Question-and-Answer SessionKarl KeirsteadUBS Investment Bank, Research Division So David, maybe we'll start. Like there were -- there are a number of things about your recent quarter that were really strong. Your core did better. Your AI native breadth widened out a little bit. You renewed that big contract. So a lot of good things to talk about. So let's take those in order. So I think one of the things that stood out to me was the strength in the core. So exiting out all the AI natives, the core accelera ...

Summary of Datadog Conference Call Company Overview - **Company**: Datadog (NasdaqGS: DDOG) - **Event**: 2025 Conference on December 02, 2025 Key Points Industry and Market Environment - Datadog operates in the cloud monitoring and observability software industry, which is experiencing a shift towards modernization and cloud migration [3][5][7] - The buying environment is described as constructive, with a focus on modernization of software stacks and cloud migration, which is expected to be a long-term tailwind for Datadog [4][7] Financial Performance - Datadog reported a strong quarter with broad-based growth, particularly in its core business, excluding AI-native revenues [3][4] - The company has seen an increase in new customer acquisitions and larger contracts, contributing to a strong net retention rate [3][4] - AI-native customers now represent 12% of total revenues, indicating successful penetration into this fast-growing segment [9][10] Product Suite and Adoption - Datadog's product suite includes core infrastructure monitoring, APM, log management, and digital experience, with parallel strength across these areas [8][9] - The digital experience segment has crossed $300 million in revenue, showcasing significant adoption [8] - Customers are increasingly consolidating their observability needs onto Datadog's platform, moving away from point solutions [8][9] Customer Dynamics - Datadog maintains a high gross retention rate of over 98% among large customers, indicating strong customer loyalty [22][24] - The company has over 500 AI-native customers, with more than 100 spending over $100,000 annually, and 15 spending over $1 million [14][15] - Contract structures for cloud-native and AI-native customers typically involve annual commitments, with opportunities for longer-term contracts as usage increases [16][17] Competitive Landscape - Datadog faces competition from companies like Chronosphere and open-source alternatives, but maintains a strong market position due to its comprehensive observability platform [27][29] - The acquisition of Chronosphere by Palo Alto Networks raised concerns, but Datadog believes it can coexist with competitors by offering a more complete solution [27][28] Pricing Strategy - Datadog employs a volume-based pricing model, which allows for lower unit prices as customers scale, while maintaining margins through a diverse customer base [30][31] - The company actively helps clients optimize their usage to avoid unexpected costs, enhancing customer satisfaction [31] Future Growth Opportunities - Datadog is focusing on expanding its Cloud SIEM and service management offerings, which are expected to drive significant revenue growth in the coming years [32] - The company has made strategic acquisitions in product analytics and data monitoring, positioning itself for future growth [32] Margin Guidance - Datadog aims to maintain long-term margins in the mid-20s while investing in growth opportunities, indicating a balanced approach to expansion and profitability [34][35] Conclusion - Datadog is well-positioned in the observability market, with strong financial performance, a growing customer base, and a comprehensive product suite that addresses the needs of modern cloud-native and AI-native companies [3][4][9][10]

Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Datadog. The Motley Fool has a disclosure policy. Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool. ...

Core Insights - Datadog has launched Bits AI SRE, an AI agent designed to autonomously investigate alerts and provide rapid remediation paths, significantly improving incident response times for organizations [1][5][6] Company Overview - Datadog is a monitoring and security platform for cloud applications, integrating various capabilities to provide real-time observability and security across technology stacks [7] Product Features - Bits AI SRE operates 24/7, analyzing telemetry and runbooks to identify root causes of alerts within minutes, thus allowing engineers to focus on building resilient systems rather than managing incidents [1][3][4] - The agent supports enterprise-scale operations, including HIPAA-regulated workloads, and features role-based access controls (RBAC) to ensure secure AI adoption [4] Market Impact - The launch of Bits AI SRE is seen as a significant expansion of Datadog's AI strategy, having been tested in over 2,000 customer environments, yielding positive outcomes in incident management [5][6] - Early adopters, such as Uber Freight, report improved clarity and reduced cognitive load during incidents, highlighting the agent's effectiveness in surfacing relevant information quickly [5][6]

Core Insights - PagerDuty's market cap has fallen to approximately $1 billion, reflecting a valuation of about 2x its annual recurring revenue (ARR) of $500 million, indicating a significant decline in growth expectations despite achieving profitability [3][4][8] Financial Performance - PagerDuty reported an ARR of $497 million, representing a modest year-over-year growth of just 3% [4] - The company's net revenue retention (NRR) has dropped to 100%, indicating no expansion among existing customers [4][14] - The customer count has remained flat at around 15,400 for three years, suggesting challenges in acquiring new customers [4][16] Growth Challenges - The growth rate has slowed to approximately 4-5%, a stark contrast to previous rates of over 30% [4][15] - The decline in NRR from 139% at IPO to 100% today highlights a significant deterioration in customer expansion [11][14] - The competitive landscape has shifted, with larger platforms like Datadog and ServiceNow bundling incident management solutions, posing a threat to PagerDuty's market position [28][29] Market Valuation - Companies with higher growth rates (30%+) are trading at multiples of 10-15x ARR, while PagerDuty's low growth has resulted in a valuation of only 2-3x ARR [9][20] - The market is currently valuing PagerDuty at a level that reflects its slow growth, positioning it as a value stock rather than a growth stock [21][40] Strategic Considerations - PagerDuty is exploring a potential sale, indicating a shift in strategy as the board seeks to enhance shareholder value amid declining growth prospects [25] - The company has attempted to expand its total addressable market (TAM) through acquisitions and new product offerings, but these efforts have not yet translated into significant growth [48][49] Competitive Landscape - The emergence of new startups focused on incident management, which are more affordable and user-friendly, is intensifying competition for PagerDuty [30][32] - The overall market for incident management has matured, leading to challenges in sustaining growth for established players like PagerDuty [36][37]

