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Datadog (DDOG)

Participants
Yuka Broderick Head-Investor Relations
Olivier Pomel Chief Executive Officer and Co-Founder
David Obstler Chief Financial Officer
Sanjit Singh Morgan Stanley
Raimo Lenschow Barclays
Kash Rangan Goldman Sachs
Fatima Boolani Citi
Matt Hedberg RBC
Kamil Mielczarek William Blair
Brent Thill Jefferies
Gregg Moskowitz Mizuho
Mike Cikos Needham & Company
Peter Weed Bernstein
Call transcript
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Operator

Good morning, and welcome to the Q2 2022 Datadog Earnings Call. My name is Sheryl, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] I will now turn the call over to Yuka Broderick.

begin. may You

Yuka Broderick

Good to Sheryl. which thank for this you announced Thank Datadog's morning, second us morning. issued release review our results, quarter joining in you, press and XXXX we financial

today call and CEO; Datadog's the on Obstler, me are Pomel, Founder David Datadog's Olivier CFO. and Co- Joining

strategy, statements operating XXXX, outlook words product believe, During third and for or market our continue, differ including intend, similar forward-looking are quarter this variety of subject similar margins, our only future uncertainties statements and statements ability future our and on intended make will of views to expressions These to call, year gross anticipate, the and could margins financial our to expectations. a are estimate, we fiscal results expect, our capitalize and cause actual indications and statements, reflect related performance, capability our to materially. risks forward-looking The today to that of identify our will opportunities. as

a Form For actual to XXXX. material refer important other quarter please results, affect and our that risks could for March factors XX, our the ended of of XX-Q discussion the

a XXXX, will of the available quarter our for in Additional ended Investor replay made Relations filings the SEC. on website, other upcoming XX-Q with June this our Form be information This along available information also XX, and with the is of section call.

turn are to most With reconciled also investors.datadoghq.com. which in their like available comparable release, which over will Olivier. financial financial I'd the to is measures, that, call measures tables earnings We to our discuss non-GAAP GAAP directly in the at

Olivier Pomel

for Thanks, Yuka. joining this us morning. And all you thank

extended well, leadership. to QX results in our as pleased we and executed are strong category report We we

more, ARR our million, year in review of of Let me performance. ago the range. $XXX ended We XX,XXX the In about customers, XX% customers products. of generated about QX our QX, XX,XXX $XX in X,XXX We the their margin quarter flow increase up to year a increased from free with up off high about net of year-over-year XXX,XXX ARR. retention ago our end cash more from with based the adopted of was XX%. above dollar or of guidance be had about X,XXX flow XXX%, cash revenue with And XX% free our and generated an financial We customers start million quarter. a as rate usage of quarter. over continues and and These customers

in affected which with have strong food levels. see component in our includes spending certain this a log saw business at In discretionary, dynamics, industries, based consumer growing growth to pronounced spending we some This continued lower was on lower APM and but was in who customer overall not customers with effect than and moving and did management historical past. have quarter's specifically e-commerce such seen growth as drivers. variability our delivery customers as the a grow more continue to saw more particularly suite. our products with that Now while that among and customers us in SMB larger we volume QX, we they Note our this and rate We strong customers.

opportunities are we continue as remain While the outlook, leading points execution bullish our we confident these micro prudent positive term very see our underpinning trends short and current and with near growth climate to our to data our in us business. be about

points growing number steadily, by our hosts momentum which customers migration and transformation digital being is First, the containers and of continued to cloud monitored projects. of

number US to a a agency, ore deal a closed in robust the seven company, media we record a new quarter, the customers as the figure turning customers a impact including Belarus about as with added had six metal new Second, sizable during the mining on diverse logo including government off conglomerate, we a of in execution in XXX we was strong new year-over-year QX. side X,XXX logo ARR customers, SaaS quarter Russia of And and the and hyperscaler. business

of high product pipeline is half our large Third, logos And new revenue year gross in churn with cross-sells into the steady going low strong. new the mid of and second the fourth, remains retention to XXs.

to our products. Moving on

infrastructure, our pleased the all strongly log management products our The and Observability, for We which adoption with pillars customers. QX. expansion grew of in are are APM of three continued and

and exceeds APM quarter now management of [ph] Our log suite billion ARR. three of a

core Synthetics, Continuous we as reminder, APM suite APM, As Profiler. RUM and define including a

recent that, to our strongly continued grow with pleased also to addition quarters. infrastructure the In newer products. with monitoring We're of on par adoption

infrastructure excluding ago. continue than announced X,XXX CI has And at some suite already Dash to with products, paying last logos. Visibility months more a year-over-year. than grow specific a management, we strong log more Visibility ARR APM monitoring, start and CI product newer Our new just seen we've and product, customers, our for few started including charging XXX% which year

platform Our in market. strategy resonate continues also the to

of two using or of more XX% of products, a of or customers ago and ago. our X% using were products, of As products, up up six from up using ago. end XX% year customers customers year or four from a QX, year XX% were a XX% more XX% were the more from

platform. strong first unified to to published we But Monitoring order once year from Performance and product has covering and delivered in teams the We're to experience, of cloud pleased our carry want We our securities, the best-of-breed for of Watchdog, teams dimensions. in analysis. over provides congratulate monitoring Observability. our DevOps, and architectures In very to cloud the this as five [ph] fully Datadog and GA on AI Magic to our our having June, one quarter leader, improved of recognition and for Pipelines, and June, XXXX again see from R&D, a it automate move availability of another all Application with achievement. place. a preserve on general announced last went the APM product been the again trouble and which where proactive Datadog XXth In our in continued innovation. we ranking also I engine, scores platform years, - Quadrant of in complexity this attribute and just evolution let's Gartner native product that takes to alerts, shooting Observability Now

