Datadog Inc at Barclays Global Technology Conference Transcript

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

Question: Raimo Lenschow - Barclays - Analyst : So if you think -- so a lot has happened since the Q3 results, like has there been any changes to what's going on? Obviously, the world has changed a lot. We had election and whatever. But any changes from your perspective that you want to call out?

Question: Raimo Lenschow - Barclays - Analyst : So then that kind of makes my next question also redundant but I'll ask it anyway because it comes up like Q4 budget slash. It doesn't sound then that you guys are really thinking about that.

Question: Raimo Lenschow - Barclays - Analyst : Yeah. And then last thing on this subject. In the early years, I remember post-IPO, David was always really happy about -- like every quarter, as the CFO, he could sleep a little bit better because overages came in. It does look like customers learn how to size their commitments, better, et cetera. Is that still something that comes up? Or is that a thing of the past?

Question: Raimo Lenschow - Barclays - Analyst : Okay. Perfect. And then the -- I mean, it almost like the answers -- you almost gave the answer already. Like the next question I'm getting a lot from investors is around, if you think about potentially better times ahead, like no 2026 guidance or anything now and the question here intended, but how would that show up in your business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 8:50PM, DDOG.OQ - Datadog Inc at Barclays Global Technology Conference

Question: Raimo Lenschow - Barclays - Analyst : And you mentioned workload migrations because that's the one big thing we're all looking out a little bit. And one of the things is like -- and I don't know how much you guys are using it, is looking at the classic kind of hyperscaler performance and like what's Azure core doing or what's AWS doing, if you strip out AI, et cetera. Is that something that you guys pay attention to, to think about workload migrations because that kind of new workloads coming to the cloud is going to be a good revenue driver for you. Is that something that you see as a thing that can be correlated? Or how do you think about that?

Question: Raimo Lenschow - Barclays - Analyst : So it's more like one is the long-term trend, one is like a short term kind of --

Question: Raimo Lenschow - Barclays - Analyst : Yeah, yeah. And then you mentioned one thing. And I have to say we were all, say, positively surprised, but yeah, surprised last quarter when you talked a little bit about AI and the AI contribution. I mean, conceptually, from my perspective, I would have seen -- expected from you something actually later in the AI adoption cycle because -- and it's more like AI apps coming into production and then you want to monitor it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 8:50PM, DDOG.OQ - Datadog Inc at Barclays Global Technology Conference You gave already numbers. Like can you maybe speak to those numbers and why you give them out?

Question: Raimo Lenschow - Barclays - Analyst : So in a way like what we see at the moment as the revenue is more like an OpenAI or someone like, not to name customers but like the AI specialists basically kind of using you. But it's not necessarily Barclays doing some AI projects and using Datadog for that one.

Question: Raimo Lenschow - Barclays - Analyst : And how do you think about that like conceptually more longer term, like the AI opportunity for you, is that just inference workloads that are in production and you need to do that? You had like LLM Observability as kind of an area, like how do you think this is kind of playing out for you?

Question: Raimo Lenschow - Barclays - Analyst : And then the -- are those -- a lot of them -- those AI workloads are -- from what you see, most of them will be cloud because, I guess, it has so much compute, which should favor you over like a one of the classic or the old observability vendors that were more on-premise?

Question: Raimo Lenschow - Barclays - Analyst : Yeah. Okay, perfect. And just moving a little bit away from the AI, if you think the one big theme that played out for you over the last few years, like how much broader your product set did get, like how much more -- how many more sources of revenue you're realizing, can you maybe speak to that a little bit? Like and -- you and I go back quite a few years when Datadog, like when we thought about Datadog as an infrastructure monitoring vendor kind of, the observability but then actually there was more observability need now or it's really observability. Can you speak to that evolution a little bit?

