Datadog (DDOG) 8 Aug 232023 Q2 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Q2 2023 Datadog Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

to Broderick, conference Relations. Vice like speaker to now Yuka today, President would hand over the your I of Investor go ahead. Please

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

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

quarter will to outlook intended our margins call, optimization we assumptions, identify make similar or the third our of to trends. ability for estimate, forward-looking capitalize financial future this including and usage anticipate, indications related forward-looking XXXX During expectations. statements and year words our future opportunities performance, are the notes believe, continue, and and and and product fiscal statements, to capabilities, The will operating related expect, margins, statements on our intend, gross our market expressions similar

subject These statements variety views of and only of differ as reflect and our that cause to actual to risks materially. results a uncertainties could are today

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

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

investors.datadoghq.com. in most release, tables earnings will comparable We in financial non-GAAP measures at which is to also discuss the available which directly reconciled measures, GAAP financial are their our

over to the I'd that, Olivier. call With to turn like

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

conference welcome as in well our attendees execute to continued week. at QX thousands we last of team Our Dashes

of continue quarter. throughout We strong deliver logo new a we bookings recorded the number new product and large innovations to

about ARR ended Let our last ended million, of from about above range. high-end We XX,XXX increase XX,XXX more, performance. with $XXX free These customers of the cash XX%. generated a of last a free our with we $XXX year. guidance X,XXX year-over-year cash quarter an was margin million, $XXX,XXX with of start XX% generated customers, from about review with of up X,XXX flow flow financial Revenue QX ARR, with up customers or of of We and and me the about our XX% about year.

Now let's had we growth it At first, for high a saw customers was discuss quarter's quarters. this previous that business drivers. in QX usage level, lower existing bit a than been

continue strong signs optimization start Second, we new that our sales we third, bookings do cloud with in logo may see scaling subside. QX. And to

In deeper. one-level previous Going QX, growth than we had in it was for existing bit lower that been usage saw customers a quarters.

and continue costs during customers, larger particularly observability some We see optimize spending to scrutinize their cloud usage QX. and customers,

guidance provide our for growth updated reflecting commentary our We geography. guidance in more and lower will David are regarding this XXXX,

activity signs the other stabilized appear cloud to the may who our began customers about ago On hand, we at across the subside. are recent similar and related see to we what in And in to saw levels growth the we the QX. usage to as the more rebound are QX, with of The growth optimization that of base seeing July by that in year users have commitments end optimizing cohort indicated us. a aggregates start customer

with customer our macro cloud trends, uncertainty along and remains, the While of optimization tenor interactions early are encouraging. these call new a level end it too significant to is an to of

bookings were Lastly, our QX. in strong

of by and the new haven't cycles and side. period been to bookings growth healthy Our the impacted new deal logo sales see we optimization cloud continue product on and

behind largest the ever, QX our had only QX From quarter second largest a XXXX. new logo bookings larger perspective, seasonally we and

logos product. our land of up the to new cloud, in turn our time annual expect We much new add customers into commitment. into of than larger model, deals more also number with business and larger lead closed a And as $XXX,XXX we over record they extend

we So growth. positive new for while customer apply to activity as usage ramp-ups trends a well logo future as signs conclusion, conservatism and our recent do are our as strong guidance,

turning to that resonate adoption. strategy Now show market. platform our QX platform the in metrics to continues

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

adopted our and The strong others. visibility already of security multiproduct new launched our monitoring, scanner, of at database include XXXX, adoption expansion customers one data craft XX% CI cloud since management, into products newest have cloud About least sensitive products. our including

expect more of time. continue their adoption products to over we to these as capabilities We expand broaden opportunities

In security quarter Securities, we over mentioned that last customers have X,XXX adopted products.

with of started Security, to cloud scale. getting many While X,XXX just these help seeing their Datadog are at we customers secure are opportunities

customers a our of $XXX,XXX and more XX on are spending QX, Security Datadog handful now $X million. than more than of spent As

the insight This model time showcased in number and of deploy place introduced data. performance, Now as which engineers includes week, AI that off ML Conference on new engineers large kick keynote, issue centralized every all development interact over launched we for our help Last with identify R&D. to and LLM performance to the and features analysis every move allows customer model and first enabling production. view and themselves; User let's product, users. exciting and real-world our models degradation and products manage model had in innovation the on a performance to To model safely quality our of DASH with model. our and our generative model catalog model to language pipeline; happens identify manage we address drift, for observability We state the our and

