Core Insights - AGIX aims to capture the essence of the AGI era, positioning itself as a key indicator similar to Nasdaq100 during the internet age [2] - The concept of "Default Alive" versus "Default Dead" highlights the importance of companies being able to sustain themselves without further funding, emphasizing the risks of over-reliance on financing [3] - The demand for high-quality AI products is immense, particularly in programming, but supply constraints related to computing power and infrastructure can limit growth [4][5] - Companies that can balance innovation speed with profitability are more likely to survive, especially in niche areas that larger firms may overlook [5] - The success of Salesforce's ecosystem illustrates the importance of building a robust platform to address market needs, which is relevant for current cloud vendors [6] - Palantir's recent revenue growth demonstrates that service-driven growth and solving last-mile problems can be effective strategies in the AI era [7] Market Performance - AGIX has shown a weekly performance of 2.61%, a year-to-date increase of 15.58%, and a return of 55.02% since 2024 [9] - The semiconductor and hardware sectors have seen a weekly performance of 1.78% and a year-to-date increase of 5.59% [10] Hedge Fund Activity - Hedge funds have significantly increased their positions in global equities, particularly in the U.S. market, countering previous reductions in market value [13] - The TMT sector has seen substantial buying activity, with funds focusing on semiconductor and software stocks despite recent volatility [14] AI Developments - OpenAI's release of GPT-5 marks a significant advancement in AI capabilities, with improvements in various fields and reduced hallucination issues [16] - Anthropic's Claude Opus 4.1 has enhanced programming and reasoning abilities, showcasing the competitive landscape in AI model development [18] Company Updates - Nvidia has received export licenses for its H20 chips to China, easing market access challenges [19] - Duolingo has raised its revenue guidance for the year, reflecting strong growth and the integration of AI tools into its offerings [21] - Datadog's target price has been raised due to strong performance driven by AI-related usage growth [22]

Core Insights - Datadog reported revenue of $826.76 million for the quarter ended June 2025, reflecting a year-over-year increase of 28.1% [1] - The earnings per share (EPS) for the quarter was $0.46, up from $0.43 in the same quarter last year [1] - The reported revenue exceeded the Zacks Consensus Estimate of $790.78 million, resulting in a positive surprise of +4.55% [1] - Datadog's EPS also surpassed expectations, with a surprise of +12.2% compared to the consensus estimate of $0.41 [1] Key Metrics - The number of customers generating over $100k in annual recurring revenue (ARR) reached 3,850, slightly above the estimated 3,848 [4] - Total customer count stood at 31,400, exceeding the estimated 31,165 [4] - Remaining performance obligations were reported at $2.43 billion, compared to the estimated $2.39 billion [4] Stock Performance - Datadog's shares have returned -0.8% over the past month, while the Zacks S&P 500 composite has increased by +1.9% [3] - The stock currently holds a Zacks Rank 2 (Buy), suggesting potential for outperformance in the near term [3]

Core Viewpoint - Datadog reported strong fiscal second-quarter results, with revenue and adjusted EPS exceeding analyst expectations, but the stock traded lower following the announcement [1][10]. Financial Performance - Fiscal second-quarter revenue increased by 28% year-over-year to $826.76 million, surpassing the analyst consensus estimate of $790.97 million [1][3]. - Adjusted EPS was 46 cents, beating the consensus estimate of 42 cents [1][4]. - Adjusted operating income reached $164.1 million, with an operating margin of 19.8% [3][10]. - Gross margin improved to 80.9% [4]. Growth Drivers - Strong usage trends from existing customers and momentum in the AI-native cohort contributed 11% of total revenue and 10 percentage points to year-over-year growth [2][6]. - AI-native customers accounted for 11% of revenue, up from 8% in the previous quarter, indicating a significant increase in adoption [6][11]. - Security revenue surpassed $100 million in annual recurring revenue (ARR), growing in the mid-40% range year-over-year [3][6]. Guidance and Outlook - For the third quarter of 2025, management guided revenue to be between $847 million and $851 million, with operating income projected at $176 million to $180 million, and EPS between $0.44 and $0.46 [4][9]. - Full-year 2025 revenue guidance was raised to $3.312 billion to $3.322 billion, with operating profit expected to be between $684 million and $694 million, and EPS projected at $1.80 to $1.83 [4][7]. Analyst Ratings - Needham maintained a Buy rating with a price forecast of $175, while RBC Capital and Bank of America Securities also maintained positive ratings with price forecasts of $165 and $175, respectively [5][8][12]. - Analysts noted Datadog's industry-leading growth and expanding AI customer base as key factors supporting their ratings [5][12].

