI-written code shifts value to observing and understanding it in production, Datadog's investments build towards this.

Q: Sanjit Singh asked about cloud migration trends.

A: Olivier Pomel said cloud migration is steady, a prerequisite for AI adoption.

Q: Raimo Lenschow asked about guidance and gross margin.

A: David Obstler said guidance is based on recent trends with conservatism, gross margin impact due to investment and cloud costs, with plans to optimize.

Q: Kash Rangan asked about AI product perspective and investment benefits.

A: Olivier Pomel said more product to build in AI, David Obstler said investments show return with productivity gains.

Q: Jake Roberge asked about AI native cohort renewals.

A: Olivier Pomel said healthy renewals but potential volatility due to concentration.

Q: Gregg Moskowitz asked about AI native cohort ARR and sales productivity.

A: Olivier Pomel said concentration exists, David Obstler said sales productivity similar to expectations.

Q: Brent Thill asked about sales capacity ramp.

A: David Obstler said continuing sales capacity ramp with expected productivity.

Q: Kirk Materne asked about AI efficiency.

A: David Obstler and Olivier Pomel said AI used for productivity, long-term efficiency gains expected.

Q: Howard Ma asked about Enterprise segment consumption vs new logo ARR.

A: Olivier Pomel and David Obstler said no contradiction, volatility in usage but consistent growth.

Q: Matthew Hedberg asked about AI native cohort and Eppo/Metaplane impact.

A: Olivier Pomel said impact small, David Obstler said revenue guidance not including immediate impact.

Q: Brad Reback asked about bring your own cloud.

A: Olivier Pomel said addressing on-prem and bring your own cloud opportunities.

Q: Andrew Sherman asked about net-new adds.

A: Olivier Pomel said drivers include new use cases, products, share gains, and boomerang customers returning