Datadog, Inc. Q3 FY2024 earnings call

• Financial performance: Q3 revenue growth, customer and ARR details, free cash flow. - Platform adoption: Increasing percentage of customers using multiple products. - R&D: AI integrations with ~3,000 customers using them, LLM observability in use by hundreds of customers. - Product launches: Datadog monitoring for Oracle Cloud infrastructure GA, Datadog On Call in limited availability. - Sales: Examples of large deals in India, U.S. federal agency, American financial services, European airline, hyper-scaler division, and Latin American food delivery company.

Revenue for Q3 was $690 million, a 26% year-over-year increase and above the high end of guidance. The company ended Q3 with about 29,200 customers, up from 26,800 the prior year. There were approximately 3,490 customers with ARR of $100,000 or more, which generated about 88% of ARR. Free cash flow was $204 million with a margin of 30%. Regarding platform adoption, 83% of customers were using two or more products, 49% were using four or more, 26% were using six or more, and 12% were using eight or more. Infrastructure monitoring/APM suite and log management together represent more than $2.5 billion in ARR. Fifteen of the 23 products now exceed $10 million in ARR.

• Q4 revenue expected to be in the range of $709 million to $713 million, representing 20% to 21% year-over-year growth. Non-GAAP operating income expected $163 million to $167 million, with a 23% operating margin. Non-GAAP net income per share expected $0.42 to $0.44. - FY2024 revenue expected $2.656 billion to $2.660 billion, 25% year-over-year growth. Non-GAAP operating income expected $658 million to $662 million, 25% operating margin. Non-GAAP net income per share expected $1.75 to $1.77.

• Volatility in billing and RPO due to timing of deals. - Potential volatility in revenue from AI native customers as they may optimize and recommit. - Impact of hyperscaler GPU workload trends on short-term metrics.

Q: Mark Murphy asked about AI contributions and billing timing.

A: Olivier Pomel discussed AI innovation and potential, David Obstler talked about billing timing being due to past year's different contract timings.

Q: Sanjit Singh asked about security, service management, and customer spending intentions.

A: Olivier Pomel spoke about security opportunities, On Call product reception, and customers focusing on consolidation and AI innovation.

Q: Raimo Lenschow asked about hyperscaler trends and sales capacity.

A: Olivier Pomel discussed hyperscaler trends and David Obstler talked about sales capacity scaling with top line growth.

Q: Kash Rangan asked about GPU workloads and customer feedback.

A: Olivier Pomel spoke about GPU monetization and David Obstler mentioned similar customer trends post-Q3.

Q: Brent Thill asked about RPO trajectory.

A: David Obstler and Olivier Pomel discussed RPO variability due to contract timing and focusing on revenue as the North Star.

Q: Karl Keirstead asked about AI native customers and Q4 guidance.

A: Olivier Pomel discussed AI native customer dynamics and David Obstler mentioned conservative Q4 guidance assumptions.

Q: Kirk Materne asked about federal government trends.

A: Olivier Pomel spoke about federal government opportunity and product compliance plans.

Q: Mike Cikos asked about gross margin and usage growth.

A: David Obstler talked about gross margin management and Olivier Pomel discussed future growth catalysts from AI applications.

Q: Gray Powell asked about Datadog On Call.

A: Olivier Pomel spoke about On Call's integration and future automation plans.

Q: Ittai Kidron asked about products under $100M and 2025 guidance.

A: Olivier Pomel discussed product growth potential and David Obstler mentioned stable customer behavior and investment environment.