Bits provide AI and features, management module Bits can many vendors generating XX customers' and triggering introduced and well Datadog announced collaboration Bits act critical across providers incident issue. tools. Among AI also identifying frameworks. success, from from automatically as as databases, natural Vector stack AI. as and remediate an understands We documentation infrastructure we platform the And GPU integrations language to insights AR tests its workflows orchestration our copilot from to new next-generation the across suggesting synthetic and

everyone days traction our product contributed our it's said AI and believe last are well getting as about next-gen And data for to them we we help technologies, and are QX, alongside Datadog customers this we our space, although, uniquely incorporate make And of quarter, AI we workloads. of to positioned customers. in both with ARR. is best them AI As new excited these early customers X% the about in our as into

number separately We allowing in for cases capabilities space. customers use observability new make We high-volume million from periods of choose introduced Flex AI. showcased flexibly the and on cost-effective. logs new performance to to Moving retention required a log management,

squaring, applications We across changes. trade are onboarding large issue. so with now any errors. complete Assistant, With introduced Tracking customers capabilities manages simplifying solve our to APM localized understand explain, for APM data live AI which for production Error all We without and enable test any impact the can core can organizations, APM our automatically engineers of observability

a application we teams testing. experience also tests to have from experience, applying synthetic bringing mobile first-class developer digital help session And live for monitoring generate automatically features we're data. traffic expanded their technologies mobile and customers our mobile with mobile AI next-gen In replay

several security. announced in innovations also We cloud

and them tasks. pressing issues, a of number inbox security surfaces thousands reducing correlating technical the security of most to new smaller Our insights actionable

into We and whether Sim our Cloud behavior in the our and customers leading with And exact beyond visually our container going the an as can than [indiscernible] With vulnerable are mixed code capabilities in auto with on venerability can detection, applications, map investigator, infrastructure more a feedback extended year, remediation. expect identifying more detail. customers custom back now vulnerabilities, faster detection images code investigation they majority to code hosts. attacker's we

quality we introducing deploying Customers code issues more developers buggy left, Shifting within and rules from static or can prevent scan engineers analysis. quality with set we're code delivering to production. can directly for e-secure, are gates Datadog slow and solutions for

to announced to on help spend new Finally, more capabilities efficiently. we customers property receive

And discover on under Those just utilization we recommendations, at cloud our cost many opportunities DASH. or Our over to act functionality provisioned. some saving to container which clear them. announcements adding applications cloud makes were product made management cost the it of automatically are and with resource we're

keynote, website Relations to encourage a Investor includes to link DASH I you and to the Our more. watch learn it

Monitoring more innovation. I'm pleased focus has and platform, been Quadrant Application away believe innovation, Magic that and to third to year in also silos for teams across unified product from Gartner I the which row, Performance step deliver a We this intensely our approach Observability. on note the leader XXXX to for named on breaks Before Datadog in validates the

marketing. and Now move let's to on sales

expansion significant new said I bookings, strong earlier, As customers. continue see with logo we recorded and to existing we opportunities

So discuss wins. let's our of some

vendor expect a million Datadog, among their over critical pricing an their eliminate First, we major consider to $X moving incident not By company. customers' they American silos video previous over annually [indiscernible] SaaS vendors. quality value this with recent achieve to change expects monitoring, we deal from games results, save to signed as a some observability delivering produce customer other management shifting capabilities Datadog to higher of get to better by out These was motivated collaborative alerting such rich and eight-figure get and on years three previous as users. and vendor. And

and major seven a serverless customer confusion users. is is its a teams. consolidating fragmented open-source signed meet customer legacy This to seven-figure ramped we already has over broadcaster. among tools and resolution tools Datadog Datadog Next, products, longer XXX five moving AWS and to with in This times and incident land developing

signed a home-grown and company vendor a company. been we seven-figure Japanese media a capabilities. leading smaller using observability and alongside tools This has Next, land with competitive toys

full Datadog visibility great the time on they their five of focus busy They products, adoption save experiences work the on and for can their have customers. delivering applications. With into

needs team slowing at programmatically come AI environments demand objectives adoption expansion service its Datadog, as manage tech fleet critical and level a they provide with them down real-time customer were new put generative AI we able seeing on to tools [indiscernible]. Next, workload. new their to track launches. world's their the of risk is Using This online, seven-figure increasing and and massive With GPU their home-grown product this for visibility companies. one to alert product is of for signed meet scale largest and

chose one thousands and world's run of expansion applications this aggressively and that a replacing cloud a thousands we as number are to strategic This preferred highlights. taking And this platform massive for move expanding by and scale, Last customer tools modernize, of year. as institutions, the Datadog legacy signed units least, cloud financial of developers their their the to products for application. they Datadog with eight-figure tens business largest customer They XX public observability at this to have but is of operates quarter's commercial to we ARR. an of not supporting initiative

week. I'd the like our their thank helping make and of for last in our most out team execution Dash go-to-market to QX for customers

