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01/10 05:58
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary indicates strong financial performance with 23% YoY growth, stable operating margins, and promising guidance. Product development and AI integration are progressing well, with positive market strategies and security growth. The Q&A session reinforced optimism in AI adoption and product innovation. Despite some uncertainties in net retention rates, the overall sentiment is positive. The lack of market cap data limits precise prediction, but given the strong performance and guidance, the stock price is likely to see a positive movement in the next two weeks.
Revenue $886 million, an increase of 28% year-over-year. The growth was driven by broad-based demand, strong new logo bookings, and usage growth of existing customers.
Customer Count Approximately 32,000 customers, up from about 29,200 a year ago. This growth reflects the company's ability to attract and retain customers.
High-Value Customers 4,060 customers with an ARR of $100,000 or more, up from 3,490 a year ago. These customers generated about 89% of ARR, indicating strong engagement from high-value clients.
Free Cash Flow $214 million with a free cash flow margin of 24%. This reflects efficient operations and strong cash generation.
Customer Product Adoption 84% of customers using 2 or more products (up from 83% a year ago), 54% using 4 or more products (up from 49%), 31% using 6 or more products (up from 26%), and 16% using 8 or more products (up from 12%). This indicates increasing product adoption and cross-selling success.
Digital Experience Products ARR Exceeds $300 million. This includes rapid adoption of product analytics by more than 1,000 customers, showcasing the value of these offerings.
Security ARR Growth Mid-50s percentage year-over-year in Q3, up from mid-40s last quarter. This growth is driven by strong adoption of Cloud SIEM and other security products.
Net Revenue Retention 120%, similar to last quarter. This highlights strong customer retention and expansion.
Gross Margin 81.2%, compared to 80.9% last quarter and 81.1% a year ago. This reflects stable and efficient cost management.
Operating Income $207 million with a 23% operating margin, compared to 20% last quarter and 25% a year ago. This indicates strong profitability.
Billings $893 million, up 30% year-over-year. This reflects strong bookings and customer demand.
Remaining Performance Obligations (RPO) $2.79 billion, up 53% year-over-year. This indicates strong future revenue visibility.
Digital Experience Products: These products, including Real User Monitoring (RUM), synthetics, and product analytics, have exceeded $300 million in ARR. Product analytics has been adopted by over 1,000 customers.
Security Suite: Security ARR growth was in the mid-50% year-over-year in Q3, up from mid-40% last quarter. Cloud SIEM is being included in larger deals, and there is fast uptake of good security and cloud security products.
AI Innovations: High customer interest in Bits AI agents, with thousands onboarded for preview access. LLM observability tools have seen adoption, with the number of LLM spans sent to Datadog quadrupling. MCP server adoption is growing, integrating Datadog with AI agents like OpenAI and GitHub Copilot.
Customer Growth: Datadog ended Q3 with 32,000 customers, up from 29,200 a year ago. Customers with ARR of $100,000 or more increased to 4,060, generating 89% of ARR.
New Customer Contribution: New customer bookings and revenue contribution increased. New logo annualized bookings more than doubled year-over-year, with enterprise customers driving growth.
AI Native Customers: AI native customers represented 12% of revenue in Q3, up from 11% last quarter and 6% a year ago. Over 500 AI native companies are customers, with 15 spending more than $1 million annually.
Revenue and Financial Performance: Q3 revenue was $886 million, up 28% year-over-year. Free cash flow was $214 million with a margin of 24%. Gross margin was 81.2%.
Customer Retention: Gross revenue retention remained in the mid- to high 90s, and net revenue retention was 120%.
Operational Efficiency: Cloud efficiency projects contributed to maintaining gross margins above 81%.
AI and Cloud Market Positioning: Datadog is advancing in AI and cloud markets, building AI observability products and integrating AI into its platform. The company is targeting the growing trillion-dollar market opportunity in cloud and AI.
Enterprise Focus: Datadog is focusing on enterprise customers, with significant 7-figure deals signed across industries like telecom, financial services, and technology hardware.
Integration Expansion: Datadog now supports over 1,000 integrations, enabling customers to connect disparate data sources for deeper analysis.
Market Conditions: Potential risks associated with economic uncertainties and market conditions that could impact customer spending and growth.
Competitive Pressures: Challenges in maintaining market leadership amidst increasing competition, especially in AI and cloud observability sectors.
Regulatory Hurdles: Potential risks related to compliance with evolving regulations in different markets.
Supply Chain Disruptions: No explicit mention of supply chain disruptions in the transcript.
Economic Uncertainties: Economic uncertainties could impact customer budgets and spending patterns, affecting revenue growth.
Strategic Execution Risks: Risks associated with the execution of ambitious AI roadmaps and integration of new technologies into customer workflows.
Revenue Expectations: For Q4 2025, revenue is expected to be in the range of $912 million to $916 million, representing 24% year-over-year growth. For the full fiscal year 2025, revenue is projected to be between $3.386 billion and $3.390 billion, reflecting 26% year-over-year growth.
Operating Margin Projections: Non-GAAP operating income for Q4 2025 is expected to range from $216 million to $220 million, implying a 24% operating margin. For the full fiscal year 2025, non-GAAP operating income is projected to be between $754 million and $758 million, with an operating margin of 22%.
Net Income Per Share: Non-GAAP net income per share for Q4 2025 is expected to range from $0.54 to $0.56, based on approximately 367 million weighted average diluted shares. For the full fiscal year 2025, non-GAAP net income per share is projected to be between $2.00 and $2.02, based on 364 million weighted average diluted shares.
Capital Expenditures: Capital expenditures and capitalized software are expected to account for 4% of revenues in fiscal year 2025.
Market Trends and Strategic Focus: The company anticipates long-term growth driven by digital transformation, cloud migration, and AI adoption. The market opportunity in cloud and AI is expected to grow into the trillions of dollars, and Datadog is positioning itself to support customers in these areas.
AI and Product Development: Datadog is advancing its AI roadmap, including Bits AI agents and next-gen AI observability products. The company is preparing for general availability of Bits AI SRE agents and has onboarded thousands of customers for preview access. Over 5,000 customers are already sending AI data to Datadog's integrations.
The selected topic was not discussed during the call.
The earnings call summary indicates strong financial performance with 23% YoY growth, stable operating margins, and promising guidance. Product development and AI integration are progressing well, with positive market strategies and security growth. The Q&A session reinforced optimism in AI adoption and product innovation. Despite some uncertainties in net retention rates, the overall sentiment is positive. The lack of market cap data limits precise prediction, but given the strong performance and guidance, the stock price is likely to see a positive movement in the next two weeks.
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