Datadog Inc at Morgan Stanley Technology, Media & Telecom Conference Transcript

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

Question: Sanjit Singh - Morgan Stanley - Analyst : So let's start sort of level set where we are in the business. Datadog had another solid year growing the business 26%. You're at $2.7 billion in revenue, 25% operating margins, a great financial profile, and you have 30,000 customers. Oli, I think what stood out to me about this year was this wasn't a year of easy comps per se, and yet the stability of growth really came through. What were the factors that enabled that stability of growth? Where did you think the team executed well and where do you think there's areas of improvement? Yes.

Question: Sanjit Singh - Morgan Stanley - Analyst : That's great. I kind of dovetails into my question for David. When we think about the guidance, you guided Q1 to about 21%, full year 18% to 19%. Margins come down a little bit versus last year. Can you give us sort of the underlying guidance assumptions? I mean, beyond the -- is there any sort of factors that stand out beyond sort of you discounting the sort of new consumption trends on the revenue guide. And on the investment side of the house, what parts of the business is poised to get incremental investment in 2025?

Question: Sanjit Singh - Morgan Stanley - Analyst : That makes total sense. Speaking with David, I actually would love to get both of your perspectives, sort of taking a step back. We've been sort of three years into a higher rate, more cost-conscious budget environment. What's been the storyline in terms of how the competitive environment sort of changed and as the sort of dust has settled in this sort of a tighter budget environment? What would you point to for investors that Datadog is coming out of this cycle in a stronger competitive position? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 6:45PM, DDOG.OQ - Datadog Inc at Morgan Stanley Technology, Media & Telecom Conference

Question: Sanjit Singh - Morgan Stanley - Analyst : As we think about where we are in in the state of the business, $3 billion in scale, for investors who haven't, are not as familiar with the data story, maybe they've heard of Datadog looking at as an investment opportunity maybe for the first time or revisiting the story. I mean, what gets you excited? You're at $3 billion in scale. What are the opportunities that you're really excited about that can essentially move the needle in terms of growth at this stage of the company, right?

Question: Sanjit Singh - Morgan Stanley - Analyst : I love how you framed it between like the core opportunity which still has a lot of runway as well as how AI can drive growth. Some of my industry conversation last couple of months there's a lot of framing of sort of 1.0 versus 2.0. It's framed in different ways, but if you sort of just take 1.0 as the applications that we've been monitoring for the last several years, applications running in the cloud or applications built on cloud native infrastructures. What does the next era of observability look like from the Datadog perspective?

Question: Sanjit Singh - Morgan Stanley - Analyst : Yeah, is that -- is there a theme there in terms of shifting left in some sense, as the value sort of move away from code generation to operations. And any sort of thoughts there on how or maybe give us an example of how data is making that shift.

Question: Sanjit Singh - Morgan Stanley - Analyst : One of the interesting things I find covering this space is just you know all of the different sort of technology debates because it's a category that's kind of defined by a fast pace of innovation. And so when we think about some of the emerging technology trends, GraphQL, for example, the query data or advances in sort of database technology to store and process data, AIML approaches to analyze data. I guess the question is always how is Datadog ensuring that it remains at the forefront of the technology curve as you guys continue to move more and more upmarket?

Question: Sanjit Singh - Morgan Stanley - Analyst : Yeah, it's a fantastic sort of feedback loop into the product engineering organization. One more question for you on the sort of technology side of the house. This relates to open telemetry and for those in the audience who know, OpenTelemery is an open-source standard to collecting telemetry data. See OpenTelemetry gets more and more popular. You guys have supported open tele quite extensively. You're a type 5 contributor to the project. But in terms of -- as OpenTel gets more capable, is there a concern about making it easier for customers to insource their observability capabilities and to what degree is OpenTelemetry becoming a threat to the growth equation?

Question: Sanjit Singh - Morgan Stanley - Analyst : You mentioned one of your previous answers in terms of framing out the opportunities, sort of being under penetrated in the log opportunity, and our recent conversation, there seems to be a sort of reemphasis on getting logs right. Can you talk about Ddog's evolution in terms of its log management product and your recent acquisition of Quickwit? To what extent do you think buying criteria is shifting more and more towards how to effectively manage, process, and analyze logs?

Question: Sanjit Singh - Morgan Stanley - Analyst : Yeah, let's talk about prosecuting the enterprise opportunity. The enterprise business has been one of the leading growth segment in the business for the past year and a half. In terms of the enterprise go-to-market sales motion, Oli, when you think about 2025, what's the sort of magnitude of change? What do you have plans for the enterprise go-to-market motion? How does that compared to last year and to what extent are partners becoming a more important piece of the puzzle?

Question: Sanjit Singh - Morgan Stanley - Analyst : Yeah, to pick up on that question, one of the questions that we're getting is that as Datadog moves the market, prosecutes that enterprise opportunity, does the unit economics needs this great efficient, highly efficient business model that you've built over the last decade, does that sustain going REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 6:45PM, DDOG.OQ - Datadog Inc at Morgan Stanley Technology, Media & Telecom Conference forward as you move further and further out market? And do we see that same level of efficiency granted that you're making some investments near term, but does that sort of prove does the model sort of prove out when you when you move further?

Question: Sanjit Singh - Morgan Stanley - Analyst : And that's where cloud most or at least under penetrated, that's where the growth dollars are, which makes a ton of sense. Let's spend the last five or so minutes talking about the opportunity, some of the debates on. One of the debates that we hear on Datadog is that as we go into a new compute cycle and this category has been highly sensitive to changes in compute cycle, where there need to be a new sort of AI-native approach to observability in the way that applications are built. And is that in any way disruptive to how Datadog is built today? How do you sort of respond to that?

Question: Sanjit Singh - Morgan Stanley - Analyst : I can't let you go without asking an agentic architecture question. Whenever we talk, I talked about technology trends in the context of Datadog, you always sort of frame it in terms of the level of complexity. When we talk about agentic architectures and agents proliferating in customers' environments, what is the implication for Datadog's business as customers build out those architectures?

Question: Sanjit Singh - Morgan Stanley - Analyst : Maybe we can wrap up the conversation just getting your perspective, Oli, of where we are in the cycle in the framework of training versus inference. Are you seeing your customers get consequential application of production that's sort of meaningfully impacting the business sort of in a crawl-walk-run framework, whatever framework you want to look at. Where do you think we are in sort of the AI application build-out cycle?

Question: Sanjit Singh - Morgan Stanley - Analyst : Maybe just quickly to end on, it's like, could you describe the world where Datadog becomes -- is business starting to benefit from more, the cycle getting more mature. Is that a proliferation of enterprise applications or just describe that world of where we are in that cycle where Datadog becomes more of a beneficiary.

Question: Sanjit Singh - Morgan Stanley - Analyst : Awesome with that. Thank you so much, David, Oli, for joining us at the conference again this year.