Before posture macro uncertainty, our it the over let recent David a I longer-term and trends turn optimization of continued financial to for product the outlook. Despite speak to me review, same. our remains

in of in innovation to opportunities, the transformation trends confident cloud by digital are driven beyond. our as growth well set and customers secular and our pace We migration observability as long-term of rapid

opportunity we new are adoption and and the quarter growing indicative Datadog. trends our think for continued And product strong this logo large of

changed. So not plans have long-term our

invest to other modern move as to We customers our AI the and are continuing technologies. cloud, they to serve

me to David? that, CFO. With let it turn over our

quarter-over-quarter. XX% up drivers we In existing million, of usage some of solidly $XXX the year-over-year to and on into was dive revenues QX, QX see the X% pressure we continue execute performance. up and customers. continued of growth QX To also Olivier. to Thanks,

we our with positive First, as to usage quarter recent trends to in product quarters, customers, lines. this similar lower growth existing across saw usage than growth of broadly

QX While customers, usage more existing saw July growth broad QX. on quarters. We to in native was too to draw of than that and conclusions, similar businesses more to traditional pressure than early improved customer similar enterprise cloud previous

customer trends on moderate the base rates relatively customers larger growth by the spending more consistent growth more across were Regarding pressure with with usage customers. size,

about could optimizing we though, to customers began recognize optimizing their who with customers Datadog, year customers remain have may rates of ago, these of appear other the usage growth cohort growth a the discussed, optimize. Olivier that muted As stabilized and

Regarding total customers.

increased count from XX,XXX last quarter. customer XX,XXX Our to

about at very moved This immaterial our quarter's to cleanup financially end, count are low of total one-time tier. includes paying free customers customer the who a XXX

some seeing Our customers have with additions customer remained churn are our customers. impact especially limited strong, revenues. larger gross on we who smaller of Meanwhile, have

customers' the As gross importance of indicating of product unchanged a result, operations. and retention to remains our our mid in to our revenue high rate the product the our stickiness XXs,

We up. to as meaningfully are and new strong executing on new logo ramp growth customers bookings contributing they our

logo mentioned, QX. largest As second for our a and record new had we bookings quarter Olivier

become more XX QX, about these growth these they expect attributable with that our revenue expand from acquired year-over-year customers growth or growth as past XX% We year. In to the us. meaningful to were new of customers of was points in

continue Consolidation deals. same to platform, improve of see we allows consolidation the time. Finally, particularly our into functionality by all one money at to data saving their larger customers opportunities, in getting while

on trailing adopted Moving retention rate, XXX% was as to their increased more usage net our dollar-based in NRR or products. XX-month QX and NRR. over customers

trajectory stack continues as QX on decline trailing trailing below levels, as make to customers existing our call, and discussed but If XXX decline their we current NRR QX. to quarter's our As XXX XX-month we costs in XX-month last in improvements. to we expected above expect at NRR efficiency scrutinize continue growth tech and our was

results. $XXX the the obligations, year-over-year. in up quarter, duration XX% million XX% billion, duration was were deals which increased up larger We RPO Current about increase the quarter, some an performance to in up Remaining drove year-over-year. year-over-year. signed Moving year-over-year. in financial on growth multiyear $X.XX Billings RPO our XX% or Billings was year-over-year. slightly

As a to our of the the RPO we invoicing than revenue we've as can relative continue contracts. timing revenue of on trends is mentioned fluctuate based before, indicator and to believe customer billings better and those business duration of

are results. review noted, statement let's otherwise non-GAAP. some Now all income key Unless metrics

profit reconciliation in of last to was compares and quarter of our release. a XX.X% XX.X% a million, of a $XXX ago margin This representing the in gross We earnings quarter. margin to have Gross the financials non-GAAP provided in XX.X%. gross GAAP quarter year

cloud in sold reflected cost efficiencies experience quarter. of costs goods our to continue in We this

a our XXs. is gross margin, high As we target of in in result, the are excess experiencing which a

uncertainties. last last year-over-year quarter our in was up costs, year the Our margin, growth income QX given OpEx this decline operating and XX% and We a quarter. XX% a or quarter. pace macro year-over-year, XX% grew controlling the XX% flat operating moderated was million, $XXX on ago XX% and hiring from to executed from QX

on with quarter. in pleased are our investment control disciplined cost this We execution and

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

forming turning assumptions usage the conservative our existing quarter outlook Now we our to use our for third growth the guidance, to and to the fiscal year as of XXXX. In customers. continue

a discounted additional reminder, observed trends to carry recent guidance philosophy in forward with our As conservative. quarters, is

to million revenue $XXX in growth. to third represents the expect quarter, XX% year-over-year to be range million, $XXX For we of a XX% the which

