Datadog Inc Q4 2024 Earnings Call Summary

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

Question: Mark Murphy - JPMorgan - Analyst : Thank you so much. Great to see the record bookings in Q4. I'm curious how you're feeling overall about the book of business for AI native customers we recall you anticipated several months ago that some of them were growing so rapidly that they would increase their commitments with better terms. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 1:00PM, DDOG.OQ - Q4 2024 Datadog Inc Earnings Call And I'm curious if the developments that you mentioned on the call aligned with that or whether any of them might become so large that they would they would try to handle observability in health. Just in other words I'm trying to understand if the AI usage and commits are kind of on the same trajectory that they were on or whether you feel that it's so there some oscillations there.

Question: Mark Murphy - JPMorgan - Analyst : Okay, understood. And then, just as a very quick follow up, Olivia, either for Olivia or David, all three major hyper scalers did miss their Q4 revenue forecasts and they were talking about capacity constraints on the AI side. But the non-AI side, for some of them seem to slow just the regular, typical cloud migrations and I'm just wondering if you felt the timing of the holidays had any impact on December, or whether their AI capacity constraints might be flowing through to Datadog as well.

Question: Mark Murphy - JPMorgan - Analyst : Thank you very much. Really appreciate it.

Question: Sanjit Singh - Morgan Stanley - Analyst : Thank you for taking the question and congrats on the record bookings quarter in Q4. Olivier, I want to talk on the sales and marketing side, how you're thinking about this year in terms of the magnitude of change versus the prior year whether it's relating to the investments in underserved geos or the channel partners or you know continuing to serve the enterprise opportunity. What do you have in store for the sales organization going into 2025?

Question: Sanjit Singh - Morgan Stanley - Analyst : That makes total sense and just as a follow up. I actually was going to ask about logs and Flex Logs it sort of dominated a lot of your customer highlights this quarter. In terms of like logs becoming a sort of renewed focus you know across the sort of observability stack you obviously have some incumbents. But is there anything sort of changing technologically you guys have obviously I think re-architected your log platform, but what seems to be driving the renewed interest in log and cloud SIM that gets you excited about the opportunity?

Question: Sanjit Singh - Morgan Stanley - Analyst : Thank you, I appreciate the thoughts.

Question: Raimo Lenschow - Barclays - Analyst : Okay, perfect. Thank you. There's a lot of focus on the big AI guys at the moment, but how do you, I mean, but that's only the starting point for the AI opportunity. Can you see, like what you see in first feedback on people looking at inference workloads and trying to have observability on them because I would assume in the long run that's probably the bigger opportunity. What do you see there and then a question and I have to follow up with David.

Question: Raimo Lenschow - Barclays - Analyst : Okay, yeah, that's really exciting. And then David, like, if you think about the increase investments that we're seeing across sales and marketing and R&D, obviously, we could have kind of taken kind of an accelerated approach or an approach there, like, this time last year, the year before, et cetera. What drives your confidence or what drives the decision to kind of think this year, what are the signals that you're seeing out there to kind of, get you excited about that. Thank you.

Question: Raimo Lenschow - Barclays - Analyst : Okay, perfect. Thank you.

Question: Kash Rangan - Goldman Sachs - Analyst : Hi, thank you very much. I'm wondering if I could get your assessment of, the disparity between the strong forward-looking indicators so that's RPO, CRPO, forward-looking, bent to the business versus the conservative guidance, any thoughts on that? Is it, a bit more conservative given that your forward-looking indicators actually look a little bit stronger than one would have expected? And second, maybe this is one for you, David, is there at the margin any change at all with respect to the usage upside versus the commitment that customers are making and therefore that could help understand why the guidance is what it is. Thank you so much once again.

Question: Kash Rangan - Goldman Sachs - Analyst : I get that. I think you explained it, but at the margin, how do you convert those commitments into usage? I mean, are there things that you're emphasizing the organization to get better conversion and in a shorter span of time. That was really the heart of the question, if I'm not clear. Sorry about that.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Great, thanks for taking my question. David, for you, it was nice to see NRR pick up a bit, and I realized it's a trailing 12 metric, and this year was met with a lot of stability here. I'm just sort of curious, when you think about that, going forward, what have you embedded from a retention perspective in your '25 outlook. And then maybe to put a finer point on the on the on the digital, the AI native question earlier. I mean does your guidance assume that that we see a pretty stable contribution there, throughout the year?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Got it thanks. Congrats on the results.

Question: Koji Ikeda - BofA Global Research - Analyst : Yeah, hey guys, thanks so much for taking the questions. I appreciate all the disclosure on ARR coming from the three core pillars here on infrastructure monitoring, APM, and logs. And so as we move into 2025 and beyond, how do you think about the potential for infrastructure monitoring, specifically the growth there to accelerate from current levels, and what would be the trigger for that?

Question: Koji Ikeda - BofA Global Research - Analyst : Got it, thank you. And just to follow up here on FX and the impacts of revenue and guidance and so I know the vast majority of contracts are in USD, but with 30% of revenue being international, are you considering some changes in pricing and packaging, making pricing more localized for international customers, and then also trying to understand any benefits to operating margin from FX in 2024. And how that may be accounted for in the 2025 guide. Thank you so much.

Question: Eric Heath - KeyBanc Capital Markets Inc - Analyst : Hey, thanks for taking the question here, Oli. You talked about Flex Logs having a lot of success, some M&A in the marketplace that's opened up some opportunity, but just curious from displacement activity that you're seeing with some of the recent M&A take outs on the SIM and log management vendors. And curious also what your ability is to win both the logs and security use cases because. In our feedback talking to customers and channel it sounds like it's oftentimes one or the other but not both so I'm curious of your ability to win both those workloads.

Question: Eric Heath - KeyBanc Capital Markets Inc - Analyst : Awesome and Oli, I'd love to just get some of your thoughts on agentic AI and AI generally just curious when we think about agents which parts of the core observability platform that you think are most relevant or going to be most beneficial to your business as you start to monitor those.

Question: Eric Heath - KeyBanc Capital Markets Inc - Analyst : Thanks Oli.

Question: Patrick Walravens - Citizens JMP - Analyst : Oh great thank you so much. So Oli, I think you started touching on this, but you guys help your customers to digitally transform but when you look inside of Datadog. What are some of the processes in the areas where you see the possibility to really drive some improvements?

Question: Patrick Walravens - Citizens JMP - Analyst : Yeah. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 1:00PM, DDOG.OQ - Q4 2024 Datadog Inc Earnings Call

Question: Patrick Walravens - Citizens JMP - Analyst : Thank you. And then the follow up on that is. Do you see your efficiency as an organization overall, increasing where you can just grow with sort of the same number of people. Do you feel like in the future you're going to need to add the same amount of headcount to drive growth as you do today.

Question: Patrick Walravens - Citizens JMP - Analyst : Great thanks, Oli.