Timber, project reminder, open our a this As a very is named based XXXX of acquisition popular on company the source behind Vector.

from telemetry destination, leaks management Observability vendor By Engineers of standardize cost logs overall and improving of data in complexity this destination data data, an and redact risks sensitive organizations to data using their the can data and quality, and increase control sources the their volume [ph] sensitive scale decouple from traces of core them maintained And Datadog costs. data volumes Pipelines, manage of better and sources quality exponentially. and data metrics, many customers must to As large grows applications, compliance. lock-in, leads volume have to wrap

teams. services, Next, help. With we remediate the announced June, issues this governance This hundreds do often Catalog. adopt call Cause can globally challenging Audit maintaining which understand and who are compliance, and Service for by which to while are the availability be in of of we architectures, owned or week, businesses building platform, general of to Analysis Root enforcing interconnected announced Trail to helping distributed of makes services Datadog cloud greater large difficult, creating customers general availability often what safely thousands network transparency. of developed to And

populated. inventory Service are and or do team Our typically what CMDBs manually ownerships similarly Catalog services to independencies very defines where configurations displays might CMDBs

identify this can Catalog it specifically information cloud Service Our the designed was automatically for edge. as

public third-party acquired our With we Seekret Seekret, our for security teams suite APIs unlock visibility better we new to S-E-E-K-R-E-T. this Finally, their private, Seekret, of platform. it quarter. API APIs. engineering announced to we're hard control teams which for their this product will needs morning, to to is accelerate our capabilities to Platform that very needless APM sets on gives our update bring say, exciting Observability work. and we customers spelled path into the their for manage and That's overtime, continued grateful And our and engineering all product on

Now and moving marketing. on to sales

some in discuss Let's our wins QX. of

First, legacy our products, transformation, Azure. a customer going of services to particular, we on-prem centers open in data purchase with upsell source consolidating is support and audit signed digital as our to and and from through They tools global migrating a nine disparate a and clouds Datadog X-figure large-scale including all well management multiple premier company. platform and services. are as account strategic as their technical This

customers, figure ours with sell This and Datadog are tool in seven their their the experiencing provider as is managed and APAC. rapid as a entire upsell a transitioned Next, the at had region. partner Datadog-authorized - to service growth Datadog to CDN are monitoring legacy They the the services in well expanding US from MSP a top Asia customer as adopted and they platform. we we in opportunity that

major and log revenue. and Next, as by Datadog company avoiding legacy of figure scales. their infrastructure, streaming media more we loss wasn't found one aggressive This international their current that had This for land including expand incidents a to products with APM with a resolution opportunity simply of But and solutions its mix in of management, source seven usage customer service, markets. company. needs. they plans the expansion itself started before of has in open multinational and their They just customer accelerating with to the with meeting calculated

land chose Next, ago, we company. figure providers customer six a over with homegrown Three a Datadog. legacy had XXX monitoring this years solutions logistics Fortune and

customers' around dozens their year Meanwhile, time incidents platform way our long incumbents has since a Now come with these leading resolution. particularly to then. high to communities needs, were of unable high-profile adoption, meet a a to

multiple Additionally, expects developer by with $X save resources consolidating million in these nearly Datadog. to customer products

we lacking company native with But land hyperscaler despite open own a solutions critical consumed primarily and the hyperscaler. a using Finally, engineering customer this to this using visualize By was and gaming services. gaming expertise, unlocked cloud homegrown six division granularity prescriptive at alert source Previously, way deep and had resources. tooling. maintain Datadog, were technical its a figure

we number In these our announced help quarter's engineering looking a are We this for contraction like wins is six platform. with on ability conditions also customer companies continued save These streamline with worsen. and their that and in customers to to the software addition costs and logo expansion force customers their to are figure thank and strategic had to our highlights, experienced or seven that confident we and economic teams execution. less, deflationary on multiple I'd these reductions. business should do go-to-market our were a more believe And have operations, efforts sizable vendors wins, consolidate new recently of staff

to change macro outlook. of towards the no let XXXX. look is Now and and the uncertain journey. back DevOps we cloud-based trends the We environments, our as remains long-term half environment me modern services that speak critical we recognize also But to longer-term Observability into see to

and drive to complex leadership their solve to customer's problems. for value, continue market efficiency cost and We monitoring savings our

continue As digital critical to in And order it that is we trends a these growth believe feel life companies very in increasingly are to efficient and result, transformation our for journeys more early their better our and confident on believe serve move their and engineering embark multiyear investments. we of are cycle. become these drivers times still infrastructure migration faster, and in like with customers opportunities. to in their our long-term cloud We

closely and continue strength. our necessary, to environment opportunities. monitor At same time, balance long-term priorities to to plan we So these long-term will execute with further, in the if to our demand financial investments calibrate we on we'll the solid invest continue to

Before I to over I wanted David, of to a couple announcements. hand it make

been on are Center product conference user in we're excited York and Dash the our XX occasion we City. holding to Javits October XX First, to. to the that for our one we've latest and us This show at is New showcase an innovations XXXX, up

of investor an not of pleased our financial senior Citigroup we more of to as a valuable guidance. will Franchises on and in meeting CFO David? that, shortly. experience CEO brings to services to of XX share Board will Titi for over at incredibly And performance in we'll The the call organize industry. be roles leadership turn Dash Directors. we I it will least, review but global on welcome scale. perspective last experience at to the also Cole and and years our Legacy is and are over With our We details be financial continue Titi