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

additional the on some for finally, Now guidance. notes

large we continued long-term financial plans well to with our on efficiently. near-term balance invest and in strength are our have We investment to executing opportunities,

for our expense expect tax $XX full be $XX the million to year fiscal and other be $XX we year expect income to XXXX for million Next, we approximately and million. to interest net

software revenues Finally, capital of we year in together expenditures expect fiscal XXXX. be and capitalized to about X%

in our To we're long-term reiterate to I opportunities our execute continuing those Olivier's for Datadog comments, this we about our efforts opportunities. against remain quarter. worldwide excited and want thank growth to

Operator, the open will we that, questions. with call let's And for the Q&A. begin

Our comes [Operator question Lenschow Raimo Instructions] from line you. first from Barclays. the Thank of

bit discuss on see a bit the can of a little the about Hey. the what the year or that compare Thank you versus the optimizations in niche, nature follow-up, you when at -- terms the little then think you. see what of changed of nature the cycle now. last you saw you in Olivier, after you early parts what if there? one And the -- you're you late recession there have has Does David. seeing (ph) I

a the observability that change the metrics and themselves be the can also big the across so see nature the yet the log in did bit started workloads, products separate done see the optimization mix existing of like workloads as from bit said that. the cloud as not started from we cloud later earlier, we're don't optimization, are have lower that some volume we customers. growth from customers a and have there. for across side on would I a and little quarter No, we new that it's this in others say, comments of suggest a and (ph) have things optimizing of (ph) all such We little they the board many

on the they at stay the as year some course optimizing see, as that done ago but did we're has that we customers least and stabilized going now feel their a know. however, to more confident a And that of customers the the We of growth. you're primary larger in and side lot side far and on they've

see idea of us again current at usage, these at which their that inspired about we a you what to the customers comments too suggest next, we there. by end. some are we be your good we Still early of more is signs levels levels As seem going fact solid start we've -- to this for but is we some think the -- you call some seen it, period or what part might which that above see all -- of forward long-term that and have of committing with ground on that

Yes.

versus other with how a and of what headwinds given year QX on kind of that kind that Like a et lot of of cetera.? guidance of kind just you. effect about the Okay. growth even maybe that's seen full QX, is get And because QX then you Thank there. of obviously that had guidance, you lagging the a linking conservatism, coming QX where I implied that before then up still there's are much questions, factors like we've think your

Yeah, it's both. Because our had it QX been previous quarters. growth was in than little lower a in than the

then recent We And of moving logos. our growth, performance, our guidance -- forward given effect have that, we we revenue in most model. usage around on discount that but also recurring new the top particularly in philosophy,

So combination financial it’s of in of results those for the a flowing both that, year. our through

you. Thank Okay. Perfect.

moment One next question. you. for Thank

comes next of Our Stanley. question Morgan line from Singh the Sanjit from

question. taking Thanks, guys for the

trends, understand slower I of low end. think around customer quarter. sort higher compared just We sort into I wanted at to of competition. comments slow dig issues the churn count growth to this you mentioned QX. David, usage I around particularly growth down see total

part why than any of of [indiscernible] needed open sort up we're either seeing pick hyperscale or a source mix And potential or think there? customers slower even rather it of or DIY we Has competition quarter? usage getting trends seen solutions. about this that the as is maybe of So with to competition,

little a bit. Sanjit, you're breaking up

paid this they disappear your amounts not the that did as start This tiny, of We deals active an if what more cleanup appropriately, are I us create have businesses but basis, that having we also to of in a ongoing -- or question super business needle to end. out is are happens the at hope small themselves we health together. higher and I the up on -- tiny today. return if we related -- out don't customers go some or quarter for very slightly are do low use onetime see answered they a not very, the might So platform are

customers, that, But that, see churn around onetime ended beyond We very, of there with are The of the the the to criteria mid a changed actually a in terms little which there. unchanged changed and of retention up number They're material in XXX in very revenue. low which a higher do completely high remains we XXs bit some cleanup at the aggregate. gross small and overall numbers end.

side time. bookings -- said on comments, I the on or a And said of that been We think cross-sell. a dollars, be it, other platform, of and long of that in the onto a we to also had a portion I my consolidation tends lot we that, logo that as going said has new in which strong

seeing we David, And of that, it's on with also good see our think to Yeah. numbers out We're and we're see turn If business. end time new new more we seems record what logos of product go to we're a of and into very the beyond terms dynamics the more to by the more point, committee consolidation of there, see I and (ph). very or actually from lending nothing scale new independently us. we churn -- do goes in what favor customers on else, as happy