Core Insights - Datadog reported a non-GAAP EPS of 46 cents for Q2 2025, a 7% increase year-over-year, exceeding the Zacks Consensus Estimate by 12.20% [1] - The company's net revenues reached $826.8 million, reflecting a year-over-year growth of 28.1% and surpassing the consensus estimate by 4.55% [1] Customer Metrics - Datadog ended Q2 2025 with 31,400 customers, an increase from approximately 28,700 in the same period last year [2] - The company had 3,850 customers with an annualized run rate (ARR) of $100,000 or more, up from about 3,390 year-over-year, contributing to 89% of total ARR [2] - 83% of customers utilized two or more products, while 52% used four or more products, an increase from 49% in the previous year [3] - The trailing 12-month net revenue retention rate was approximately 120%, up from the mid-110% range in the prior year [3] Financial Performance - Datadog's adjusted gross margin contracted by 110 basis points year-over-year to 80.9% [4] - Research and development expenses grew by 45.5% year-over-year to $263.2 million, representing 31.8% of revenues, an increase of 380 basis points [4] - Sales and marketing expenses rose 27.4% year-over-year to $200 million, accounting for 24.2% of revenues, a slight contraction of 10 basis points [4] - General and administrative expenses increased by 22.9% year-over-year to $41.9 million, making up 5.1% of revenues, a decrease of 20 basis points [5] - Non-GAAP operating income was reported at $164.1 million, a 4.2% increase year-over-year, but the non-GAAP operating margin shrank by 460 basis points to 19.8% [5] Cash Flow and Balance Sheet - As of June 30, 2025, Datadog had cash, cash equivalents, and marketable securities totaling $3.9 billion, down from $4.4 billion as of March 31, 2025 [6] - Operating cash flow for the quarter was $200 million, a decrease from $272 million in the previous quarter [6] - Free cash flow was reported at $165 million, compared to $244 million in the prior quarter [6] Guidance - For Q3 2025, Datadog anticipates revenues between $847 million and $851 million, with non-GAAP EPS expected in the range of 44-46 cents [9] - For the full year 2025, the company projects revenues between $3.312 billion and $3.322 billion, with non-GAAP EPS expected to be between $1.80 and $1.83 [9]

Core Insights - Tradr ETFs is set to launch two first-to-market leveraged single-stock ETFs on Astera Labs Inc. and Datadog Inc. on August 12, 2025, expanding its leveraged ETF lineup to 21 funds [1] - The new ETFs are positioned within the AI growth narrative, with Datadog recently joining the S&P 500 Index and Astera experiencing significant revenue growth since its IPO in March 2024 [1] - As of August 7, 2025, the assets under management for Tradr's suite of 12 recently launched 2X long leveraged ETFs stand at approximately $400 million [1] Company Overview - Tradr ETFs focuses on sophisticated investors and professional traders, offering leveraged and inverse ETFs that provide short or long exposure to actively traded stocks and ETFs [3] - The company aims to cater to high conviction investment views, making its products distinct from traditional ETFs [3] Market Context - The introduction of these ETFs reflects a growing interest in AI-related investments, highlighting the potential for significant growth in this sector [1] - The performance of the new ETFs will be closely tied to the underlying stocks, which have shown strong growth trajectories [1]

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides Datadog's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Datadog's unaudited condensed consolidated financial statements for Q2 2025 show a 26% revenue increase, decreased net income, and significant cash usage in financing activities [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheet Highlights (in thousands of USD) | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$5,822,415** | **$5,785,339** | | Cash and cash equivalents | $489,030 | $1,246,983 | | Marketable securities | $3,421,940 | $2,942,076 | | Goodwill | $530,982 | $360,381 | | **Total Liabilities** | **$2,626,658** | **$3,070,976** | | Deferred revenue, current | $966,442 | $961,853 | | Convertible senior notes, net | $981,357 | $1,613,305 | | **Total Stockholders' Equity** | **$3,195,757** | **$2,714,363** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance, including revenue, gross profit, operating income, and net income for the reported periods Statement of Operations Summary (in thousands of USD, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | **$826,760** | **$645,279** | **$1,588,313** | **$1,256,532** | | Gross Profit | $660,782 | $521,780 | $1,264,707 | $1,022,935 | | Operating (Loss) Income | $(35,500) | $12,618 | $(47,920) | $24,614 | | **Net Income** | **$2,647** | **$43,824** | **$27,289** | **$86,455** | | Diluted Net Income Per Share | $0.01 | $0.12 | $0.08 | $0.24 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the cash inflows and outflows from operating, investing, and