David Obstler

Revenue QX. up We year-over-year delivered up performance Olivier. million, XX% Thanks, strong in quarter-over-quarter. XX% financial was $XXX and

to beginning continued some Olivier with existing in we our macroeconomic customers strongly traction. robust As concerns, new customers. to usage executed continued ARR see did of and strong described, with But which logo we growth low costs growth, response manage platform some our churn impacted

quarter, our our the on dollar-based existing adopt usage existing as products Looking XXth existing growth saw for customers of to was customers, some we decelerate new use saw above see our lesser XXX% discretionary represents low where and our relative was deceleration We strong concentrated with Datadog our in continue steady larger opposed year-over-year. deceleration more growth QX spending consecutive with growth teens net to customers in industries, we retention and customers that platform. which remained at Amongst customers, percent spending products as the consumer in our ARR. remaining customers,

monitoring growth we year-over-year. of like platform diversified And segments. in ARR aspects a log highly As expansion Infrastructure relatively have weighted are components certain we towards and volume-based areas and steady reminder, rate was lower industries of APM. saw management our that

the across company mid- gross gross our industries unchanged sustaining logo And and to geography remained and ARR broadly our of acquisition and XXs. our product hand, and to sizes. has clients. retention and because continued the our high by that reached other the growth, these Oli strong retention new is the of we mentioned, and as stickiness We of in new saw platform believe steady logos, On levels criticality our our

using or QX. strategy platform and XX% the platform our end more using of products, now two customers more resonate of Finally, products four customers XX% continues XX% Datadog with to six or using products, as the more or with in of our

results. year-over-year. Billings up XX% $XXX Moving million, on to financial our were

Remaining last differences in obligations, up this mid-XXs. billings of was of timing year And billings growth some in QX slightly pro QX for but was year-over-year. mid-XXs were and year-over-year, the than the ago $XXX customers, RPO was those Current the large RPO, quarters, million, lower duration year-over-year the in As which in contract quarter. performance few in in a or we was year had were built growth XX% adjustments, forma previous billed year.

and customers some their level that usage commitments, of billings in observed we growth not conservative growth but RPO being their addition, In are but aren't growth. impacts changing more revenue which

said can due of of billings XXXX first or the whether from growth, duration timing billings XX% As and year we this, fluctuate invoicing and illustrate the previous year-over-year. growth quarters, contracts. higher customer we vary to revenue RPO lower of half was significantly growth of note in that To the and for

metrics ago a reconciliation the statement Unless of in was Now results. quarter let's to review some million, XX% in the last and key non-GAAP, we margin XX% Gross compares income earnings non-GAAP a GAAP have financials quarter all quarter. otherwise to of gross provided year noted, XX%. of representing margin release. and gross This are our in a profit $XXX

be we medium in We expect range. reflected quarter. continue to experience XXs term, sales margins efficiencies our cost costs the In in of this to long continue cloud to the to high gross in

of This in investments our in travel increasing versus QX. in-person and and our the events, year-over-year the included in operating OpEx. sequential in operating $XX margin QX XX% $XX margin XX% growth success year year-over-year Operating our was grew or million operating XX% of R&D million to OpEx income contributed million QX income to office XX% which ago our or $XX go-to-market, Given non-GAAP compared return to quarter. in

Cash securities. turning and equivalents, the cash billion balance cash of consideration a After was $X.X with capital cash free sheet flow flow $XX quarter. was $XX and restricted cash software, statements. quarter the margin operations into cash, flow XX%. marketable flow Now with in and free in million cash expenditures million ended to capitalized We taking the from

XX%. the first Our of free XXXX in cash was half flow margin

for the XXXX. third the Now year fiscal quarter for outlook and our

the assumptions customers. guidance, of account to into as our growth organic recent uncertainty among informing using conservative macroeconomic the Taking the growth we of and variability certain First, are customers.

execution As Olivier environment. containers own in we trends less macroeconomic into but see strong recognize healthy business, and the may the mentioned, customers host due in businesses we have to our monitored and visibility their

in net XXX $XX we of average is based expect to quarter, million $X.XX million XX% million, growth outstanding. shares diluted million $XX to to $XXX and $X.XX be the the at to million the midpoint. for in per share of weighted per to the income is be share range year-over-year Non-GAAP be to represents So range in the third expected non-GAAP which revenues approximately operating $XXX income expected range on

Non-GAAP full on fiscal the of based billion $X.XX million. in per weighted year of in year shares range operating million in XXX is to expected $X.XX to $X.XX of $XXX to at the For year-over-year $X.XX million Non-GAAP be is expect per expected be be billion, XX% XXXX, which growth midpoint. range share average approximately we income the to diluted revenue the range $XXX net the to represents to outstanding. income share

to regards our as guidance, Now out. wanted to point margin I

at in-office First, operating events. of gross impact additional basis this We been historical range. the margin point attendance, and top XXX sequential was impact have have and QX, in we we expense, basis an margins In in sequential margin XXX our to QX. a recently returned expect estimate that point travel

As mentioned, hold of these the at conference re:Invent, year. Dash we and show participate The in customers be of our to will We're the will and the cost our get in our will fully year, approximately Oli of we impact. product largest end events we're showcase trade QX, in-person XXX this user and events many in margin excited innovations. back points to front basis of AWS

will future. we and off and marketing in and been the these we investments, successful believe pay sales Next, have in making R&D

cost remain and disciplined we in we given uncertainties. While invest, plan to our macro to continue judicious structure will

in be the by half the XXXX low non-GAAP in double operating expect we guidance, margins indicated to digits. As of second the

we our model ROI cash driving efficient, a on We and high on basis a frictionless over time. investments highly our while are have flow built profitable And free non-GAAP generative. healthily business

Our are efficiency mindful our advantage. migration customers' strength and journeys, of calibrate financial that to the now, aggressively necessary, our have, their will macro financial recognize the our importance of further, uncertainty investing and financial worldwide critical market are our cloud maintaining are greater to for thank we intend drive into not will opportunities want long-term right these in strength. costs long-term believe make monitoring call is participants are we environment best and the this embark We In our while of and other we our that, macro of if I environment And see uncertainty we begin options to times affords we the maintain the change customers and carefully, opportunity to closely will while transformation, competitive the we Q&A. which positioned in we open strength. there Datadog's we course, digital But of no Operator, us to growth. with on are to in let's and our help well questions. for efforts. conclusion,

Operator

Instructions] Thank you. comes Our [Operator Stanley. from first Singh from Morgan Sanjit question

now is line Your open.

