Datadog Inc at Bank of America Global Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Koji Ikeda - BofA Global Research - Analyst : And so we'll just kick it off here very, very high level to start. Maybe for those that are not familiar with Datadog in the room, what is Datadog? What do you guys do? How do you think about the opportunity you're going after?

Question: Koji Ikeda - BofA Global Research - Analyst : Got it. Thank you. When asked the demand question, it's been very, very topical over the past two months. So without getting too into the weeds, I understand you guys don't give intra-quarter updates, right?

Question: Koji Ikeda - BofA Global Research - Analyst : So we'll stick to that. But how would you categorize the demand environment today versus six months ago versus a year ago? Would you say more or less same, better, worse? I mean how would you think -- how should we think about it?

Question: Koji Ikeda - BofA Global Research - Analyst : When you look back into the transcripts of Datadog, you just mentioned right there, second quarter of 2023 called peak optimizations. But you're actually talking about it before that; I remember when looking at the transcripts. And so it doesn't feel like you might have saw things happen in real time early. And now you're seeing the recovery real time early. Is that a fair way to categorize how you see the spend environment out there? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 04, 2024 / 5:40PM, DDOG.OQ - Datadog Inc at Bank of America Global Technology Conference

Question: Koji Ikeda - BofA Global Research - Analyst : Yeah, that makes sense. Wanted to transition the conversation over to everybody's favorite topic, AI. We asked a ton of questions last year on it. We're going to ask you questions on it this year. Generative AI, 18 months into it, very -- from an explosive awareness perspective, how has AI either evolved the way your end-market thinks about consumption or building new applications? Do you believe it's a massive tailwind for you? Are you seeing the fruits of that yet? Or is it all really still to come?

Question: Koji Ikeda - BofA Global Research - Analyst : So thinking about the customers out there and the contracts and you talked about, hey, they sign up -- you talked about this a lot over the years, they sign up for a certain amount of usage for the year. They generally hit those markets particularly in higher levels. And so it does seem like a lot of the good results that we've seen from you over the past -- frankly, since the IPO, it doesn't really have AI budgets in there yet. I mean, it sounds very positive, but the contracts, the usage trends, the commitments over the next 12 months from now even longer for the bigger customers don't really incorporate that, because the ability to up the consumption contract quite easily. Is that the right way to characterize it? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 04, 2024 / 5:40PM, DDOG.OQ - Datadog Inc at Bank of America Global Technology Conference

Question: Koji Ikeda - BofA Global Research - Analyst : So on that point of the 3.5% of ARR, you are one of the few companies out there that are calling out a percentage of ARR. And for yours, it's specifically digital or generative AI native.

Question: Koji Ikeda - BofA Global Research - Analyst : Tools providers, right. So you also mentioned that it's generally inference that's part of that 3.5% in production and in inference?

Question: Koji Ikeda - BofA Global Research - Analyst : Yeah. And I do know that you've stated publicly that these companies, you sift through the data and say, okay, this is clearly AI native company -- tool company. We're going throw them in this bucket.

Question: Koji Ikeda - BofA Global Research - Analyst : Does it become more difficult or I guess, visible to you in the future as more companies have AI applications and production to truly see within the business model where the inference is coming from? Is that --?

Question: Koji Ikeda - BofA Global Research - Analyst : Yeah. That makes sense. I do want to press you on this a little bit. It does seem like there's one, a positive if you're able to call out, some percentage for generative AI. But also somewhat of a predicament, because it becomes less visible in the future. And so because you have this data point out there, it does feel like the investor community is becoming accustomed to getting it. And it does feel like it maybe removed at some point or just talked about less frequently. So how do you anticipate in the future, either quantitatively or qualitatively describing your participation in generative AI?

Question: Koji Ikeda - BofA Global Research - Analyst : So when I think back to DASH last year, one of the more exciting announcements that we thought was your integration with NVIDIA down to -- I think it was the chipset, right? You go straight in there. Is that something -- that definitely feels like it's an AI indication. Would that be -- I'm not saying give a metric today, but would you be able to have that type of visibility with that type? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 04, 2024 / 5:40PM, DDOG.OQ - Datadog Inc at Bank of America Global Technology Conference

Question: Koji Ikeda - BofA Global Research - Analyst : Okay. I'm going to ask you one more question here, not on AI, a different question. And then I wanted to open it up to the audience to see if there's any questions out there. (Conference Instructions) Okay. So next question before I open it up. Big deal activity, right? Every quarter, you guys talk about some pretty big deals out there -- six-figure

Question: Koji Ikeda - BofA Global Research - Analyst : Got it. Thank you. Any questions from the audience? (Conference Instructions) We've got one question in the back. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 04, 2024 / 5:40PM, DDOG.OQ - Datadog Inc at Bank of America Global Technology Conference Unidentified Participant Thanks. So two questions. One, first from an AI perspective, do you get any feedback as to whether or not activity is picking up in terms of the tools that your customers are using? Or is it stabilized at this point with people just doing proof of concepts? And then the second is there's a very large theme over the last couple of weeks that the software market has matured significantly. It's now slow growth. And if you're seeing signs of improvement, are you seeing signs from your traditional installed base that's actually coming back? Or are you seeing potentially market share gains? So that it's not necessarily a sign that the overall market's coming back, but that you're doing better?

Question: Koji Ikeda - BofA Global Research - Analyst : Maybe one more question from the audience, if there is one. David, wanted to ask you a question related to that on buying patterns from your customers out there and it can be both for new or expanded. I know a lot of your customers. When you speak with them, they always tell me, a contract's a year, but we know we're going to run out at some point. And so there seems to be some runway to remind, some pattern in there, whether it's six months, nine months, whatever it may be. Have you noticed that run-off time change over the years, meaning was it a much shorter time -- call it -- I don't know, 2018 to 2020, and now it's a longer runway today? I mean, how would you categorize it?

Question: Koji Ikeda - BofA Global Research - Analyst : Okay. And I guess the follow-up there would be thinking about pricing trends in the market versus the competition. Are you seeing roughly the same pricing trends out there? When I look at observability, specifically, there's been some movement. There's been some consolidation out there. What are you seeing specifically that you could comment on with the pricing trends?

Question: Koji Ikeda - BofA Global Research - Analyst : Okay. You are the CFO. I'm going to ask you two CFO-y questions. One on cash flow and the other on stock-based compensation. So one thing that might be coming up more and more for you from an investor debate perspective is cash taxes. You guys are profitable. And so how do we think about cash taxes this year, next year, into the future?

Question: Koji Ikeda - BofA Global Research - Analyst : Yeah. So stock-based compensation. When I look at the model, sometimes I'm like, that's a lot of stock-based comp. So how do you think about stock-based compensation? Because I understand you guys are R&D focused. And so there is a component of that to drive product differentiation. So how should we be thinking about stock comp?

Question: Koji Ikeda - BofA Global Research - Analyst : We're all out of time. Thank you so much, David. This was fun.