Question: Raimo Lenschow - Barclays - Analyst : Yeah. And then the -- if you think about it, like it did get broader, like last quarter, I remember on the call back, I was talking with your CEO about like security event management and things like that. It's like, if you sit together with the team and think about a product evolution like, is that how does it feel in terms of like what's still out there that can still be covered in terms of how broad this can get? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 8:50PM, DDOG.OQ - Datadog Inc at Barclays Global Technology Conference

Question: Raimo Lenschow - Barclays - Analyst : Yeah. And if I think about your data footprint, I mean, there's still a lot of like vendors out there that started before you, where there's a lot of on-premise and like crazy amounts of data still sitting there. And it gets me to my next question, like in your industry, there was a fair amount of consolidation over the last few years and some very large vendors like Splunk, for example, went away as public competitors. How did it play out so far? And how do you think about that conceptually in the long run?

Question: Raimo Lenschow - Barclays - Analyst : Yeah. I mean, like on that, you mentioned product set because like there's like new things like Oracle Database, Oracle OCI. Like I mean it's like where you think like, oh, yes, you should have had that but actually, there's only something recently like -- is that kind of -- like even if you look at the basic stuff, there's a lot more you can do with these.

Question: Raimo Lenschow - Barclays - Analyst : Yeah. And then talking about -- sorry, and I should have asked that one question before that. Talk about the -- if you think about the legacy guys and thinking about them as a migration opportunity, was there anything you guys did internally in terms of sales, et cetera, to try to expose yourself better there or like maybe work on these new logos?

Question: Raimo Lenschow - Barclays - Analyst : No, no, like in terms of the big accounts that are sitting out there that are sitting with legacy vendors. Is there anything you guys did like in terms of having new sales guys that are hunting those logos or something?

Question: Raimo Lenschow - Barclays - Analyst : That was my next question because like the one thing I do notice when I talk to guys in the industry is that you do show up more upmarket. And is that something that, from your perspective internally, that you wanted to do, that we kind of, yes, we did bottoms up and a lot of guys are using it but we could do a better job. So you talked about the sales changes as well, but your product got more powerful as well. Do you see that in the numbers that you're kind of -- you're doing more stuff upmarket? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 8:50PM, DDOG.OQ - Datadog Inc at Barclays Global Technology Conference

Question: Raimo Lenschow - Barclays - Analyst : And the other thing I wanted to do and there is like to show the success you have already. I threw out a number yesterday and you answered it really well. It was like, while the Dynatrace ASP is $400,000. Yours is like $100,000. So there's still a lot of room but you gave me a number that actually trumped that looking at the bigger accounts for you guys.

Question: Raimo Lenschow - Barclays - Analyst : Do you see that in your statistics, if you look at deal statistics, in terms of like we would think out there there's your top 20 deals and it's going to be like, oh, Splunk, Dynatrace, and Datadog will show up all the time. Is that really what you see in reality?

Question: Raimo Lenschow - Barclays - Analyst : Yeah. Okay. Last couple of minutes, I wanted to switch gear a little bit. So you've been able to grow at a healthy clip and it looks like that growth

Question: Raimo Lenschow - Barclays - Analyst : I mean how do you think about like you just went through the budgeting cycle? And it's more of a David's question, so I apologize. But if you think about -- is profit and outcome, like in a way you could think about growth, there's your OpEx that you build to that. And then if you do better revenue, the OpEx is built and you get ahead of profitability, like what happened in 2023? Or like how do you think about that as you start the year?

Question: Raimo Lenschow - Barclays - Analyst : And it's like how is the -- I mean, David feel -- to me feels like he's the old statesman in the organization that have to say no a lot of the time in terms of the -- if you think about investment returns that -- I'm sure the R&D organization or sales wants to invest in [Western Red]. How do you see him in that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 8:50PM, DDOG.OQ - Datadog Inc at Barclays Global Technology Conference

Question: Raimo Lenschow - Barclays - Analyst : And then last question for me and then I need to let you go. You just did a convertible. Like how does that fit in? Like what was the idea? And how does it fit into your overall capital structure?

Question: Raimo Lenschow - Barclays - Analyst : Okay. Good. Perfect. Yuka, thank you. I really enjoyed our conversation. Thank you.