Sanjit Singh

a thank impressive guess in about what of assuming to of stabilize the question with that to framing respect sort a you I And you the business us or context how taking in helpful? to David, guidance terms some to see the for talk were the guidance usage in you're you I that results framing quarter is, comment Yeah, particularly give in some with trends then, and that If the back the you're be would some these verticals? bit as slower these some you the a back questions improve little worsen? or half progressed, start some sense the sort when and did QX? trends of July, wanted on in super of the that? could first half, XX% seeing are on did terms it of of seeing give of just you're the trends you QX with really of And us you respect in and can growth. of it, the QX Is how guide. give

Olivier Pomel

Okay.

and in growth June. with usage late maybe start start did April, I'll that we saw in we the So linearity. We May mentioned. viability the that really And see

some say some of we trends, remain growth an But noisiness seeing types the of we we but fact this historically. still in bit To and is of what as in have what there. did of - did COVID, ones our got that happened cloud have - the I we containers, a that in that term growth as was all just, net or a fully others what those I we by more And you getting we're which of are than that at while macro indicative this that products, of answer if and quarter. to a I continued is for conservative is for the thinking we're few saw improvement about for should see proceeding migration some host instances maybe as of the that in valuations, a customers the David pullback of some seen really think the say, would deeper into but sharp short cloud it's did volume growth, customers time. the data talk our you're especially still ahead APM, But say and positive is for certain more So should slower a we noise. question underpinned we not uncertainty. before. more There's also, see outlook and is should because going see that of healthy July, component, seen it we the terms I bit. logs on have little

that? we bit be that do on and want more comment David, careful. you a want it So to derisk bit little to a

David Obstler

macro seen we've uncertainty. be have the the what the quarters. and we note Yeah. raise more And would can't maintain as reason know, confident and as was that growth about raise QX, given it is look you I that into the our we that conservative organic other where On lower happens using philosophy. metrics the that if been and passed through lower, always to conservative than continue macro you historically is done we beat guidance percentage guidance, the here in in the for than uncertainty of by previous from have at

some would using to that, I guidance. assumptions that the quite been incremental there, But that we've everybody take lower we put than this. were are conservatism into say So conservative there I'd in if remind give past you when want always

Sanjit Singh

the And helpful. of lower one that could which like super the that's just context. comment in slightly APM, quick on you volume-based on products understand I more all logs host-based if pricing. I'm appreciate me may complete on sneak products question. though, sense. makes some I With one Olivier, why be usage. based if fully sort I like That's the I'm think see a wrong, little Because confused there. correct might primarily on deceleration seeing I

side like two on comments in how terms cost -- in side of parts of the terms you're log trends any portfolio? usage of seeing some So the of those the across APM versus

Olivier Pomel

great a question. That's

part So is for of like host-based - is APM, it and there's part actually part it of logs, APM of traffic-based. that is looks is APM which

control the spend show recent data this than do more, the they And customers. these there. generative can have to some APM of you to little growing, And and would parts want these healthily, it basically part of levers actually If have growth. customers which - your growing can you analytics run you for on It's seen retention retention, the we've reduce thing logs. longer but data, both slower quarters bit that's with I still can on in say, you still were but slower like types are certain a behaves other same

Sanjit Singh

Makes I total it. very sense. got you much. Thank

Operator

you. Thank

from from comes Raimo question next Barclays. Our Lenschow

is open. line Your now

Raimo Lenschow

new I of Thank name, you. on that stay version its subject, Meith [ph] Can Olivier. The my

need log So is not side are if to I different impacted use like if infrastructure my and much not how and need I is as you a the as you you say like if are work pattern thinking as on people infrastructure because to monitor or I'm volumes APM applications infrastructure. you more much monitor that my Like think with -- part? you, is important as or of - impacted there

help the us like then -- maybe one bit little understand And I just there? follow-up. I'm So a have differences

Olivier Pomel

short-term business you we customers in No, we bit have them levers seen slow their that's customers what it's we us, consumer and they example. those anything cases, were these is APM, down. That's customers to the in several delivery, that growing XX%, - for mentioned little if us, us and naturally, have One they're already equivalent are to discretionary themselves using In really, that their to we've volume-based. But small part into very break natural. small do are buckets. XX% for that that's a also very then been, - that's our always with in optimize just point. have would this only at three spend is of a too part actually pay of have a like business, customer cater and customers. and we We're diversified, to are us our uses, bucket if now that word logs a more word customer What I mean, lot to seeing to

uncertainty you I a he have us. say And The a more series little second they bucket can see spend in would future. with don't the is customers bit

all we what they time has again. because might quarter, we've every in this the example. do or What logs, of but some they happens mean their that expenses. they maybe you same mandate goes looking then a for closely optimize a and then whoever They're bunched and be So those same events. they all where their at is I challenged find to see in optimize bit at they're And businesses close. do said need look typically before, more today, that cycles again new. something every optimization. in through macro the go we is little like through you for not they're is CFO find pretty times same some And customer just looking much see customers the going for can can to leaky not faucets those And

it some seeing bucket in that we we're see on out not is this the seen beginning we third But call comparable the that wanted we've there. data, of in in still, COVID. so of... And or So the again, to call. Then of breadth to at the what magnitude

Raimo Lenschow

Go Sorry. ahead...

