Datadog tops fourth quarter growth expectations

Datadog Inc. as soon as once more topped development expectations within the fourth quarter after logging a 44% year-over-year income enhance. 

The New York-based observability supplier reported as we speak that its gross sales reached $469 million within the final three months of 2022, surpassing the Zacks consensus estimate by about 5%. Datadog additionally topped analyst projections within the earlier quarter. 

“We’re happy with our fourth quarter efficiency, as we delivered extra worth to extra clients throughout our broadening platform, whereas driving sturdy profitability and money era,” stated Datadog co-founder and Chief Government Officer Olivier Pomel. “We’re pleased with our sturdy execution in fiscal 12 months 2022, with 63% year-over-year income development, $418 million in working money circulate, and $354 million in free money circulate.”

Datadog supplies a software program platform of the identical identify that helps corporations detect uncommon developments of their expertise environments. Datadog can detect sluggish community connections, utility outages and hacking makes an attempt. It additionally supplies a set of testing instruments that builders can use to scan their software program for reliability points.

Previous to its preliminary public providing in 2019, Datadog targeted totally on serving to corporations detect technical malfunctions of their purposes and cloud infrastructure. The software program maker has since expanded its focus to a number of adjoining markets.

As a part of its namesake platform, Datadog presents instruments that assist corporations detect hacking makes an attempt focusing on their cloud environments. Datadog additionally spots vulnerabilities that could possibly be utilized by hackers in future cyberattacks. The corporate’s platform can scan a cloud surroundings for insecure configuration settings, prioritize them primarily based on severity and supply technical information about every challenge.

For software program groups, Datadog presents utility testing instruments alongside its core outage and cyberattack detection options. The instruments allow builders to ship simulated consumer requests to an utility and measure how nicely it processes them. Errors are logged to facilitate troubleshooting. 

Datadog’s efforts to increase the breadth of its platform have emerged as a core pillar of its income development technique. New Datadog clients usually purchase one or two elements of its platform at first, then buy extra modules over time. That results in elevated spending. 

In an investor presentation final November, Datadog detailed that 80% of consumers use no less than two of its merchandise. Furthermore, 40% have bought 4 or extra merchandise. In late 2020, solely about one fifth of Datadog clients used 4 or extra of its instruments. 

Datadog reported as we speak that the variety of clients spending greater than $1 million yearly on  its software program reached 317 within the fourth quarter, up from 216 a 12 months earlier. The variety of clients spending no less than $100,000 yearly grew 38% year-over-year, to 2,780.

Datadog’s steadily increasing characteristic set displays its rising funding in product improvement. In the course of the November investor presentation, the corporate detailed that its analysis and engineering finances grew from lower than $200 million in 2020 to simply over $400 million in the course of the 12 months ended October 2022.

Datadog makes occasional startup acquisitions to enrich its in-house product improvement efforts. Within the fourth quarter, the corporate bought Cloudcraft, the developer of a software program device for monitoring cloud environments. The startup’s device helps directors monitor how the varied infrastructure sources and purposes in a cloud surroundings work together with each other.

Regardless of its elevated analysis and engineering spending, Datadog topped fourth quarter earnings expectations. The corporate delivered an adjusted working revenue of $83.1 million within the three months ended Dec. 31. That translated into earnings of 26 cents per share, considerably greater than the 19 cents per share the Zacks consensus estimate projected.

Nonetheless, Datadog’s shares over 7% of their worth in as we speak’s buying and selling session. One doubtless contributor to the decline was that the corporate’s first quarter steering fell wanting expectations. The corporate is projecting revenues of $466 million to $470 million, whereas analysts anticipated $484 million.

For the total 2023 fiscal 12 months, Datadog is projecting gross sales of $2.07 billion to $2.09 billion. The corporate expects to earn between $300 million and $320 million in adjusted working revenue.

Picture: Datadog