Datadog’s first quarter performance reflected strong customer demand for its cloud monitoring and security platform, as well as continued expansion within enterprise accounts. CEO Olivier Pomel highlighted notable momentum in new customer bookings, with dollar bookings for new logos rising over 70% year-over-year and a marked increase in large enterprise deals. Pomel also emphasized the rapid adoption of newer offerings like Flex Logs and Database Monitoring, both of which have surpassed key adoption milestones, suggesting that Datadog’s focus on broadening its product suite is resonating with customers seeking consolidated observability solutions.
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Datadog (DDOG) Q1 CY2025 Highlights:
- Revenue: $761.6 million vs analyst estimates of $741 million (24.6% year-on-year growth, 2.8% beat)
- Adjusted EPS: $0.46 vs analyst estimates of $0.42 (8.4% beat)
- Adjusted Operating Income: $166.5 million vs analyst estimates of $165.1 million (21.9% margin, 0.8% beat)
- The company lifted its revenue guidance for the full year to $3.23 billion at the midpoint from $3.19 billion, a 1.3% increase
- Management raised its full-year Adjusted EPS guidance to $1.69 at the midpoint, a 2.4% increase
- Operating Margin: -1.6%, down from 2% in the same quarter last year
- Customers: 3,770 customers paying more than $100,000 annually
- Annual Recurring Revenue: $3.20 billion at quarter end, up 24.6% year on year
- Billings: $747.7 million at quarter end, up 21% year on year
- Market Capitalization: $53.58 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Datadog’s Q1 Earnings Call
- Mark Murphy (J.P. Morgan): Asked about the implications of AI-written code for Datadog’s business model. CEO Olivier Pomel explained that as code creation becomes more automated, the need for robust monitoring and validation increases, shifting value to observability.
- Sanjit Singh (Morgan Stanley): Inquired about trends in cloud migration and the opportunity in data observability. Pomel described steady demand for cloud migration and emphasized that data observability is becoming a key enabler for AI workloads, especially with the integration of Metaplane.
- Raimo Lenschow (Barclays): Sought clarity on the rationale for raising revenue guidance and the factors affecting gross margin guidance. CFO David Obstler attributed the higher forecast to strong Q1 trends and bookings, but noted that increased cloud hosting costs and product investments caused margin pressures.
- Kash Rangan (Goldman Sachs): Questioned the financial impact and expected returns from stepped-up research, development, and sales investments. Obstler stated that R&D investments typically take two to three years to fully realize, but recent successes in Flex Logs and Database Monitoring validate the approach.
- Jake Roberge (William Blair): Asked about customer trends in the AI-native cohort and the competitive landscape in log management. Pomel highlighted continued growth but cautioned about potential volatility due to revenue concentration, while also noting opportunities to displace incumbents through Flex Logs.
Catalysts in Upcoming Quarters
In future quarters, our analysts will be closely tracking (1) the pace of customer adoption for new AI observability and data monitoring solutions, (2) Datadog’s ability to maintain and expand large enterprise and AI-native customer relationships, and (3) the impact of ongoing investments in sales and R&D on both top-line growth and operating margins. The integration of recent acquisitions and updates expected at the DASH user conference will also be key metrics for execution.
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