Olivier Pomel

the to deliver promised had finish it. buckets, three three. I I'll you Just

The are less the The third growing year the slowed smaller spend, we case, us. are have a ones larger on customers down more basically this lesser than mean bucket larger is They slowly growing as haven't. than that $XXX,XXX before. which bit actually ones. ones while were They're little a in they

David Obstler

if data logs, parts indexing. other - pricing, Just after it's that like there's you'll see want and related that are as to clarify, in when APM our on look related Oli are to are host-based ingestion the call website, that that you mentioned, but

so what and through experience that which was the use to didn't the the of also is much And but and a saying both where of we indexing APM we're with both tweak variability. ability part of of variability, part part, more saw logs, the ingestion the infrastructure a is the data as but that APM infrastructure

Raimo Lenschow

thought impacted. And the follow-up kind Consumer thing if then of about sounds Perfect. first sure as in it the the discretionary you about, half. think is second like implications have the downturn and that about Okay. thought gets you for I'm you the

to Is supply kind that like also go how next, little fashion newer you of second or comes were BPG more food you companies. the Thank bit, the kind think when about something it do How the seems a tech comes half? So think you. you that do about for delivery next. of mentioned you retail chain? buffering that anticipate You which is through

Olivier Pomel

Yeah.

diversified. very we're So

in revenue. our particular probably say, So to terms also, that would part part or start have. of other the following in more we the we them verticals - of actually of industry migration we in consumer covers And customers, have than native I the no of our that of in discretionary large very cloud with, they are those cloud actually

So looked that guidance. we that into when consideration all our came at

Raimo Lenschow

Okay, perfect. Thank you.

Operator

you. Thank

next from Sachs. comes Kash Our from question Rangan Goldman

is Your line now open.

Kash Rangan

Yeah. I Raimo’s well. can pronounce perfectly name

So, Thanks question you. here. thank giving me ask chance for to

I growth sequential context growth. growth, it. much curious They had on us they your you with good basis. sure whatever I'm put CRPO see And we AWS I help call time, at reconcile and you backlog backlog How uncertain business. are want the So do there did when you an larger look growth specific up how to that what's your basis, But pertain happening if I'm look during growth, Azure, year-over-year company that at of can bookings, things think mean, whatnot. you in to of a even hyperscalers. tremendous the

So of exposure is so, to there backlog. at teens did Maybe discretionary. way out, Maybe of is could the the able look rest or the parse you to to the you if a up it's how different were And that specific Datadog? business percentage quantify hyperscalers high rest the put that XX% to the business. kind something there consumer relative to if how of

mind. to you I'm of So trying just an bridge so Thank don't you if performance versus cloud at much. public Datadog level, the aggregate the

Olivier Pomel

Yes.

you the on start give I'll David more maybe on color the can with So rapid bookings then trends hyperscalers and the part.

So in did than the better we a QX, lot hyperscalers.

them we're basis. And than actually all decelerated So they've faster growing more of in we've a lot than done relative combined.

larger than a commanding Like we ratio last the there. So are were quarter. feel good we we revenue the portion cloud of actually about

In in don't terms leading success the for that. business the terms to forward, think go see of indicators specifically trends, we But good of us. - the are for of hyperscalers we looking I that of guide all have

a We're future. on We've second year with but are and with the good. into putting of the new great The mentioned also our it very capacity I've we've logos. pipeline's that's attaches. So we're action hiring the very seeing half added the the and new great product success done seeing to well going with everything call

So of for to more us want a which do bit a leads color What necessarily don't conservative. of of terms gap we all the of the is looking terms have in be David, of in that to more growth, little noise it? the part little you more have the data we good. is on booking future in give

David Obstler

Definitely.

and is is in remember, that the RPO everybody the for ARR they whole look with expand remind getting that the ARR that going the metric. to growth you land of So and we get used variability over at increased we start look scale on on go way at the there's the And this business by to revenues. They up time, model. mentioned the billings that that, Because to average, best through, growth certain they commit. point growth. has where and go when clients, an the net-net, been our a towards that Again,

use get of a it whether you - take commitment. is bill times pure is or doesn't or timing goes on-demand which the because plus XX, an linearity, new a XX%, that is that XX% bill a when multiply You that and previous and the altered either by commitment out in

be us. to going analysts it. with it's understand investors So that We look always noisy at and

of revenue think that, give over we on only that the to up to I was the year, the and that in it some revenues. very the the basically of in in back have half moved quarter quarter of this pretty everybody and And that the timing to to comes close that, but were variable in growth so drivers second XXs, really we it said try effect we -- second on much So business. there first the the the Because the remind to but quarter first there gets first is relative Why? put of time color down, our billing remind just doesn't everybody. growth, quarter

Olivier Pomel

business And And to actually this, like manage us about billings. just aligns customers. our to because very don't we it theoretically, be that's clear with the

we land manage we're into expanded. it for turns we - typically and it When heavily to What we very land, is us. So which revenue pretty directly this means small. usage, land

expansion expand their we're of really next has that change the going customers. doesn't It So on we really this quarter, it to small doesn't growth quarter that really doesn't matter billings. that a because And we doesn't usage change to them. change from actually profile. revenue the impact when whether see do really It typically

manage see there, we it. noise business so we to And and some the don't

Kash Rangan

and David. Oli you, Thank Appreciate it.