financing activities for the reported periods Cash Flow Summary for the Six Months Ended June 30 (in thousands of USD) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $471,596 | $376,694 | | Net cash used in investing activities | $(634,475) | $(320,919) | | Net cash (used in) provided by financing activities | $(603,801) | $26,426 | | **Net (Decrease) Increase in Cash** | **$(757,953)** | **$80,624** | - Significant cash usage in financing activities in 2025 was primarily due to the **$635.5 million** repayment of the 2025 Convertible Senior Notes[32](index=32&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, significant acquisitions, convertible note conversions, revenue recognition by geography, and stock-based compensation - In January 2025, the company increased the estimated useful life of capitalized software development costs from two to three years, representing a change in accounting estimate[40](index=40&type=chunk) - During Q2 2025, the company completed three business acquisitions for an aggregate purchase price of **$178.4 million**, resulting in **$16.3 million** of intangible assets and **$164.5 million** of goodwill[50](index=50&type=chunk) - The remaining **$634.1 million** of the 0.125% Convertible Senior Notes due 2025 were converted prior to maturity, settled with cash and **1,354,569** shares of Class A common stock[59](index=59&type=chunk) - As of June 30, 2025, remaining performance obligations (RPO) were **$2.43 billion**, up from **$2.27 billion** at year-end 2024, with substantial recognition expected over the next 24 months[82](index=82&type=chunk) Revenue by Geographic Area (in thousands of USD) | Region | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | North America | $586,689 | $448,002 | $1,120,504 | $873,602 | | International | $240,071 | $197,277 | $467,809 | $382,930 | | **Total** | **$826,760** | **$645,279** | **$1,588,313** | **$1,256,532** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 26% revenue growth driven by existing customers, strong KPI trends, operating loss due to R&D and S&M investments, and robust liquidity despite note repayment [Overview and Key Performance Metrics](index=31&type=section&id=Overview%20and%20Key%20Performance%20Metrics) This section provides an overview of the company's business model and key operational metrics, including customer growth and retention rates Key Business Metrics as of June 30 | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Customers | ~31,400 | ~28,700 | | Customers with ARR ≥ $100,000 | ~3,850 | 3,390 | | Trailing 12-Month Dollar-Based Net Retention Rate | ~120% | Mid-110%'s | - Product adoption continues to expand, with **52%** of customers using four or more products and **29%** using six or more products as of June 30, 2025[128](index=128&type=chunk) - For the six months ended June 30, 2025, revenue grew **26%** year-over-year to **$1.59 billion**, generating **$409.7 million** in free cash flow[120](index=120&type=chunk) [Results of Operations Comparison](index=37&type=section&id=Results%20of%20Operations%20Comparison) This section compares the company's financial results for the three and six-month periods ended June 30, 2025, and 2024 Comparison of Three Months Ended June 30, 2025 and 2024 (in thousands of USD) | Item | Q2 2025 | Q2 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $826,760 | $645,279 | $181,481 | 28% | | Gross Profit | $660,782 | $521,780 | $138,902 | 27% | | R&D Expense | $387,482 | $274,599 | $112,883 | 41% | | S&M Expense | $239,026 | $187,005 | $52,021 | 28% | | G&A Expense | $69,774 | $47,558 | $22,216 | 47% | | Operating (Loss) Income | $(35,500) | $12,618 | $(48,118) | N/A | Comparison of Six Months Ended June 30, 2025 and 2024 (in thousands of USD) | Item | H1 2025 | H1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,588,313 | $1,256,532 | $331,781 | 26% | | Gross Profit | $1,264,707 | $1,022,935 | $241,772 | 24% | | R&D Expense | $728,543 | $544,587 | $183,956 | 34% | | S&M Expense | $453,317 | $360,886 | $92,431 | 26% | | G&A Expense | $130,767 | $92,848 | $37,919 | 41% | | Operating (Loss) Income | $(47,920) | $24,614 | $(72,534) | N/A | - Revenue growth for both periods was driven approximately **80%** by existing customers and **20%** by new customers[152](index=152&type=chunk)[162](index=162&type=chunk) - The increase in R&D expense was primarily due to higher personnel costs from increased headcount and increased cloud infrastructure-related investments[157](index=157&type=chunk)[165](index=165&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's financial liquidity, capital resources, and ability to meet its short-term and long-term obligations - As of June 30, 2025, the company held **$489.0 million** in cash and cash equivalents and **$3.4 billion** in marketable securities, deemed sufficient for future requirements[170](index=170&type=chunk) - During the first half of 2025, the company repaid its 2025 Convertible Senior Notes, settling conversions with approximately **$634.1 million** in cash and issuing **1,354,569** shares of Class A common stock[173](index=173&type=chunk) Reconciliation of Net Cash from Operations to Free Cash Flow (in thousands of USD) | Description | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $471,596 | $376,694 | | Less: Purchases of property and equipment | $(23,900) | $(18,573) | | Less: Capitalized software development costs | $(37,952) | $(27,594) | | **Free cash flow (Non-GAAP)** | **$409,744** | **$330,527** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate fluctuations on investments and foreign currency exchange rates on international operating expenses, with no material impact from a hypothetical 10% change - Primary market risk exposures stem from interest rate fluctuations on **$439.5 million** in cash equivalents and **$3.4 billion** in marketable securities, and foreign currency exchange rates on international operating expenses[186](index=186&type=chunk)[187](index=187&type=chunk) - All sales are U.S. dollar-denominated, mitigating revenue currency risk, but operating expenses in France, Ireland, and the UK are subject to foreign exchange risk[188](index=188&type=chunk) - The company has not utilized hedging instruments for foreign currency or interest rate risk to date, but may consider them in the future[189](index=189&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[191](index=191&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter[192](index=192&type=chunk) [PART II. OTHER INFORMATION](index=49&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, unregistered sales of equity securities, and other relevant information [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - Datadog is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial position[195](index=195&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) This section details various risks, including economic dependency, growth challenges, security breaches, competition, regulatory compliance, and the dual-class stock structure - Key risks include economic downturns affecting IT spending, failure to sustain growth, historical operating losses, and dependence on customer renewals and expansion[197](index=197&type=chunk) - Cyber-attacks and security breaches pose a significant threat, potentially harming reputation, reducing demand, and incurring liabilities[197](index=197&type=chunk) - The company faces intense competition from diversified technology companies, native cloud provider solutions, and other specialized vendors[200](index=200&type=chunk) - The dual-class stock structure concentrates voting power with Class B shareholders, limiting Class A shareholders' influence[200](index=200&type=chunk) [Strategic and Operational Risks](index=52&type=section&id=Strategic%20and%20Operational%20Risks) This section outlines risks related to business strategy, customer retention, security, service reliability, and reliance on third-party providers - Business depends on existing customer renewals and expansions; AI-native cohort revenue contributed approximately **ten percentage points** to Q2 2025 growth but may introduce future usage volatility[210](index=210&type=chunk) - The company is vulnerable to security breaches, as evidenced by an April 2025 unauthorized access to source code repositories via compromised employee credentials[222](index=222&type=chunk) - Widespread platform outages in March 2023 highlight the risk of interruptions and performance problems, potentially leading to customer loss and legal claims[228](index=228&type=chunk) - Reliance on third-party cloud providers means any disruption, capacity limitation, or termination of these services could significantly harm operations[232](index=232&type=chunk)[233](index=233&type=chunk) [Legal and Regulatory Risks](index=67&type=section&id=Legal%20and%20Regulatory%20Risks) This section addresses risks arising from evolving data privacy laws, AI-specific regulations, intellectual property disputes, and international trade compliance - The company is subject to stringent and evolving global data privacy laws like GDPR and CCPA, with non-compliance potentially leading to significant fines and reputational harm[262](index=262&type=chunk)[264](index=264&type=chunk)[272](index=272&type=chunk) - AI product integration introduces new risks concerning intellectual property rights, cybersecurity, and compliance with emerging AI-specific regulations, such as the EU's Artificial Intelligence Act[257](index=257&type=chunk)[259](index=259&type=chunk) - Indemnity provisions in customer agreements expose the company to substantial liability for intellectual property infringement and data protection violations, potentially exceeding insurance coverage[261](index=261&type=chunk) - Operations are subject to U.S. and international export controls, sanctions, and anti-corruption laws like the FCPA, with violations leading to severe penalties[276](index=276&type=chunk)[281](index=281&type=chunk)[282](index=282&type=chunk) [Risks Related