Datadog Inc at Citi TMT Conference Transcript

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

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : I know we're going to jump on a couple of those different topics that you brought up. But what I do want to peel back the onion on is the AI native customers. I think you characterized this as necessarily a false bifurcation of AI native versus a non-AI native. And I think in your defense, it's you're damned if you do, damned if you don't. If you don't have AI native customers, what are you doing? If you do have AI native customers, let's talk about the slippery slope of navigating the concentration risk, right? So with that in mind, maybe at the highest level, clearly, it has been occupying a lot of investor mind share. And so from that standpoint, are there any helpful perspectives you can share on the usage behavior, the consumption and usage patterns, the product portfolio adoption of the AI native customers relative to the cloud natives. And I'm framing the question this way is because we kind of saw the feast and famine, hot and heavy behavior from the cloud-native companies back in the COVID days, right? So if you can kind of help us give an analog on how these things can go from 0 to 60 (inaudible) I think that would be really helpful.

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : And the feverish pace at which a lot of these AI native companies are driving their own businesses forward, you had made a point around net retention rates within the AI native vertical having similarities to the cloud-native behaviors, right? I'm wondering, is the baseline NRR behavior of the AI native cohort significantly above and beyond the company average because that is a metric that you share? Or is it pretty much close to the (inaudible)? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 03, 2025 / 5:30PM, DDOG.OQ - Datadog Inc at Citi TMT Conference

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : Downsell, churn, all facets, same side of the coin, right? When these large customers who are in very consistent growth experimentation mode, the optimization risk is a faith (inaudible), right? So when you think about some -- your largest AI native customers and in and of itself, it's a small cohort. How should we brace for a potential churn, downsell and all the way to the other end of the spectrum, a full-on in-sourcing event where they say, hey, I'm just going to -- I'm big enough. I'm going to do this in-house. How are you thinking about that level of risk to the business in terms of the gradient of that risk?

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : And just a little bit of a non-sequitur. As you think about being proactive in your customers' usage of the platform, ensuring they're getting maximum ROI from more deeply using the footprint. From a sales rep and a sales organization perspective, how is a salesperson incentivized to actually tell their customer, hey, you're actually spending too much here or you could be better suited to utilize these capabilities at a certain rate, Flex Logs, Frozen Logs. So how are you kind of straddling those two dynamics where fundamentally the conversation is, hey, use it a little less or use it more efficiently, which is right by the customer, by the way.

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : I appreciate that nuance. Zooming out, we talked a lot about the AI native customers. What about the blue-chip classic enterprise customer that you have and what that AI opportunity looks like for them because the quote-unquote core business for you has been workload migration to the cloud. And those are the coattails that you have been very successful in writing, right? So what is that broader AI opportunity from the vantage point of a normal organization, a normal financial services firm and what have you?

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : Staying on this topic, there has been a lot of handwringing about the whole commodification, commoditization of the software development process, the software development life cycle, i.e., if I can have 90% of code generated by an LLM, am I hiring as many people? And so the train of logic here is as follows: what is the strength, the weakness, the opportunity, and threat for someone like a Datadog where maybe an organization is hiring fewer site reliability engineers or cloud engineers. So where do you fall in that paradigm?

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : David, you and I have talked about this offline in the past, but the secular trend around cloud migration, the effects of IT and architectural modernization, those have been fine friends to your business. Do you think the [AI appification] of the enterprise, enterprise business processes, do you think that adds to the estate growth opportunity in the cloud? So is that more volume for you to capture? Or does that accelerate the pace? So there's a volume argument and then there is a time argument. What is your perspective on that?

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : I appreciate that. David, in your opening remarks, you talked a little bit about the higher-level product and platform level milestone. So infrastructure monitoring, which is your core DNA, it's your stalwart franchise, $1.25 billion in ARR. You've got each of logs and APM running at a $750 million ARR rate. You're now at $3 billion and change, $3.3 billion to be exact, if I gross up your -- $3.3 billion in ARR is my math. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 03, 2025 / 5:30PM, DDOG.OQ - Datadog Inc at Citi TMT Conference

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : So you have $2.75 billion spoken for. So can you talk to us about that pocket of $500 million to $600 million of ARR? What's in that bucket? You called out security. So help us understand in terms of the chunkiness of size in that $500 million to $600 million bucket. And then the related natural follow-up to that is, what do you think is going to be the star performer from a (inaudible) perspective in that bucket?

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : David, I'm going to ask you the same question, but I'm going to flip it around. So infrastructure monitoring at $1.5 billion it's the nucleus of everything that you do, right? So on the one hand, you've got all these adjacent SKUs that are just blowing the doors off in terms of growth and hitting escape velocity. But that begs the question, hey, what's happening on the infrastructure monitoring side where growth is maybe on a relative basis plateauing, right? Now it's hard for me to conceive that there is saturation when between the hyperscalers, there's $0.5 trillion worth of spend happening, right? So it seems a little bit silly to say, hey, there's saturation. But maybe to ask it simply, why isn't infrastructure monitoring growing faster?

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : On the cybersecurity side, and I think you've been awfully candid about this that, hey, this has been a work in progress from both a go-to-market perspective, but also, hey, there has been some white space (inaudible) capabilities. Can you give us a rundown on where you are in the cybersecurity scope of capabilities? How confident are you that what you have today in the market is pretty competitive? And what are you doing on the

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : Good segue into my next question to you about, okay, there's an abundance of opportunity in terms of the broader tailwinds and secular dynamics. But you have actively and have had more of an active reinvestment posture this year. So I'd like to take some time to discuss with you sort of where the priority sequence of those investments have been. And then even maybe taking a step back, we talked about the numerous product pillars, if you will. And again, I know you don't necessarily run the business that way, but I'd imagine those product pillars and those SKUs have very different gross margin profiles, right? So how does that ultimately filter through the P&L? And how do you adjudicate the OpEx envelope against those opportunities and kind of the bigger picture mandates around increasing sales capacity, increasing international presence, et cetera?

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : You're naturally at the stage of the company where you are doing larger transactions with larger customers with more consequentiality, right? How does that change the ethos of the go-to-market organization where I think historically, we've talked about most of your $1 million, $2 million customers were graduates of the $100,000 ARR program. I remember talking about Oli, where we're doing victory laps with a (inaudible) that just (inaudible) into $100,000. So how has the spirit of the go-to-market organization changed as you naturally are going to be landing bigger and you naturally are going to be expanding much bigger?

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : And has that been a 2025 mandate? Or has that been?

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : My last question for you. I know we're out of time, but the single most palpable investor misconception or misperception on the state of the business.

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : I like it. It's a good place. Thank you. Always a good conversation.