Olivier Pomel

Thank you.

Operator

Thank you.

Our next comes Boolani from question from Citi. Fatima

is line Your now open.

Fatima Boolani

for some DIY or But remarks. you displacements well, Good my the broke, suppose one or free Thank open prepared fix questions. it type I talked more and Oli, source if in - for model you David taking don't uncertain backdrop, it your please. one wins potentially is macroeconomic attractive. challenged vis-à-vis, and for as about morning. aren’t Oli, you in a more

give then us some commentary open sort I'll color compete with for of can effectively you especially alternatives, you your it expect "free on some source" separately. if follow of to curious for how I'm And volume-based solutions? up So

Olivier Pomel

Yes.

So thing before to free earlier you to is script expensive actually we layoffs expensive from they turns for have had bought the that because us. because with in customers our had typically number the people have most with more first time We actually tend that for the build And the sizable announced actually wins mentioned we a customers. be it it yourself. big out And us most been shortly have of or expansions efficient. that's

their concentrate to more opposed efficient efforts actually - where adds as been reinventing business expensive there have their We were to and way it themself.

Fatima Boolani

their as that. of quarters rate And historically, you, to RPO think think your I tied type David, in customers business committed and some moderating you three levels moderate just I appreciate contracts. roughly you've commitment card mentioning that categorical characterized very for were of committed are the I that is level. And

that commit much very get and the your to the well month as levels perspective impact usage is of as your translates I on the business around was X So to into next sort quarter on of increased that how XX conservatism average-oriented. curious

for you of that of it month more a from for If here? me. us to just X could kind XX that's in frame frame And

David Obstler

thanks for the haven't Yes, - seen yes, we question.

have recommit, of same, to grow, that, land, any that conservatism their on those in optionality. demand. change This into looking more may consuming on-demand, really the use, of is that they management of level introduced but with at some to plus in We situation in that did seen affect we that still haven't was financial level get commit, because revenues want the We more we still say the numbers. but that uncertainty. retain into stayed commit for previous have they're doesn't Because sort the of they may clients

customers unit pay marginally higher generally the we higher some that be trading that be And if there unit will the the going You continue opt a some would what's next, more for we but of optionality. commitments. way, know to did you'd happen if don't higher see but to We stayed think will of have off uncertainty, price price that to the that. that macro for relative pattern would type you price, we

Olivier Pomel

offer times commitments. it down. with customers, align we're play that, We way. and fine business we're usually design, that, again, our success designed that, discounts don't very We we And to or to with time In large the for the that happy it the that's And way. by of want large always way. that keep like by like -- actually

Fatima Boolani

Thank you.

Operator

Thank you.

Our from Hedberg next from Matt question comes Markets. RBC. Capital

now Your open. line is

Matt Hedberg

verticals fairly maybe assumptions guys. for your question Maybe follow-up, I question, they David, slow sounded my actually Raimo's Thanks from this great. beyond usage? their like guidance Hey, consumer think discretionary smaller to strong assume were philosophy, It taking quarter. really the did And earlier, in what a are you other customers?

David Obstler

retention. We the part, we to always take think and we in net consistent saw smaller our second very gross I that do Yes, had customers, that.

down. takes or So organic it our guidance new always growth be drivers, usage the always and it takes which would the the logos,

So we every in that do quarter.

following inject overall, the that And But I of think I less mentioned down level things through conservatism. the beat guidance. incremental our an all the us. of of quarter, passing know in providing philosophy from of by remains it taking of basically core this we philosophy you and of those at that

Matt Hedberg

Got it.

the element a geographic? Okay. And there was then of Or a there consumption? sort of in the any of geographic it European Was was element? just to kind slowdown broad-based

David Obstler

We was see It was did There not. geographic. that. not not

we be but it more large did As that to not based, see spend we tended or industry either geographically. mentioned,

Matt Hedberg

Got lot. it. Thanks a

Operator

Thank you.

from Kamil ] from Our next comes Blair. William question [Mielczarek

open. now is line Your

Kamil Mielczarek

One Thanks for taking everyone. maybe. question. morning, Good Olivier, for my

of solutions. them new First has of products done historically Dave and launching rapidly acquisition Seekret. congrats as a the job all, great on always integrating these of

year is one a Dash, products at to for think the turnaround that these I solutions. typical become you mentioned Datadog stand-alone

now generation making trend your changed valuations However, and more equivalents and market upward are given around potentially in billion, the have thoughts the cash approaching cash $X your decline especially a transformative in acquisition, today? given

Olivier Pomel

But valuations that. businesses see like really those more is higher larger some looked to we're down looking for value It's of at in us possible. there. the Everything opportunities and is coming open. past. themselves the presenting We've some We at

general, in side. very So active M&A the everything is But we're on possible.

