Datadog Inc at William Blair Growth Stock Conference Summary

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

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : <_ALACRA_META_ABSTRACT>David, just to kick things off, I guess, for those that might be newer to the Datadog story, would love if you could give us just a high-level overview of the business and some of the problems that Datadog really aims to solve for its customers.

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Awesome. Well, yes, so infrastructure monitoring is Datadog's heritage and where it really began. But this past quarter, you actually talked about APM, application performance monitoring and your log management suite surpassing over $1 billion in ARR. What are REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 07, 2023 / 6:20PM, DDOG.OQ - Datadog Inc at William Blair Growth Stock Conference you doing differently with just only releasing those in the last 5 or 6 years than some of the incumbents in the space to see that type of momentum in the business?

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Yes. It's been really impressive just to see that attach rate and how many more customers are adopting those multiple solutions. But AIOps, I guess a lot of people hear about it. It's a buzzword that's thrown around a lot. And so I'm curious now that you've compiled a pretty broad observability suite where we can do infrastructure monitoring, APM, logs, the (inaudible). And I'm curious, what is AIOps to you? Like how do you actually help customers perform AIOps within their own organizations?

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Yes. Helpful. And then -- so there's AIOps, but then the buzzword today that everyone's talking about is generative AI.

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Of course. Yes. So on the generative AI front, I'm curious how you and your team is thinking internally just about the magnitude of data, the magnitude of workloads that generative AI could really create for Datadog to observe, to monitor in the cloud one day? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 07, 2023 / 6:20PM, DDOG.OQ - Datadog Inc at William Blair Growth Stock Conference

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Yes, that's actually 2 things I kind of want to dig into on that answer. So you talked about earlier where, hey, Datadog is really helpful when we get these complex infrastructures with micro service with containers. And so generative AI move into the cloud just creates this messier infrastructure. So that's one side of the equation. But then the second side of the equation is, and I'm curious for you, are you starting to have conversations with customers that are saying, "Hey, we might go to the cloud 2 years or earlier than we originally anticipated because we want to access these generative AI technologies and move more and more workloads to the cloud quicker than they may have previously expected."

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Okay. Helpful. Well, that will be it for my generative AI questions but that's the top... REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 07, 2023 / 6:20PM, DDOG.OQ - Datadog Inc at William Blair Growth Stock Conference

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : There you go. But just taking a step back, I think a common feedback point that we get from a lot of investors is Datadog is a great business. It's operating in a really large market, but there are a lot of other alternatives in there, whether it be log management players or APM players. So I'm curious, how do you compete in that type of market? And how do you make sure you're the long-term winner in the true observability space?

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Yes. No, it's really impressive to see the margins that you have while still spending low 30% on R&D. But just thinking about the actual performance. So 2022, really solid year. Over 60% revenue growth, really solid margins. But we did start to see revenue growth decelerate a bit towards the back half of the year and into this year. Just as people -- we impacted the macro and there are things people going through cloud optimizations, everything around that. So I would love to kind of hear how the macro impacted you, especially as it relates to those cloud optimizations?

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : That's helpful. So that's on the cloud optimization front. And where we've obviously seen that from the hyperscalers as well. So there's a lot going on. You've mentioned a lot on the recent calls just that actually Datadog optimization project to have been quite a bit within your customer base. So curious if you could just walk us through what a typical optimization project looks like in terms of duration and what customers are looking at in terms of how much data they're ingesting, where they want to place workloads. I'm curious how that typical project goes and how long it lasts?

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Yes, that leads me right in my next question. And so I'm curious if we could dig into that a little bit more. So as we head into particularly tougher budget environment where people might look to cut costs, they move costs around. There's also a really nice consolidation opportunity. And so I'm curious what the early results have been on that and what you're seeing in the competitive environment. I think customers really looking to consolidate on broader platforms like Datadog.

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Yes. That's helpful. And then switching over to another topic. You've mentioned shift left a few times. So Datadog has been on the security journey over the past few years. Can you walk us through the progress that you've made with that product suite and just some of the recent updates with that business?

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Yes, that brings up a good question, just if you're not going into endpoint security, not going into these different places. So I'm curious, who are you competing with in this cloud security market? And where do the budget dollars come from when your customers adopt Datadog security plan?

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Yes. That's helpful. You mentioned that you now have 5,000 customers on the security platform. And so I'm curious, now that you have that large of a customer mass, what are you seeing in terms of the data of where you might be really striking a cord and customers really like using Datadog platform and maybe some areas that you really want to -- you don't have right now that you want to dig into deeper over the next few years?

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Yes. That's helpful. So security just launched the last few years, but we touched on your R&D organization earlier. Just over 30% of revenue. I'm curious, in your perspective, outside of the ones that we've talked about, what are some of the newer products that you're pretty excited about right now? Because your product team pushes out quite a few product feature, so I'm curious where you're seeing some early fruit? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 07, 2023 / 6:20PM, DDOG.OQ - Datadog Inc at William Blair Growth Stock Conference

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Yes. So that's the R&D side of the equation. But on the go-to-market side of the equation, you have really strong unit economics, really efficient go-to-market motion, what allows you to kind of run that type of model with how many different products that you're selling today?

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Yes. And that -- we've seen that buying pattern be really effective, especially with SMB mid-market customers. But you're starting to move your platform further and further upmarket. I'm curious if you think the go-to-market motion has to evolve at all as you move further upmarket, so that might be maybe GSI partnerships thinking about that angle. I'm curious how you're thinking about evolving

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Yes. No. In the -- I'm curious if we take a step back and think about the macro again and how it relates to customer conversations that you're having, in the observability market, where data is this big -- is a big growth driver. It's a really nice opportunity over time. But I'm curious in your conversations with customers, how are you thinking about addressing that in an uncertain macro time where a customer might think of Datadog is potentially a data tax and how they're thinking about things. So I'm curious how you're thinking about those customer conversation in an uncertain macro?

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Yes. I know we're coming up on time here. So I'll just ask you 1 last question as we wrap up. What makes you most excited about Datadog and staying with the company and really driving things forward? And yes, what makes you excited about Datadog?

Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst : Well, we're definitely excited about the story as well. So thanks again, David. I appreciate you having me. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 07, 2023 / 6:20PM, DDOG.OQ - Datadog Inc at William Blair Growth Stock Conference