to Ownership of Our Class A Common Stock](index=81&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Class%20A%20Common%20Stock) This section discusses risks associated with the company's dual-class stock structure, potential impacts of convertible notes, dividend policy, and anti-takeover provisions - The dual-class stock structure concentrates approximately **44%** of voting power with Class B stockholders as of June 30, 2025, enabling considerable influence over corporate matters[312](index=312&type=chunk) - The conditional conversion feature of the 2029 Notes could adversely affect financial condition if holders convert, potentially requiring cash payments impacting liquidity[330](index=330&type=chunk)[332](index=332&type=chunk) - The company does not intend to pay dividends in the foreseeable future, requiring investors to rely on stock price appreciation for returns[320](index=320&type=chunk)[321](index=321&type=chunk) - Anti-takeover provisions in the company's charter and Delaware law could delay or prevent a change of control and limit the stock's market price[324](index=324&type=chunk) [Item 2. Unregistered Sales of Equity Securities](index=86&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities) This section details the issuance of unregistered Class A common stock for acquisitions and the retirement of shares from capped call settlements related to 2025 Notes - In the first half of 2025, Datadog issued **771,355** unregistered shares of Class A common stock for acquisition activities[336](index=336&type=chunk) - In June 2025, the company acquired and retired **1,360,738** shares of Class A common stock following capped call settlements related to the matured 2025 Notes[337](index=337&type=chunk) [Item 5. Other Information](index=88&type=section&id=Item%205.%20Other%20Information) This section discloses that several directors and officers adopted or modified Rule 10b5-1 trading plans during Q2 2025 for future securities sales - During Q2 2025, several directors and officers, including the General Counsel, CTO, and directors Amit Agarwal and Shardul Shah, adopted or modified Rule 10b5-1 trading plans for selling company stock[340](index=340&type=chunk)[341](index=341&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q2 was $827 million, representing a 28% year-over-year increase and exceeding the high end of guidance [8][28] - Free cash flow was $165 million, with a free cash flow margin of 20% [9][34] - Gross profit was $669 million, resulting in a gross margin of 80.9%, compared to 80.3% in the previous quarter [32][34] - Operating income was $164 million, with an operating margin of 20%, down from 22% in the previous quarter [33][34] Business Line Data and Key Metrics Changes - The number of customers increased to approximately 31,400, up from about 28,700 a year ago [8] - 83% of customers used two or more products, and 52% used four or more products, indicating strong platform adoption [10] - The security suite generated over $100 million in ARR, growing at a mid-forties percent year-over-year rate [11] Market Data and Key Metrics Changes - AI native customers contributed about 11% of Q2 revenues, up from 8% in the previous quarter [28] - The twelve-month trailing net retention percentage was about 120, higher than the high 110s from the last quarter [29] Company Strategy and Development Direction - The company continues to focus on digital transformation and cloud migration as long-term growth drivers [23] - There is a strong emphasis on AI integration into the platform, with new AI products launched to enhance observability and incident response [26][27] - The company aims to improve standardized adoption of security products across large enterprises [55] Management's Comments on Operating Environment and Future Outlook - Management views the demand environment as solid, with low churn and stable gross revenue retention in the mid to high 90s [8] - The company is optimistic about the growth opportunities presented by AI, with expectations of broader adoption across various industries [24][25] - Management acknowledges potential volatility in revenue growth from AI native customers but remains confident in long-term growth [52] Other Important Information - The company held its DASH user conference, announcing over 125 new products and features [12] - The company ended the quarter with $3.9 billion in cash, cash equivalents, and marketable securities [34] Q&A Session Summary Question: AI contribution and market opportunity - Management discussed the layers of AI opportunity, emphasizing the need for observability in applications that are increasingly non-deterministic [41][44] Question: Sales capacity and productivity - Management confirmed successful ramping of sales capacity and productivity, with evidence of new logo production and pipeline growth [47] Question: Guidance and potential volatility - Management indicated that current growth metrics do not show volatility yet, but they remain cautious due to potential future fluctuations [52] Question: Security product adoption - Management expressed satisfaction with the current adoption of security products but acknowledged the need for broader enterprise-wide adoption [55] Question: Trends in customer demographics - Management noted stable growth in enterprise customers, with gradual improvements in SMB usage [59] Question: FlexLogs progress - Management confirmed that all major deals with enterprise customers now involve FlexLogs, which is resonating well with customers [95]