I headwinds some green of, the preliminary appreciate of the optimization sort seeing potentially several made on and you color. last David comments that I shoots then Olivier, seen over guess, the And some quarters. we've

the yet going the What is? optimized, hasn't of forward? percentage of base any potentially that the that could sort optimized color percentage large of but terms of how hasn't In base customer

in a was in really consider were we on we the that and very highest of stabilization was to the cohort the the in for We first volume, looking can't we one. give call there. optimization nature be at But the typically that a was getting the large cloud-native the started you cohort risk percentage optimizing mentioned that one sense

our numbers, based the on the few we one over that comment on. the and quarters one that's the growth past most So on of a weighed lot

pick saw existing mentioned in and in customers QX David the our first then that that in growth earlier, trends other July. up aggregate, the to we addition on late In of fact

color, Olivier. the Thank appreciate you. I

you. our question. next moment One Thank for

the from Our comes Mark of next Murphy JPMorgan. from question line

have has and And obviously, a you're point, compress Once Yes. need to Thank how going to some that you spending, customers ramping pretty Then to there's much they're that. very growth again. grow they And materially larger have much. can to the spending compressor going at limit LLM to in going started then all further to head Is that observability. and on we the that your as you're it have of comparisons optimizations you're security. subsiding be XXXX think It entering comments. sounds easier XXXX. as based like reasonable could into

of And optimistic these of year, we I relative reasons, on then know be haven't picking that David, going think is XX% of you. up to answer you it's numerically, kind all because speak these in a for could answer exit time might should of how starting that into around we it's point. which or be Thank you to guided drag which on kind is the it frames just just to around across imagining, you some would if XXXX this that mid-teens. as think maybe growth And you yet just hard to -- QX qualitatively. And can't I I

Yeah.

We We see but lapsing provided think the of is that too given to guidance existing that. that embedded The has amount timing haven't in we base. I said our of customer next it's growth that. our the said, we for been green revenue shoots year. cited to critical call early optimization of

factor. biggest So that's the

provided really new that but next another assigning ramped that, shoot in of specific our guidance who logo so can't new could do that said green on go we it's is customers -- I year, terms for numbers further. then performance we addition, In haven't

we're existing customers we on, from the working and control transition. big very and a be to products products, great we trends customers. of for environment Well, products how seems their the results in optimize is everything like of and still that of Everything things see that great the and look, we are quality I mean, cloud that. for new and don't secure growth future. really And obviously Short-term, we're attach which the with these But obviously, we control tech optimistic customers to we early that. new the these we much and see new are -- the

is we're would new that a a little of was to customers at optimization that, use products, Most but a customers I implement add to week. scale last conversations onto see going just platform. our thing one add and still bit conference were in cost new around customers The with about who the conversation our we cases, thinking of get time. our control, things a up, consolidate of up There like less bit also our

the face when it's will early they So as want might everything aggregate, growth in in obviously. themselves. we kicks about mid, know and there overall terms of sometimes the tell term, in, that careful said, too because be David customers to difficulties long They we more to optimistic But know our as go. we're very

that. And you Olivier, for thank

follow-up. quick a as Just

think just there, in shift the a you're putting on vision where platform mentioned each displacing of maybe vendor bookings this seven you it other competitive off in in the a displacements I the consolidation I customer and but and don't dent count, new play off advantage? believe rattled Datadog. maybe eight to pretty a big onto new that I landscape to we see which win -- and seeing of every figure interpreting those wins, a of Am kind of think strong this really Datadog's logo to consolidated accurately vendors of and You rates, terms other that one seeing sounded like handful of competitive

existing when have by it of continuation we them deals headline run tend we and their general, this -- biggest customers. in the those a close as be we see with to opposed the consolidation Well, Yeah. to see nature, have number ones rate just we that

the -- above new the in of $XXX,XXX. there, number we functions step causes out call on business them why record earnings across But what that's that's call. we deals and a have general, So

what don't spread overall in So of larger. between you number customers and the medium see is the smaller,

part a that see the ebb of are end which all that end of flow at sales the where a bit. customer numbers with and and middle force, and makes the we for nicely our sales go it, force. quite count, the which noise of little with we the actually There's high commensurately bit number low But target those

we're that. about very So happy

to Just clarify the customer count.

on Olivier a But the usage between border on are resulted -- a the end weight slight produced the the net the higher seen very, and customers but with And what net So quarters. the record -- in QX. larger very is, mentioned in free more very gross average that the we land. on additions, low deals That's we've mentioned, consistent what previous as very number cleanup, trial. on

So the as wins. as consistent and consolidation you and I you get gross activities addition fact, in have deals, impetus to And more within strong. were larger those you the mentioned think

you Thank much. very

Thank you. for next question. our moment One

question of Goldman next comes Sachs. line from from the Kash Rangan Our

you. conference, motion logo is up we announcements highlight? your on seeing end slowdown. DASH in from green great Kash. Two or This hiring, for Anisha segments since second, or Hey. would that you you're go-to-market right now? ramp shoots growth from give usage markets And particular may One or a be Thank you the quick on conviction hiring questions. (ph) on can and what moderated Is had number of verticals growth new that coming to you've while maybe

