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Datadog_ FY25 Revenue Guidance Comes in Below, as Predicted; Focus Should Be on Growth at Scale and Ongoing Growth Investments. Thu Feb 13 2025
Berkeley·2025-02-16 15:28

Summary of Datadog Conference Call Company Overview - Company: Datadog - Industry: Software - Monitoring and Security for Cloud Applications Key Points and Arguments Revenue Guidance and Performance - FY25 revenue guidance is set at 3,185million∗∗,reflectingan∗∗18.73,185 million**, reflecting an **18.7% year-over-year growth**, which is below the Street consensus of **3,241 million or 21.8% growth [2][13] - Q4 total revenue reached 738million∗∗,representinga∗∗25.2738 million**, representing a **25.2% year-over-year increase**, surpassing Street consensus of **716 million [2][13] - The company reported a PF operating income of 179million∗∗witha∗∗24.3179 million** with a **24.3% margin**, also above the Street consensus of **167 million [2][13] Growth Trends - Datadog achieved a new record in bookings and reported that RPO dollars added in Q4 significantly exceeded the previous year, especially when normalized for duration [2][13] - The quarterly growth rate over the last seven quarters has been consistent, with rates around 25-27% [2][13] - Existing customer usage trends remain stable, with enterprise customers (>5K employees) showing the strongest year-over-year growth [2][13] Market Position and Competitive Landscape - Datadog is positioned as a leader in the IT Operations Management (ITOM) market, which is projected to be a 53billionopportunityby2025∗∗[10][15]−Thecompanyisseenasadirectbeneficiaryofdigitaltransformationtrends,whichareincreasingworkloadsanddrivingcloudmigration[10][15]AI−NativeCustomerDynamics−AI−nativecustomerscontributedabout∗∗653 billion opportunity by 2025** [10][15] - The company is seen as a direct beneficiary of digital transformation trends, which are increasing workloads and driving cloud migration [10][15] AI-Native Customer Dynamics - AI-native customers contributed about **6%** of Q4 ARR, with a slight increase in contribution to year-over-year growth [13][15] - The company anticipates potential volatility in revenue growth from AI-native customers as they optimize spending and renew contracts under different terms [13][15] Financial Metrics and Projections - Datadog's adjusted EPS for FY25 is projected at **1.67, down from a previous estimate of 1.84∗∗[3][21]−Thecompanyexpectsoperatingincomegrowthinthehigh∗∗201.84** [3][21] - The company expects operating income growth in the high **20%** range, which is a factor in the lower profitability guidance [13][15] - Total headcount increased by approximately **27% year-over-year**, with significant hiring in R&D and Sales & Marketing [2][13] Risks and Challenges - Potential risks include increased competition from native DevOps tools offered by major cloud providers like AWS, Azure, and GCP [15][19] - Macroeconomic uncertainties may lead to customers deferring IT spending, which could negatively impact Datadog's growth trajectory, particularly among SMB customers [19][15] Valuation and Price Target - The price target for Datadog shares is set at **140.00 for December 2025, based on a 2.2x EV/CY25E uFCF/g multiple [16][15] - The valuation reflects Datadog's strong market position and growth potential, despite trading at a premium revenue multiple [15][16] Additional Important Insights - Datadog's technologies integrate various monitoring and security solutions, providing a unified platform for observability and cloud security [10][15] - The company is focused on maintaining a balanced view amid uncertain macroeconomic conditions while leveraging its innovative capabilities [13][15]