Financial Data and Key Metrics Changes - Revenue for Q2 was $827 million, representing a 28% year-over-year increase and exceeding the high end of guidance [7][29] - Free cash flow was $165 million, with a free cash flow margin of 20% [35] - Gross profit was $669 million, resulting in a gross margin of 80.9%, compared to 80.3% in the previous quarter [33] Business Line Data and Key Metrics Changes - The number of customers increased to approximately 31,400, up from about 28,700 a year ago [7] - Customers with an ARR of $100,000 or more rose to about 3,850, generating approximately 89% of ARR [8] - The security suite of products generated over $100 million in ARR, growing at a mid-forties percent year-over-year rate [11] Market Data and Key Metrics Changes - AI native customers contributed about 11% of Q2 revenues, up from 8% in the previous quarter [29] - The twelve-month trailing net retention percentage was about 120, higher than the high 110s last quarter [31] - Billings were $852 million, up 20% year-over-year, and remaining performance obligations (RPO) were $2.43 billion, up 35% year-over-year [32] Company Strategy and Development Direction - The company continues to focus on digital transformation and cloud migration as long-term growth drivers [24] - There is a strong emphasis on AI, with plans to incorporate AI into the platform to deliver more value to customers [26] - The company aims to improve standardized adoption of security products across large enterprises [54] Management's Comments on Operating Environment and Future Outlook - Management sees a solid demand environment with ongoing healthy cloud migration and digital transformation [7] - The company is optimistic about the growth of the AI native customer group and its implications for future revenue [30] - Management acknowledges potential volatility in revenue growth due to customer contract renewals and optimizations [51] Other Important Information - The company launched over 125 new products and features at the Dash user conference [11] - The company has been recognized as a leader in the 2025 Gartner Magic Quadrant for observability platforms for the fifth consecutive year [17] Q&A Session Summary Question: How should the AI contribution be viewed in terms of market opportunity? - Management indicated that AI is a significant opportunity, with many companies needing to enhance observability as they adopt AI technologies [40][41] Question: Can you discuss the ramp-up of the new sales hires? - Management confirmed that the increase in sales personnel is showing positive signs in new logo production and pipeline growth [47] Question: What is the outlook for the AI native cohort and potential volatility? - Management noted that while the AI cohort is growing rapidly, there may be volatility in usage and contract negotiations [51] Question: How is the company addressing security product adoption? - Management expressed satisfaction with the current product set but acknowledged the need for broader enterprise adoption [54] Question: What are the trends between enterprise and SMB customer segments? - Management observed stable growth in enterprise customers, with gradual improvement in SMB usage [58] Question: What is the company's approach to expanding security capabilities? - Management indicated a focus on both organic and inorganic growth strategies in the security space [76]

[Financial and Business Highlights](index=1&type=section&id=Financial_and_Business_Highlights) [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second_Quarter_2025_Financial_Highlights) Datadog reported strong financial results for the second quarter of 2025, with revenue growing 28% year-over-year to $827 million, generating significant cash flow while maintaining a non-GAAP operating margin of 20% Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Year-over-Year Change | | :--- | :--- | :--- | | Revenue | $827 million | +28% | | GAAP Operating Loss | $(36) million | N/A (was $12.6M income) | | GAAP Operating Margin | (4)% | N/A (was 2%) | | Non-GAAP Operating Income | $164 million | +4% | | Non-GAAP Operating Margin | 20% | from 24% | | GAAP Net Income per Diluted Share | $0.01 | -92% | | Non-GAAP Net Income per Diluted Share | $0.46 | +7% | | Operating Cash Flow | $200 million | +22% | | Free Cash Flow | $165 million | +15% | - The company ended the quarter with approximately **3,850 customers** having an Annual Recurring Revenue (ARR) of **$100,000 or more**, a **14% increase** from about **3,390** in the prior year[3](index=3&type=chunk)[6](index=6&type=chunk) - As of June 30, 2025, cash, cash equivalents, and marketable securities totaled **$3.9 billion**[6](index=6&type=chunk) [Second Quarter & Recent Business Highlights](index=1&type=section&id=Second_Quarter_&_Recent_Business_Highlights) The company emphasized significant product innovation, unveiling over 125 new products and features at its DASH 2025 conference, particularly focusing on AI and security, while gaining industry recognition - At the DASH 2025 user conference, Datadog announced over **125 new innovations** for observing and securing cloud environments and AI tech stacks[3](index=3&type=chunk)[4](index=4&type=chunk) - New AI-powered product launches include: - **Bits AI Agents:** Interactive investigation and code-fixing agents for SRE, Dev, and Security teams - **AI Agent Monitoring & LLM Experiments:** Tools for end-to-end visibility and testing of AI agents - **Toto and BOOM:** An open-weights time series model and a new benchmark for observability metrics from Datadog AI Research[7](index=7&type=chunk) - Key business and strategic achievements include: - Named a Leader in the Gartner Magic Quadrant for Observability Platforms for the fifth consecutive year - Joined the S&P 500 Index - Advancing toward Federal Risk and Authorization Management Program (FedRAMP) High authorization[7](index=7&type=chunk) [Financial Outlook](index=4&type=section&id=Financial_Outlook) [Third Quarter 2025 Outlook](index=4&type=section&id=Third_Quarter_2025_Outlook) Datadog projects third-quarter 2025 revenue to be between $847 million and $851 million, with non-GAAP operating income between $176 million and $180 million, and non-GAAP net income per share between $0.44 and $0.46 Q3 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $847 million - $851 million | | Non-GAAP Operating Income | $176 million - $180 million | | Non-GAAP Net Income per Share | $0.44 - $0.46 | [Full Year 2025 Outlook](index=4&type=section&id=Full_Year_2025_Outlook) For the full year 2025, the company anticipates revenue between $3.312 billion and $3.322 billion, with non-GAAP operating income between $684 million and $694 million, and non-GAAP net income per share projected at $1.80 to $1.83 Full Year 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $3.312 billion - $3.322 billion | | Non-GAAP Operating Income | $684 million - $694 million | | Non-GAAP Net Income per Share | $1.80 - $1.83 | [Consolidated Financial Statements](index=9&type=section&id=Consolidated_Financial_Statements) [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed_Consolidated_Statements_of_Operations) For Q2 2025, revenue increased to $826.8 million from $645.3 million in Q2 2024, but a significant rise in operating expenses led to a GAAP operating loss of $35.5 million and a net income decrease to $2.6 million Statement of Operations Summary (Three Months Ended June 30) | (In thousands) | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $826,760 | $645,279 | +28.1% | | Gross Profit | $660,782 | $521,780 | +26.6% | | Total Operating Expenses | $696,282 | $509,162 | +36.7% | | Operating (Loss) Income | $(35,500) | $12,618 | N/A | | Net Income | $2,647 | $43,824 | -94.0% | [Condensed Consolidated Balance Sheets](index=11&type=section&id=Condensed_Consolidated_Balance_Sheets) As of June 30, 2025, Datadog's balance sheet shows total assets of $5.82 billion, a decrease in total liabilities to $2.63 billion, and a growth in total stockholders' equity to $3.20 billion Balance Sheet Summary | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents, and marketable securities | $3,910,970 | $4,189,059 | | Total Assets | $5,822,415 | $5,785,339 | | Total Liabilities | $2,626,658 | $3,070,976 | | Total Stockholders' Equity | $3,195,757 | $2,714,363 | [Condensed Consolidated Statements of Cash Flow](index=12&type=section&id=Condensed_Consolidated_Statements_of_Cash_Flow) In Q2 2025, Datadog generated $200.1 million in net cash from operating activities, while net cash used in investing activities was $191.1 million and financing activities used $605.5 million, primarily due to convertible senior note repayment Cash Flow Summary (Three Months Ended June 30) | (In thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $200,055 | $164,424 | | Net cash used in investing activities | $(191,067) | $(59,711) | | Net cash (used in) provided by financing activities | $(605,454) | $24,235 | | Net (Decrease) Increase in Cash | $(590,824) | $128,745 | [Reconciliation of GAAP to Non-GAAP Measures](index=13&type=section&id=Reconciliation_of_GAAP_to_Non-GAAP_Measures) This section provides a detailed reconciliation between GAAP and non-GAAP financial figures, adjusting GAAP operating loss for non-cash and non-recurring items to derive non-GAAP operating income and free cash flow Reconciliation of GAAP Operating Loss to Non-GAAP Operating Income (Q2 2025) | (In thousands) | Amount | | :--- | :--- | | **GAAP operating