Yeah.

is, IT that the and the are businesses more that for with reasons on most an a is I native larger of lot majority so and enterprises or have on more of enterprises. cloud the cloud This lot cloud. lot in system have that saving on cloud pronounced than their a slowdown. is traditional -- optimization, businesses of emphasis lot the first say, And across the the a with than a growth it earlier that the that cloud-native outside are On more with the spend of a but spending their they're board migration still would there

So are optimizing this started is though, most the we where that where us in see the most a higher months. earlier cloud-native some in we of said the some saw couple with the we've optimization, seen and of commitments as ago that It's showing past optimization. customers cohorts still call, the stabilization we year

investing. still of the still seen what in terms or very, still on What still I We observability. the on build is put we've the journey. done market. the our early we think are growing hiring, In have moderate -- lot to we're in terms align we've we we very a and of in have But we're of to growth consider to company, -- that

We lot have to security. build in a

a have We our workforce developer lot and develop experience. to build and

many We use have including many, cases AI. going be after, in There's new a ITSM. lot to we're

to there. hiring And not innovating to so not going we're we're going and stop stop

those and the go-to-market that also for our go-to-market The been on last I'll new is thing in mention are is incremental product teams. new the growing we've that investments And yielding logo growth reason side.

we’re said satisfied As we business the call, the in with working output part the of and has well, very very been that there.

need So growing protect. to being mindful we’ll of we the while keep margins the team

our Thank you. One for next moment question.

Our next from question of the comes Jacob Roberge Blair. from line William

other AI you in of updated that Do be how Hey. IT broader mainly purchasing near-term driven just delaying calling in until parts Thanks that been with out? for is customers at spending broader organization taking guide of how they much that incorporate cost? lot something want like customers out by may stack a that dynamic are a QX Or tech to kind is until Obviously, AI finalized? we're about, decisions their that feel the optimizations low maybe it will figure AI my the impacted into plans excited but of all you've are hearing and just just questions.

in probably relatively but to customers. those for scale, number use take a the embrace going say and customers see a of number have AI is and providers are or We of built themselves -- those And see that is AI yours larger two it that cases, two, fully are say that much and standing those been three our it's play. some now. past working ones would large number that are the thing There's cases full would years, reach reaching quarters on some on They I business of scale small customers that business right in right into the for one now. completely scale. -- are still or trends very don't it's really accounts of customer But to even AI I AI. we early, those cases to a

quite early. So again, customers, a but of much number larger

AI at trends two those play have at we the look So you when adoption. penetration and our AI

strong or And model curious generative customer your times quite these commonalities called a from started between just perspective? a you to start into And you've any customers are if perspective? new few bookings creating logo layer I'm Helpful. out companies LLMs from size there AI-focused to the of see any industry actually there. newer Okay. the that then a Are those maybe an

your is were bit question it? And Right. – your was read -- of low. you volume can part a little You

Yeah.

logo there The first just a from perspective? or around strong part between the new customers size was those an just and was any bookings commonalities industry if

terms of mid-market like new bookings their at value [indiscernible] in The and enterprise. are logo

So the larger on more and side on side. traditional the

number units we us that the of also been adapting started We And for from recently, of customers those but also some around business already. large the providers one comments of AI have have companies that units some were but new have in business some product. a More that customer. a while, very for customers or those with new call we more a time start of have existing are situations, AI, also customers of in

Great. my Thanks for taking questions.

moment you. for Thank our next question. One

line of Our Thill next question from comes from Brent the Jefferies.

adding to QX, marketing productive? sales be rep you in reps going a quick that get And and side? never been sequentially. follow-up. on On to Are you Are back quota-carrying down you've hiring holding the on

the the first in was there that factor quarter. and biggest kickoff quarter not sales in The the be would second

that in continuing lower that did the growing thing as but may, the mentioned, timing we're it So the major Be of invest quota-capacity, do But Olivier as in events. factor we sales with last was (ph) a more we than at rate seasonal year. change are to the events. a to around has sequential

real was of customer in Okay. large XXX. adds the XX, to your pushing some quick, just cadence XXX And

you're terms same in the going and way SMB So Enterprise it act on competitively seeing just is the equally there or is something of their conservatism?

