Stock Story -
Cloud monitoring software company Datadog (NASDAQ:DDOG (NASDAQ:DDOG)) reported Q2 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 26.7% year on year to $645.3 million. The company expects next quarter's revenue to be around $662 million, in line with analysts' estimates. It made a non-GAAP profit of $0.43 per share, improving from its profit of $0.29 per share in the same quarter last year.
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Datadog (DDOG) Q2 CY2024 Highlights:
- Revenue: $645.3 million vs analyst estimates of $625.1 million (3.2% beat)
- Adjusted Operating Income: $157.5 million vs analyst estimates of $137.4 million (14.7% beat)
- EPS (non-GAAP): $0.43 vs analyst estimates of $0.36 (20.5% beat)
- Revenue Guidance for Q3 CY2024 is $662 million at the midpoint, roughly in line with what analysts were expecting
- The company slightly lifted its revenue guidance for the full year from $2.6 billion to $2.63 billion at the midpoint
- Gross Margin (GAAP): 80.9%, in line with the same quarter last year
- Free Cash Flow of $143.8 million, down 23% from the previous quarter
- Customers: 3,390 customers paying more than $100,000 annually
- Billings: $667.2 million at quarter end, up 28.4% year on year
- Market Capitalization: $36.14 billion
Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ:DDOG) is a software-as-a-service platform that makes it easier to monitor cloud infrastructure and applications.
Cloud MonitoringSoftware is eating the world, increasing organizations’ reliance on digital-only solutions. As more workloads and applications move to the cloud, the reliability of the underlying cloud infrastructure becomes ever more critical and ever more complex. To solve this challenge, companies and their engineering teams have turned to a range of cloud monitoring tools that provide them with the visibility to troubleshoot issues in real-time.
Sales GrowthAs you can see below, Datadog's 46.3% annualized revenue growth over the last three years has been incredible, and its sales came in at $645.3 million this quarter.
This quarter, Datadog's quarterly revenue was once again up a very solid 26.7% year on year. On top of that, its revenue increased $34.03 million quarter on quarter, a very strong improvement from the $21.6 million increase in Q1 CY2024. This is a sign of acceleration of growth and great to see.
Next quarter's guidance suggests that Datadog is expecting revenue to grow 20.9% year on year to $662 million, slowing down from the 25.4% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 20.4% over the next 12 months before the earnings results announcement.
Large Customers Growth This quarter, Datadog reported 3,390 enterprise customers paying more than $100,000 annually, an increase of 50 from the previous quarter. That's a bit fewer contract wins than last quarter and quite a bit below what we've typically observed over the past four quarters, suggesting that its sales momentum with large customers is slowing.
Key Takeaways from Datadog's Q2 Results We were impressed by how strongly Datadog blew past analysts' billings expectations this quarter. We were also glad its revenue outperformed Wall Street's estimates. Revenue guidance for the full year was lifted, which is a positive. Zooming out, we think this was a solid quarter. The stock traded up 2.6% to $110.98 immediately following the results.