loss** | **$(35,500)** | | Plus: Stock-based compensation expense | $180,462 | | Plus: Amortization of acquired intangibles | $1,706 | | Plus: Employer payroll taxes on employee stock transactions | $16,067 | | Plus: M&A transaction costs | $1,373 | | **Non-GAAP operating income** | **$164,108** | Reconciliation to Free Cash Flow (Q2 2025) | (In thousands) | Amount | | :--- | :--- | | Net cash provided by operating activities | $200,055 | | Less: Purchases of property and equipment | $(15,152) | | Less: Capitalized software development costs | $(19,550) | | **Free cash flow** | **$165,353** | [Supplementary Information](index=5&type=section&id=Supplementary_Information) [Forward-Looking Statements and Risk Factors](index=5&type=section&id=Forward-Looking_Statements_and_Risk_Factors) This section contains standard legal disclaimers regarding forward-looking statements related to strategy, market opportunities, and financial outlook, cautioning that actual results may differ materially due to various risks and uncertainties - The press release contains forward-looking statements concerning strategy, product capabilities, market opportunities, and financial performance, which are based on current assumptions and subject to substantial risks[13](index=13&type=chunk) - Key risks cited include: rapid growth not being indicative of future growth, a history of operating losses, dependence on customer renewals and new customer attraction, security breach risks, and intense market competition[14](index=14&type=chunk) [About Non-GAAP Financial Measures](index=6&type=section&id=About_Non-GAAP_Financial_Measures) Datadog explains its use of non-GAAP financial measures for internal budgeting, forecasting, and performance evaluation, believing these supplemental measures are useful to investors by excluding certain non-cash or non-recurring expenses - Datadog uses non-GAAP measures to supplement GAAP results for internal planning and to evaluate financial performance[16](index=16&type=chunk) - Primary adjustments to derive non-GAAP figures from GAAP balances include excluding: stock-based compensation, amortization of acquired intangibles, employer payroll taxes on stock transactions, and M&A transaction costs[18](index=18&type=chunk) - Free cash flow is defined as net cash from operating activities minus capital expenditures and capitalized software development costs[18](index=18&type=chunk)[24](index=24&type=chunk) [Operating Metrics Definition](index=8&type=section&id=Operating_Metrics_Definition) This section defines key operating metrics used by the company, including customer count based on unique active subscription accounts and Annual Recurring Revenue (ARR) derived from annualized Monthly Recurring Revenue (MRR) - A customer is defined as an account with a unique identifier and an active subscription; free trial users are not included[26](index=26&type=chunk) - Annual Recurring Revenue (ARR) is defined as the monthly recurring revenue (MRR) multiplied by 12; MRR aggregates revenue from committed contracts, additional usage, and monthly subscriptions[27](index=27&type=chunk)

Core Insights - Datadog (DDOG) is expected to report second-quarter 2025 results on August 7, with projected revenues between $787 million and $791 million, indicating year-over-year growth of 22% to 23% [1][8] - The Zacks Consensus Estimate for revenues stands at $790.92 million, reflecting a 22.57% increase from the previous year's quarter [1][2] - Diluted non-GAAP earnings per share are anticipated to be between 40 and 42 cents, with the consensus estimate at 41 cents, showing a year-over-year decline of 4.65% [1][2] Revenue Growth Factors - Datadog's performance is likely to benefit from innovations in its AI-powered observability platform, including new modules like App Builder and security monitoring, which have attracted enterprise adoption [3][8] - The acquisitions of Eppo and Metaplane have enhanced the platform's functionality, promoting upsell momentum and increasing customer engagement [3][8] - The company has seen a 13% increase in large customers (3,770 clients with annual recurring revenues above $100,000), which is crucial for long-term growth [4][8] Enterprise Momentum - Datadog experienced a 70% year-over-year increase in dollar bookings for new logos in Q1 2025, along with 11 large deals exceeding $10 million, indicating strong enterprise traction [5][8] - The ongoing expansion within the large customer segment is expected to support revenue momentum and product penetration in Q2 [4][5] Margin Pressures - Operating margin pressures are anticipated due to ongoing reinvestments and elevated cloud hosting costs, with non-GAAP operating margin declining from 27% to 22% year-over-year in Q1 [6][8] - Gross margin also contracted by 300 basis points, which is expected to negatively impact margins in the upcoming quarter [6][8] Earnings Outlook - Datadog has an Earnings ESP of +2.86% and a Zacks Rank 2, indicating a favorable outlook for an earnings beat [7][9]