-- I didn't I understand didn't understand the question. -- what

customers? talking you're of adds plus the $XXX,XXX about Brian, net

Correct.

has the it's has we range land, XXX gotten, would although, customers that quarters. It was I And been last say, I relatively four number XX in the say steady, we have that (ph). XXX decelled would larger. land of in Yes. been the versus to that average said in

factor the factor XXX,XXX, smaller. that customers and when So source goes those that. are evolve that down from landing would be longer customers And And net major that's it to would the bigger be because for those takes that of of into retention $XXX,XXX. below a in biggest customers going into

Yes. terms of customers size. saying, And addition what the to we're good These that. nothing things reiterate are happy going the else, feel just board and about the And medium in we are very new of we're products new with across customers on -- so large the numbers improving and very and up if there.

you. Thank

question. Thank you. One moment for our next

Our Michael of line next KeyBanc. from comes the Turits question from

Hey, guys. Two questions.

[Technical you the said any just Olivier, was you Difficulty]. can my how First, go can just, And those difference had on around finish May, there usage by Can talk month, And June? month then that? traded is [Technical second Difficulty] you about you April, if question between there logic

hear didn't I second your question.

up breaking little bit. You're a

Yes. the for I ERT on question first -- quarter, the start, to first the the during guess. So maybe was question and

of for ERT not So us. completely the was ordinary out

low that, rest after we'll and to after as today. would and offset the quarter. we much throughout see I to year, improved and we're been we in That's the quarter May, being saw some That the that and say based for the trying what as a then we May. And of for I the So in what July, stick at -- And more things in more started partial said, that the we which quarters in on we a guidance we too April improved saw discount we had looking we low. is we avoid it. will having that. late of go -- end say you through June

the was versus the across Is particular product infrastructure? question difference to Thanks. say, And versus APM absorbability. was there let's then major categories, second your optimization that logs any

some additional they that, cost included to with sensitive of So would single our I that's are been on. metrics to large the to what are might tradition hand part ones of APM, are that customers logs, doing. APM And we've infrastructure, every specific observability. volume the go with in hand some deploy customers some to it is overall get the which that does transactions optimization which that part most co-optimization and seen say on is custom

why the sort the the also recently. careful that exactly So the timing might improvement seen always about of we've be which based on the we're trends we're is same, forecasting

Okay. Thanks.

Thank our you. One for next question. moment

from from comes of Andrew Fargo. question next Our the Nowinski line Wells

morning, Good everyone. you. Thank Okay.

want a growth annual to I to relative you Did apply rate you discount your your outlook So that clarification. your this you start when to with quarter? organic that put actually or together lower

essentially recent would we the Yes, assumption. most discount

then said the would the be if assumptions we in forward. they guidance in QX So assumptions most recent we were were lower, going that lower lowering

Right.

rate the actual too? just discount growth lower, rate it lower, your wasn't So being was organic

the assumptions discount you don't don't by and I I have to our rate. what understand clarify We -- mean on question. do the don't -- sorry, taking guidance based then you'd know your discounting. know I

discount the we card we the as do discount a historical, But for future. for have give don't rate We guidance. guidance

that deal, Is blend you on pr And large deal. those do enough. it enough a I large Fair had estimates we it our we normalize think the that Okay. question should year the that will that in eight-figure when about eight-figure then of have for out? deals pipeline just enough next

don't for I need think normalize it. to you

Okay. Thank you.

Thank our question. moment for One you. next

Our next question of the Koujalgi from comes line Wedbush. from Taz

far? logo that new question. the duration has bookings bookings? is And guys. Hey, taking how of have average question What on or that I the for new bookings logo trended you mentioned. so Thanks my new a

information renewals We because existing getting would it's months, between months larger the contracts but XX you're customers durations bookings, haven't larger revenues -- have of on duration. -- if most a effect are to say of talking customers, difference new the the terms bookings, that on the on given contract would existing or you're if if about existing the of year, nine be bookings the versus to contract discussed duration tended haven't our it new in just we new under to I

terms deals, our longer-term extended towards trend the customers. a which duration was existing there said, we As of in

was to higher? just consistent it the with clarify, And quarter new customers prior for the or duration was

duration The increased.

was slightly up So had previous current total than increased that we from that the reason Duration was higher and the RPO periods. contracts. the gone said that duration RPO in

helpful. Very Yeah.

Just revenue growth customers. guess, new, from of one new came follow-up. That I the XX%

up XX lower or of So see? customers revenue signed new from a in growth than what that points the higher you that consistent guess, who last, year. was metric I Is came or the usually

XX% when is the net report been. so percent. We our consistent down the or that XX than That's The of our points, something you more more that -- points higher on not the new, retention be of with goes of would and Qs. consistency true That's had growth has would would Yeah. be mathematically retention. in dependent XX growth higher a it net have as

Got it. much. very Thanks

moment One our for next you. Thank question.

Our comes line Ikeda next from from the Bank of Koji question America of Securities.

