Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $762 million, representing a 25% year-over-year increase and exceeding the high end of guidance [6][27] - The company generated free cash flow of $244 million, with a free cash flow margin of 32% [7][36] - Gross profit was $612 million, with a gross margin of 80.3%, down from 81.7% in the previous quarter and 83.3% year-over-year [33] Business Line Data and Key Metrics Changes - The number of customers increased to approximately 30,500, up from about 28,000 a year ago [6] - 3,770 customers had an ARR of $100,000 or more, up from 3,340 a year ago, contributing to 88% of total ARR [6][27] - FlexLogs product exceeded $50 million in ARR, achieving this milestone in six quarters, marking the fastest ramp [8] - Database monitoring product is approaching $50 million in ARR, growing 60% year-over-year [9] Market Data and Key Metrics Changes - AI native customers represented about 8.5% of Q1 ARR, up from 6% last quarter and 3.5% a year ago [27] - Dollar bookings for new logos increased over 70% year-over-year, with 11 deals signed with a TCV of $10 million or more, up from one in the year-ago quarter [11][12] Company Strategy and Development Direction - The company continues to focus on digital transformation and cloud migration as long-term growth drivers [26] - Investments are being made in AI observability and analysis, with over 4,000 customers using Datadog AI integrations, doubling year-over-year [12][13] - Recent acquisitions include EPO and MetaPlan, aimed at enhancing product offerings in feature management and data observability [17][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the impact of global economic conditions but remains optimistic about long-term market opportunities [26] - The company expects revenue for Q2 2025 to be in the range of $787 million to $791 million, representing 22% to 23% year-over-year growth [37] - For fiscal year 2025, total revenue is expected to be in the range of $3.215 billion to $3.235 billion, indicating a growth rate of 20% to 21% [38] Other Important Information - The company plans to host its DASH user conference in June, which is expected to cost about $13 million [37] - The remaining principal of the $20.25 convertible notes will mature in June, with expectations to redeem mainly in cash [40] Q&A Session Summary Question: Comment on the opportunity for Datadog with AI writing code - Management sees a shift in value from writing code to observing and understanding it in production environments, emphasizing the need for monitoring [43][46] Question: What attributes the strong booking strength despite economic uncertainty? - The strong pipeline and increased investments in go-to-market strategies contributed to the booking strength, with healthy sales cycles [47][49] Question: What are the trend lines on cloud migration? - Cloud migration trends remain steady, with consistent customer desire to move to the cloud as a prerequisite for adopting AI [54][56] Question: Discuss the expansion opportunities in data observability - Management views data observability as a significant opportunity, especially with the acquisition of MetaPlan, which enhances their capabilities [57][59] Question: Insights on AI native cohort and renewal trends - The AI native cohort is growing, but there is a concentration risk with larger customers, which management is monitoring closely [81][84] Question: How is productivity tracking with increased investments in sales and marketing? - Productivity from new sales reps is tracking well, with similar productivity levels compared to existing reps [92][94]
Datadog(DDOG) - 2025 Q1 - Earnings Call Transcript