I only say. we'll can temporarily more But now. as there's more are much be active not think right I markets

Kamil Mielczarek

as a year, you see we again follow-up. saw investments And engine, sales quarter. Great. into Earlier building and this I and this its accelerated marketing out just recruiting Datadog

hire T&E. the even think more you Can other Thank aggressively think out given the the balance you these after you. And maybe on versus how between about focused? preserving where end. continuing margin do adjusting to incremental are for I environment, us coming investments macro update on and stronger

Olivier Pomel

really capacity. we -- it. And of now, an the in right interesting We're So funding because success. as from of a very predictor at We're as successful are aggressively I efficient. disciplined very a been future We're it see the situation building recruiting. we're company, company. We've

than that for of you since million we've a a who than less generated time, our more on burned those then. and followed us $XX have IPO, long we way cash For lot to

company. the So discipline is DNA getting into of the

very that profitable. growing and also would past is We while quarters built extremely model this being And fairly around business two frictionless I efficiency, the by efficient. fast shown say, over the we've

there's profitability - minds the our company. in about doubt long-term the no we of profile So

could what like year, invest, spend will little didn't everybody does This year, opportunities bit invest us different. it's I it not that to could this the is money, that this, times really affords matter. it the a Last rest in of think So market everybody have.

from that those and the innovate, see an as really all opportunity we break build capacity back and to things. So even further self

is obviously, discipline as Now of said the earlier, I the company. DNA in

environment the is. looking future. do want more? are have or some maintain need to you we comment So we always profitability David, at we're adjust to the macro levers we can our the all in what margins And so

David Obstler

investments. feel cetera. periods this are as we all what top banded we line, invest as by marketing top what we Yes. investment just said we and a try to it's XX%. steady on along the integrate, went we the an execute, many focused was, can't on acceleration, maintain that that when And in hire, is I times sales to which there and And line what to can want can add is where we profile, et -- we fast up said R&D

costs margin part expansion. exaggerated our happen there that have you're That was were normal So operations. business in going of are that because COVID some didn't to

the line, at this flows deceleration, So to margin see of then of maintain acceleration profile you And might high see and such through is with top if we you try that it marginal a variability that you the a expansion. investment might a less because steady rate. see of

of advantage it's our but philosophy, invest long-term take the always that's So and opportunity. to

Olivier Pomel

as Yes. about attaches, or deployments. brand as The of opportunity product customers last about in thing or the ability see I'd product just for new well it's say feel the products that I new the pipeline, mentioned our new great it ship success as processes of us We -- pipeline to whether general. we are sales earlier, with logos, we feel great the in leading indicators

though that. around demand all us makes bit fine that. bit confident show are be this a great feel a There we with challenged. about but us more our So the a environment to longer is is time these will And possible What's investments. for we that of into investments, very

Kamil Mielczarek

That’s very helpful, Thanks. color.

Operator

Thank you.

Jefferies. from Brent Thill from comes question next Our

open. Your line is now

Brent Thill

David, everyone think Good is a little confused. morning. I still

a are inversion with you're you this of Many half? Can seeing with And an more SMB companies enterprise. seeing back view SMB You're large. conservative think what's kind the not you are happening explain at weakness and in in large inversion? why you embedding

David Obstler

inversion. an not Yes,

we X,XXX to a that of where a you're which or employees enterprise act more a et in had more was And That or substantial remember X,XXX up. look segments, differently two, a it in an been mentality. was or X,XXX, think is SMB, had. areas less, X,XXX there whether mid-market costs. what we where certain expansion, of us was what was we than is What customers at for SMB not consumer, -- saw saying, and what it's cost the conservative larger regardless said mid-market said did and happened I cetera, SMB we see did they smaller had -- we not enterprise

that in terms year, assume don't we wasn't But the fell determinations. guide the were half that those lower all those the sectors So organic and have in we it was growth we know. always, And what out. And of things. we wasn't for us we second might historically Europe, expect. It it SMB than in of the

inversion spend the what the what industry. happened of think and an driver wrong this SMB the it whether of the because thing mid-market -- look enterprise, So was level cost the what but is I was was not or

Olivier Pomel

- customers. is it see, deliver We're critical to we to we're critically value. way One important, our

more be to them have We efficient.

going on spending bit look the more whatever see the that So money, savings of the of larger the on there's us. and us, you in earlier, -- can customer whether is, levels But we're customers not And and for block. spend size chopping the mentioned they're where to of with as general, some optimize, they're especially product. going volume-based always a little at with spend they're a to we

David Obstler

retention at gross way, enterprise. the stayed SMB, by same all And the the and different levels, mid-market

do So you retention the when we do of solution, have gross to in you're our talking no across solution, you saw continuing the all customer are about, change sizes.

Brent Thill

Thanks for clarifying.

Operator

Thank you.

from comes Our Mizuho. next Gregg Moskowitz question from

line Your now is open.

Gregg Moskowitz

to Okay, this in and for Datadog they questions of you're pricing commentary frequently totally environment? thank would be Oli, lot levels speaking, about on raising are customers, the a your taking more that you helpful. Any speaking questions.

Olivier Pomel

want deal, a because products. think from to to be want always a be CFOs use They more optimistic They and of situations more in with it's our wants And like be and conservative. this more truer to so I true. problem mandate true, - even to have want going it'd for were them. that's the there's our product. of that's So to actually been always better buy but They a -- we Everybody conversion very customers where them. more more

anecdotally, see very with customers, So but we what we're bullish. from --

Gregg Moskowitz

And interesting on wondering you it. of over there or the if consolidation script, examples then I'm but Datadog? so, Got on trajectory in months has your look or you any whether Okay. to six change been not past the back some touched were customer to or standardization

Olivier Pomel

see But their it. -- the the think, we is what It's software do. of by macro the majority keep on consolidating So customers legacy now prolonged to we seeing if there market, and not might on like we save really us. we issues and again, in to of more more still consolidation want more try

what the do majority definitely happen. not but see not that's as today. that That's we of So of what Again, that's think we that projections our might any possibility. on, we we base a something

Gregg Moskowitz

helpful. Thank you. that’s Okay,

Operator

Thank you.

Cikos from comes & Our Needham next Company. question from Mike

Your now line is open.