Hey, Olivier and David.

an AI like customer initiatives very that XQ? specific a contribution LLM next-gen AI-specific being generated an remarks, we in you interest say, customers. dig what define me AI Thanks, next-gen that called here with from you How or should what customer thinking a in vendor? X% bit customers, a I And that Olivier, was existing how next-gen be then prepared guys. that is little about out X the your of wanted AI time. Just to during more. ARR into is of from

it it's either are that AI as you themselves. -- selling So the can customers see

that be the vendors LM like. would So and

to business so today. been we've differentiate selective differentiated very AI terms whole whose that in companies category on customers they said Our we are because in are who is is everywhere fairly eager built we technology. of a And put

recent years, might seen larger an illustration it in year, say, is and cases, the companies. two most emerge, past newer new the in are this X.X existing years. companies, I kinds be some businesses So fairly situations, we've divisions of In of of would basically these but

comparable in the won’t This numbers. a And give market just the color to it give we regular for time what didn’t we we probably is today. more the a We this. to basis see disclose disclose first on

the super it. Got Thank you much helpful. very for taking question. That’s

Thank you. question. next our One moment for

the Patrick from of comes Our next Walravens question line from Securities. JMP

more love your thoughts return Francisco to in-person And Great. I'd Dash you events to around this? the the about -- in San thought versus Thank attendance at broadly your what about expectations? hear Datadog or then the you. like

happily So actually overall, very surprised. we're

Francisco to go San Dash to year. have So in put decided this we

San So than things worried the in Francisco, the Coast. we maybe it little it we and bit see up switch because and East a be we the ones in see when little customers summer We're a different surprised. did had do we heard on very, bit we been us our we've to And stories about some modeled, up. very to got We which we add to keynote into shares than or happily had people day forced scramble in great price get the attendance show first to actually roads. the honest higher

The very very very, time very was was And That productive. was the good. overall, so good. conference

happen see an come of the since we see that’s board, return eager and to the to that or conference connect customers events. a them with success are in-person we across we industry again. exhibit those at, And very of events lot to terms or conferences these other the our whether own In

years much So that happening the before. this was that’s happening as definitely maybe year not something

Okay. Thanks, Olivier.

for question. next moment One you. Thank our

Our line question the of from Moskowitz Gregg next from comes Mizuho.

for taking you Thank the question.

First had I for Olivier and a then follow-up.

usage for have growth reported. a slight this first have any hear this may to existing thoughts for given that you quarter? And improvement why downtick existing cited because business Anything lower haven't quarter, usage in across? surprising was we that as was the if really the So recently consumption it customers models usage growth just than from that come been the I'm trends in other a little you to wondering quarters prior bit hearing have QX customers

which of I different different that mix mix than special Well, customer of -- to of that slightly look, the There have think specific also rest day, of we optimizations at others different industry. the we some that cloud are maybe have the to some a it's a clouds it's the are folks. the are with end than other

others. timing in of terms optimization you of you might us that, might combine when all So various see versus how some heat effects different

wouldn't So I read into much that. too

as calling in the trends IBM the same all participants the are also are what about an the see you broadly And careful think I of quite the optimization. not anywhere to other industry. (ph)

even late. are about we path of who see of the we behavior from So tech we We trends think who customers, risk the though other and see optimization. we at are from usage most we, -- the better our see the feel of them

a now then And I to on XX Oli. handful more including because $XXX,XXX, side mentioned spending the ask security $X million. customers Thanks, wanted than you Okay. over

flavor again, particular, Datadog much in this which how greenfield to us using? products customers can largest of frequently largest Thanks. displacement? most those those is how security much give opposed wins, Also, of you for So for as they're a to this,

all almost use security today. of to tend there customers largest our The products

Sometimes their And be us in there of above be the ones can and more but above be be to that customers on a these higher-end some that or and world-to-world exceptions. tech to have in mid-market organizations. are the forward are six- the -- are the tend tech mid-market that mid-market, tend figures Typically, to enterprise market are forward. tend mid side deployers customers that

a possible tracks that is would a And that practice. DevSecOps the industry solution of mature in zoom adoption as I ready we completely building unified whole overall, say the with to the a a is believe bit, adoption the have relevant And going. end-to-end this fully -- product little every single where And out customer. we're to is and industry again a the we

that so-far and time we no-brainer doing practicing all there. the those we're for choice in we're what with customers industry becomes pleased So general of by this where with

you. Thank helpful. Very

to At now I this of remarks. would for CEO Datadog, over closing time, conference the turn like back Pomel, to Olivier

Thank you.

all, our making products for making thank with week with And such a last you thank here and DASH good in customers to first had that QX all very for all also attending thank want all well-executed. the to want of we've words, I thank around our all. So And some conversations of world the of all the terms vibrant employees, Datadog's conference them. of for a call I you today. was these

Thank This participating. for call. concludes you today's conference

now may You disconnect.