Group 1 - The A-share index is experiencing fluctuations, with the software development sector showing relative strength, particularly the ChiNext Software ETF (159256) which rose by 0.20% during trading [1] - Key stocks such as Aerospace Intelligence and Zhongke Chuangda saw significant increases, with Aerospace Intelligence rising by 5.05% [1] - The CEO of Kingsoft Office, Zhang Qingyuan, emphasized that in the AI era, collaborative office software will undergo significant changes, becoming a "container of knowledge," a "carrier of digital employees," and a "provider of capabilities and services" [1] Group 2 - Guotai Junan Securities believes that AI technology is opening new market opportunities for the software industry, with companies possessing complete "AI application platform" capabilities expected to experience significant growth by 2025 [2] - Stifel's recent 2025 outlook report indicates that as the commercialization path of artificial intelligence becomes clearer, companies like Microsoft, ServiceNow, and Datadog, which have mature AI platform systems, are likely to achieve strong growth [2] - The software industry is integrating AI with data to build more intelligent and comprehensive business operation systems [2]

Core Insights - The article emphasizes the importance of conducting thorough due diligence before making any financial decisions, particularly in the context of investments and trading activities [1] Group 1 - The content includes general news and personal analysis intended for educational and research purposes [1] - It highlights that the information provided may not be accurate or in real-time, and prices may be sourced from market makers rather than exchanges [1] - The article warns that trading decisions should be made at the individual's full responsibility, and reliance on the information provided is discouraged [1] Group 2 - The website discusses complex financial instruments such as cryptocurrencies and contracts for difference (CFDs), which carry a high risk of losing money [1] - It encourages individuals to perform their own research and understand the risks involved before investing in any financial instruments [1] - The article mentions that FX Empire does not endorse any third-party services and is not liable for any losses incurred from using the information on the website [1]

Core Insights - The company is actively pursuing mergers and acquisitions (M&A) to expand its market presence, with a recent $25 billion offer for Cyber Ark and a total planned expenditure of slightly under $30 billion for two major acquisitions [1][12] - The focus is on enhancing capabilities in observability and cybersecurity, aiming for 99.9% uptime and real-time problem resolution [4][7] - The company believes it is well-positioned for future growth, targeting $20 billion in revenue and generating significant free cash flow [15][16] M&A Strategy - The company has completed 28 acquisitions in the past seven and a half years, demonstrating a successful strategy of entering adjacent markets [2] - The latest acquisition, Cronus Fair, aligns with market trends towards increased computational power and the need for application observability [3][10] - M&A has contributed to 30% of the company's growth opportunities, with the remaining 70% coming from organic innovation [11] Market Positioning - The company aims to become the largest cybersecurity firm globally, consolidating various tools into a single platform to enhance efficiency and security [16][19] - The strategy of "platformization" is gaining traction, as companies prefer comprehensive solutions over multiple vendors [17][18] - The demand for real-time capabilities in cybersecurity is increasing, necessitating a streamlined approach to infrastructure and security tools [20][24] Future Outlook - The company anticipates explosive growth opportunities in AI and technology sectors, with significant changes expected in consumer behavior and enterprise adoption [21][26] - There is confidence that infrastructure will be consumed as demand grows, despite current uncertainties in timing [24][25] - The evolution of technology is expected to lead to a future where applications operate autonomously, requiring substantial computational resources [22][23]

Core Insights - Datadog has appointed John Trapani as Field CTO for Financial Services to enhance its observability strategy for clients in the financial sector [1][2] - Trapani's extensive experience in product development for financial services will be instrumental in advancing Datadog's offerings [2][3] - The financial services industry is rapidly evolving, particularly with the rise of AI projects, necessitating a focus on digital transformation [2] Company Overview - Datadog is a monitoring and security platform for cloud applications, providing a unified observability and security solution for various technology stacks [5] - The platform integrates multiple capabilities including infrastructure monitoring, application performance monitoring, and cloud security [5] - Datadog serves organizations of all sizes across diverse industries, facilitating digital transformation and cloud migration [5] Leadership Background - John Trapani brings over 35 years of experience in software development and industry leadership, previously serving as Industry Leader of Financial Services at Appian Corporation [3] - His prior experience includes a 20-year tenure at Fitch Ratings, where he led application development teams and was responsible for core analytical platforms [3] Strategic Focus - The collaboration between Trapani and Datadog's sales, product, and marketing teams aims to address customer pain points and enhance value realization from their investments [2] - The emphasis on a unified observability and security platform is crucial for guiding financial services clients through their digital transformation journeys [2]

Core Viewpoint - The article emphasizes the importance of enabling Javascript and cookies in browsers to prevent access issues, particularly when ad-blockers are enabled [1] Group 1 - The article suggests that users may face restrictions if they have ad-blockers enabled, indicating a need for adjustments in browser settings to ensure smooth access [1]