Datadog, Inc. (DDOG) UBS Global Technology Conference (Transcript)

Summary of Datadog, Inc. Conference Call Company Overview - Company: Datadog, Inc. (NASDAQ: DDOG) - Event: UBS Global Technology Conference - Date: November 28, 2023 - Participants: - David Obstler - CFO - Yuka Broderick - VP, IR & Strategic Finance - Karl Keirstead - UBS Key Points Industry and Market Environment - The current market environment is showing signs of stabilization after a period of cost optimization among larger cloud-native customers [4][5] - Datadog's customer base has continued to grow, with signs of stabilization in usage and contract commitments from larger spenders [4][5] - The company is cautious about future cost control measures, acknowledging ongoing risk factors in the market [5] Customer Segments - Datadog's customer base is divided into three segments: enterprise (over 5,000 employees), mid-market, and small businesses (under 1,000 employees) [13] - Small and mid-sized businesses (SMBs) are showing the highest usage growth, attributed to their ongoing digital transformation and the necessity of observability tools [14][15] - The company has not seen disproportionate impacts across customer segments, indicating resilience in its SMB segment [14][15] Growth Drivers - Datadog is experiencing growth from multiple drivers, including: - Migration of workloads to the cloud and development of new applications [16][18] - Expansion of product offerings, including infrastructure monitoring, logs, and application performance monitoring (APM) [19][20] - Increased demand for unified observability solutions as clients seek to manage multiple signals from a single platform [19][20] - The company has seen a doubling in revenue from new product offerings, contributing significantly to net retention [19] Competitive Landscape - Datadog's competitive advantage lies in its flexible platform designed for modern applications, contrasting with competitors who have struggled to adapt [30][31] - The company views open-source solutions and cloud tools as both competitors and partners, emphasizing the importance of real-time observability [36][37] - The transition to DevSecOps is ongoing, with Datadog focusing on cloud and application security rather than endpoint security [33][34] AI and Future Opportunities - Datadog is currently generating 2% to 2.5% of its annual recurring revenue (ARR) from AI startups, with potential for growth as AI workloads increase [39] - The company is investing in building integrations and enhancing its platform to support AI-driven observability solutions [42][43] Financial Outlook and Margins - Datadog has maintained a focus on efficiency and optimization, achieving a margin of around 24%, which may have been an overshoot [45][46] - The company aims to balance long-term revenue growth with margin protection, indicating a cautious approach to future investments [45][46] Conclusion - Datadog is positioned well within the observability market, with a strong focus on customer segments, product expansion, and adapting to market trends. The company remains optimistic about long-term growth despite current economic uncertainties.