Datadog Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference Summary

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

Question: Matthew Hedberg - RBC Capital Markets - Analyst : <_ALACRA_META_ABSTRACT>Yeah. So David Obstler, CFO of Datadog, I'm sure you guys -- he doesn't need much of an introduction. You guys were coming off of a strong Q3 results. It seemed like a lot of stability in end markets. Can you just sort of like double click on what you saw during 3Q and kind of up until when you guided to maybe the first half of the year?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Q3 last year was sort of where you saw some of the peak headwinds. I know I've asked you this, I don't recall, what percentage of your business would you classify as SMB?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : You said that sort of some of the cloud optimization trends that you were seeing last year sort of just stabilized. I'm curious, it feels like optimization is part of the new lingo, like all companies should be optimizing all the time. What does that mean from an ROI go-to market perspective? Has selling changed sort of in a post-COVID world where it's just not -- you're not an order taker, but you're an ROI -- you have to deliver ROI? Has that conversation changed relative to the optimization trend that probably continues?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : I talked to you about this, and you and I were talking about this yesterday. You've been saying, since IPO billings isn't a great proxy and reported billings wasn't great and (inaudible) normalized and we see more mid [20s] I believe you said, they'd normalized for (inaudible). Why shouldn't that be a concern for investors? Especially when we think for next year's revenue growth?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : No, that's a great perspective. What are some boards of advice you give to investors? And I think the question -- the answer was like, people get a little too detailed in their modeling of Datadog and revenue is what matters most over sort of --

Question: Matthew Hedberg - RBC Capital Markets - Analyst : One of the real standouts in last quarter was AI natives. Really, I believe it jumped from 4% ARR to 6% this last quarter. Can you talk about what drove that? Because that's a pretty remarkable onset.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : You also -- I think you mentioned that it could cause some variability in second class numbers. Talk to us about why that dynamic could actually show up.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : And then just in terms of like what some of these AI natives are leveraging, I assume it's the whole platform. But is there anything that's unique with that cohort of customers versus cloud natives of the general data population?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : I guess the other question that a lot of us are wrestling with, when it comes to AI, it was a broader AI question than maybe data, but it does seem like customers are moving into more of the inferencing phase of generative AI. Are you seeing any customers shift monitoring towards more of that phase of generative AI? Or is that hard to ascertain what they're actually --

Question: Matthew Hedberg - RBC Capital Markets - Analyst : We're still early in that.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Are you seeing any outside of the AI natives -- are you seeing usage of Datadog within sort of like gen AI usage in the sort of a non-AI native cohort?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Got it. Let's talk about pricing a little bit. You guys, like you said, you started out more as an SMB tool, you've obviously moved up to the large enterprise quite well. How do you think about pricing and the evolution of pricing longer term, especially when you talk about some of these customers spending in figures?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : And you scale the business $10 billion more in revenue. Is this the sort of the pricing mechanism into the future?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Some non-core models, is it $2.5 billion for the --?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Staggering numbers. When you look at the competitive landscape, obviously, logs is a big part of that global algorithm right now. How do you think about that opportunity? Because it certainly seems like a lot of that could be --?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Splunk is one and there's obviously some companies that have been acquired as well. How often do you see Dynatrace competitively? Because obviously, you do pretty well in the enterprise as well. How often competitively do they show up?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : When you look to the future, obviously, (inaudible) has mentioned the innovation of all the team is incredible. Where are we in that evolution of products? Like I don't know how many technical help we have today, I think, [23]. I mean, what are the next [5, 10, 15] look like?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : You have $3.2 billion in cash. I believe that's the number, how do you think about broad capital allocation? We haven't relied heavily on a large scale, anyway. Does that change in the future? Is that cash balance continues to build as the company continues to scale? And I guess what would be a material acquisition?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Yeah. There was some news earlier this summer. I think Olivier had said -- I don't know if it's to call it, but you're not looking at anything like material right now (multiple speakers) -- in terms of balancing growth and profitability, there's been really a standout and delivering really both. And as we think towards the future and maybe the economic environment is starting to move a little bit, how do you think about that balance of growth and margins?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Is there a framework we should think about one for margin expansion, like sort of as a rule of thumb?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : When we think towards next year, obviously the guide to '25. But what would you say -- if for us as investors sort of a framework, are there things that you think about like, well, I would consider, growth in (inaudible) logs or I would consider AI natives? What are some of the key tenets that we should think about when we consider '25?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : I'm going to pause here for a second here. Are there questions from the group? Unidentified Participant How much exposure you have in government spending? And can you help us give a little color on this (inaudible)?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Maybe to wrap it up, we're sitting here next to November. Looking at the [crystal ball], what are you going to be most positively surprised with? Because the enterprise business is really accelerated because the economy is in a better place, AI natives and our -- what do you think some of the surprise would be next year?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : What is on that enterprise piece? What do you think -- people are on the (inaudible) call, this enterprise spending is -- what are some of the KPIs we're looking for that would give you confidence to say, hey, this is actually getting better?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Excellent. Well, we're out of time, unfortunately.