Mike Cikos

be SMB to pay [ph] those you're has either Or less the when your it at out to I to guess, for for enterprise. just taking thanks want here, other deals? that may Hey, guys. usage-based really, previously, did back larger regarding impact to an characterize of wallet been to the because of is vendors? it license their they're less some these just I SMB that with Is you're a come movements possible questions share the, seeing level, And organizations exposure you products. it is point the versus have SMB looking more fair

Olivier Pomel

simply but your to the the what's They exposure is, $X,XXX. difference same Probably not. have time say,

If And you're time with a much sell we what $XXX,XXX. that's see to larger it's worth your optimizations. those customer,

Mike Cikos

adoption plus time first the then deciding smaller parse implication from sequentially out me help follow-up think the at will multiproduct be helpful. could I product from from XX% actually And this look Understood. declined seen you for take is later date? there trends pay if if would -- to metric, your your customers, the that your Is or I that I another at you for again, a the is we've module two product starting customers had to that now XX%. you are And adoption

Olivier Pomel

products, are because I mechanicals we two think we said with our landing we more of - new logos. have more logos new just It's XX% and

bit. this down so pushes the a And number little

David Obstler

XX% no you these just in nothing, all XX%, nothing, know, There's - are change there's trend.

Mike Cikos

Got it. Thank you, guys.

Operator

you. Thank

from Our Peter comes Bernstein. question next Weed from

line Your is open. now

Peter Weed

rationalization that to in on. that taking actually at it's with cloud pricing Datadog or managing pulled Datadog? two customers going as even into overall cloud see the Datadog part doing some a see my Or Datadog. interested those whether that a as of and effect may that's that happens topology broader just to their And you just is be on focus. that It splash the you pulls customers not cloud are rationalization. of Help cost Thank and it something is targeted more for things, that gets me or unpack question. broader trying unpack, focused I'm directly down are

Olivier Pomel

cost It's focused just their on structure.

layoffs. optimize. So seen decreasing see and a in they line can and they to heat number of up again, that do everyone up order decreasing their number And expenses they -- least had they you've what a customers by at

going structure. we're cost that are Their they're structures core So their after cost there and workforce -- hard part that. their of

think -- to top because customers both them it's That to and critical, like certain were one us of I we a those a a use their lot will, vendors. of means, their good that tied trajectory. thing own those who of for very are, extent, us

Peter Weed

Okay.

and that So not is Datadog a line of... item on necessarily focused just on a you're splash saying very this effect as

Olivier Pomel

know they're they're save They're trying money a these those, cloud on guarantee working spending spend. customers on cloud that saying their some I'm also what providers also And in spending helping that. we for they're are money let's more lot focusing And money. money of the you, of I to there. No, with spending on. with

think customers of the these help us. be have efforts everybody trying relationship we most them where they get again, We times with to make to on actually them. customers. We they And make we side successful in like them. our to long-term and work we I providers with to what been want so And aligning successful in a the them what of there. customers involved to the spend can most their cloud is want have. on this, the of want have have we help

David Obstler

just at real-time monitoring cost of on and on their it you when at than rationalize other that at but said, more. we looking how experience if as newspapers, see less things structure, you look things feel there that you're look are clients, been application Datadog, opportunities, Datadog is And to the the read stickiness important - retention, given you businesses. focused your has focused gross other it's the generally, and Now But the what you that for across. to did our we you is

Peter Weed

other one sense. may. you Yes. Yes. No, if no, last that And makes question,

you to see some with those of think alluded there improvements kind of how may of even that In about of type caution the July quarters of thing. been juxtaposed some have contracts momentum and them I this Can comment timings some and you're over some some that on some talking of you closing the other you improvements and and have contracts. of to. in

Olivier Pomel

were in The the the contracts. a is which think closings quite one were the not fairly the improvements I contracts about usage mentioned closing everything and about July from selling else. trends, and I force

where pipeline, -- -- very we've sell with which we happy seen commented about what and we're side the in great also usage. this We July, a again, but is

David Obstler

bill We because as the is is or this ARR timing Yes, to positive, -- when to was not to try point I some time. on it's commitment calls when differences is. quarter. like out they're think out over correlated in it always been Every if billing the is not goes the call, revenues there -- as the

when we that less, that plus everybody not everybody we major drives remind the we just all remind that's And not we on - model going company. it. And it's minus. when and read the said every to to of want we I line top growth want plus, almost into the earnings it's to anything that variability time everybody you're because every remind call, - that So the metric and think that to of have land-expand

Peter Weed

a in kind utilization, I turn do think mentioning revenue and additional should positive But of it you're if future mean, trajectory, got see... I you've you periods, into Sure.

Olivier Pomel

actually same. Like the others no there's delay billings. it's period. a there and the revenue two was - in between are same There's we two. Usage - But those now is one delay were

Peter Weed

at going I revenue what How in is, guess July, are the you seeing I'm period. that and into you if forward... positive getting that trajectory it will Yes, turn see in

David Obstler

a unlike growth yes, was growth. We had Yes. - telling usage and in we're the -- But places that a in we're but that better and second on basically we're what usage we lot marginal, little What we was formative usage there in that you not is strong here. telling there we're making had where COVID the that pockets hope see a is what We're we're market reporting in helpful we growth, July, saw saying calling in saying average, we most of quarter. the way.

So yes...

Peter Weed

Okay. Thank you.

Operator

This CEO, back session. turn you. Pomel, call comments. will to closing for has the over concluded Thank question-and-answer I now the Olivier

Olivier Pomel

great the Thank call. to customers. of All spending fantastic want quarter everyone all thank employees continuing with I build again, and you. a a of Datadog right. so I proud our and for want time for us to for And on thank company

thank quarter. you see and next we'll So all, you

Operator

ladies Thank for and gentlemen. you, This participation. you conference. today's Thank your concludes

disconnect. now may You