Datadog Inc ((DDOG)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call for Datadog Inc. highlighted a strong start to 2025, characterized by significant revenue growth, customer expansion, and successful product launches, particularly in AI integration and product adoption. The company also made strategic acquisitions to bolster its portfolio. Despite some concerns over a decline in gross margin and potential volatility in AI cohort revenue, the overall sentiment was positive, indicating robust performance and a promising outlook.
Strong Revenue Growth
Datadog reported impressive revenue figures for Q1 2025, reaching $762 million. This marks a 25% increase compared to the previous year and surpasses the high end of their guidance range. Such growth underscores the company’s strong market position and effective business strategies.
Customer Expansion
The company saw a notable increase in its customer base, ending Q1 with approximately 30,500 customers, up from about 28,000 a year ago. Additionally, the number of customers with an Annual Recurring Revenue (ARR) of $100,000 or more rose to 3,770 from 3,340, reflecting successful customer acquisition and retention efforts.
Increase in Product Adoption
Datadog experienced a rise in product adoption, with 83% of customers using two or more products, up from 82%. Furthermore, 51% of customers were using four or more products, and 28% were using six or more products, indicating a deepening engagement with Datadog’s offerings.
Successful Product Launches
The company celebrated successful product launches, with Flex Logs surpassing $50 million in ARR within six quarters. Database Monitoring is also nearing the $50 million ARR mark, growing 60% year-over-year, showcasing Datadog’s innovation and market responsiveness.
Strong Bookings and Retention
Datadog reported a significant increase in bookings for new logos, which grew by over 70% year-over-year. The company secured 11 deals with a Total Contract Value (TCV) of $10 million or more, while gross revenue retention remained stable in the mid to high-90s.
AI Integration Growth
AI integration has been a key focus, with over 4,000 customers using one or more Datadog AI integrations, doubling from the previous year. This growth highlights the company’s commitment to leveraging AI to enhance its product offerings.
Strategic Acquisitions
Datadog made strategic acquisitions of Eppo and Metaplane to enhance its product analytics and data observability capabilities, demonstrating a proactive approach to expanding its technological and market capabilities.
Gross Margin Decline
Despite the positive developments, Datadog faced a decline in gross margin, which fell to 80.3% from 83.3% a year ago. This was attributed to higher cloud hosting costs and investments in new products.
AI Cohort Volatility
There is potential volatility in revenue growth from AI native customers, who represented about 8.5% of Q1 ARR, up from 6% last quarter. This indicates a growing but potentially unstable revenue stream from AI-focused clients.
Enterprise Usage Volatility
The company experienced slight volatility in year-over-year usage growth with enterprise customers, which was lower than the previous quarter. This reflects some unpredictability in enterprise customer engagement.
Forward-Looking Guidance
Looking ahead, Datadog provided guidance for Q2 and the full fiscal year 2025. For Q2, revenue is expected to range between $787 million and $791 million, with a year-over-year growth of 22% to 23%. The non-GAAP operating income is projected to be between $148 million and $152 million, implying a 19% operating margin. For the full year, revenue is anticipated to be between $3.215 billion and $3.235 billion, indicating a growth rate of 20% to 21%. The guidance reflects considerations of cloud cost efficiencies and recent acquisitions, maintaining a focus on long-term growth.
In conclusion, Datadog’s Q1 2025 earnings call painted a picture of a company on a strong growth trajectory, with impressive revenue figures, expanding customer base, and successful product innovations. While there are challenges such as margin pressures and revenue volatility, the overall sentiment remains positive, with a clear focus on sustaining growth and expanding market presence.