Datadog, Inc.

Good day, and thank you for standing by. Welcome to the Q1 2025 Data Dog earnings conference call. At this time, our participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Yuka Broderick from SVP of Investor Relations. Please go ahead.

Thank you, Antoine. Good morning, and thank you for joining us to review Datadog's first quarter 2025 financial results, which we announced in our press release issued this morning. Joining me on the call today are Olivier Pommel, Datadog's co-founder and CEO, and David Opsler, Datadog's CFO. During this call, we will make forward looking statements, including statements related to our future financial performance, our outlook for the second quarter and the fiscal year 2025 and related notes and assumptions, our growth margins and operating margins, our product capabilities, our ability to capitalize on market opportunities and usage trends. The words anticipate, believe, continue, estimate, expect, intend, will and similar expressions are intended to identify forward looking statements or similar indications of future expectations. These statements reflect our views only as of today and are subject to a variety of risks and uncertainties that could cause actual results to defer materials. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the Form 10-K where the quarter ended December 31, 2024. Additional information will be made available in our upcoming Form 10-Q where the fiscal quarter ended March 31, 2025 and other filings with the SEC. This information is also available on the investor relations section of our website, along with a replay of this call. We will also discuss non-GAAP financial measures, which are reconciled to their most directly comparable GAAP financial measures in the tables in our earnings release, which is available at investors.datadoghq.com. With that, I'd like to turn the call over to Olivier.

Thanks, Yuka, and thank you all for joining us this morning to go through our Q1 results and what was a solid start to the year. Let me begin with a review of our Q1 financial performance. Revenue was $762 million, an increase of 25% year over year and above the high end of our guidance range. We ended with about 30,500 customers, up from about 28,000 a year ago. We ended Q1 with about 3,770 customers with an ARR of $100,000 or more, up from about 3,340 a year ago. These customers generated about 88% of our ARR. And we generated free cash flow of $244 million, with a free cash flow margin of 32%. Turning to platform adoption, our platform strategy continues to resonate in the market. At the end of Q1, 83% of customers were using two or more products, up from 82% a year ago. 51% of customers were using four or more products up from 47% a year ago. 28% of our customers were using six or more products, up from 23% a year ago. And 13% of our customers were using eight or more products, up from 10% a year ago. We are pleased to see that customers are adopting more products, and I'd like to highlight two of our newer products with you. First, FlexLogs is off to a fast start and now exceeds $50 million in ARR. FlexLogs has achieved this milestone in six quarters, which is the fastest ramp we've seen to that level, and which echoes its value to customers as well as the size of the log management market opportunity. I'll also note that by adopting FlexLogs, our customers are adding new use cases at the right economics, and these FlexLogs adopters ultimately spend more on Datadog log management as well as more on our overall platform. Second, Our database monitoring product is approaching the $50 million ARN level as well and is growing 60% year over year. Database monitoring has now been adopted by over 5,000 customers. We are very excited about the early traction we're seeing there and are doubling down on our investment into broader data observability as we see strong demand signals in that area. And we'll come back to that in a few minutes. Now let's discuss this quarter's business drivers. Overall, we saw trends for usage growth from existing customers in Q1 that were in line with our expectations. We are seeing high growth in our AI cohort as well as consistent and stable growth in the rest of the business. We also had a strong bookings quarter with particularly strong execution in new logos and larger bookings. Dollar bookings for new logos were up over 70% year over year and much stronger than our typical seasonal softness in Q1. And on the large deal side, in Q1, we signed a total of 11 deals with a TCV of $10 million or more, up from just one in the year-ago quarter, as we continue to expand our business to larger customers. Finally, churn has remained low, with gross revenue retention stable in the mid to high 90s, highlighting the mission-critical nature of our platform for our customers. Now, moving on to R&D, we continue to see rising customer interest for next-gen AI observability and analysis. At the end of Q1, more than 4,000 customers used one or more Datadog AI integrations, and this number has doubled year over year. With LLM observability, we are seeing continued growth in customers and usage as they seek to manage end-to-end model performance, security, and quality. I'll call out the fact that the number of companies using LLM observability has more than doubled in the past six months. And we are adding to bits AI with capabilities for customers to take action with workflow automation and app builder using next gen AI to help our customers remediate issues more quickly and move towards auto remediation in the future. Zooming up, we're making progress on all of our AI initiatives. And you should expect more announcements in this area at Dash, our user conference, taking place in June. Moving on to security. Our teams have been very busy building up products and features for our customers' DevSecOps needs. to give you a quick overview of our capabilities. First, we have a comprehensive set of products to identify and manage vulnerabilities across software and infrastructure. In infrastructure, our cloud security product identifies vulnerabilities in hosts, containers, Kubernetes clusters, and infrastructure as code. Our security customers can use agent-less scanning to cover their entire infrastructure stack in minutes. and existing data customers using our lightweight agent immediately gain deep, granular, and timely security visibility. On the application vulnerability side, our code security product identifies vulnerabilities in code, from development to production, and for first party code, as well as third party open source libraries. This product area has launched very recently, and already has over 1,000 customers paying for the product. Because we bring visibility to production workloads, we are uniquely positioned to identify which vulnerabilities are most critical in production and break down silos between developers, DevOps, and security teams. Second in security, as vulnerabilities face threats and attacks, our threat management product helps our customer identify and remediate them. They can use our cloud theme to identify threats in logs, and they can further protect from threats in infrastructure with workload protection and in software with app and API protection. Finally, our customers use our sensitive data scanner product to discover, classify, and redact sensitive data at scale across their logs, traces, events, user sessions, data stores, code, and all the way to LLM prompts. While we have much more to do, today we are serving over 7,500 customers with our security products, or about a quarter of our total customer base. And over half of our Fortune 500 customers use our security products. a good sign of our opportunities with the largest enterprises. Now moving on from security. Last month, we announced our plans to launch our latest data center in Australia. We see a large opportunity to serve our Australian customers and help them meet local data residency, privacy, and security requirements. Finally, we recently announced a couple of acquisitions. First, we acquired EPO, a next generation feature management and experimentation platform. The EPO platform helps increase the velocity of releases while also lowering risk by helping customers to release and validate features in a controlled manner. EPO augments our efforts in product analytics, helping customers improve user experience and tie feature performance to business outcomes. More broadly, we see automated experimentation as a key part of modern application development, with the rapid adoption of AI-generated code as well as more and more of the application logic itself being implemented with non-deterministic AI models. Second, we also acquired Metaplane, a data observability platform built for modern data teams. Metaplane helps prevent, detect, and resolve data availability and quality issues across a company's data warehouses and data pipelines. We've seen for several years now that data freshness and quality were critical for applications and business analytics and we believe that they are now becoming key enablers of the creation of new enterprise AI workloads, which is why we intend to integrate the Metaplane capabilities into our end-to-end data observability offerings. We are very excited to welcome both the Metaplane and the APO teams to Datadog, as we have a lot to build together. And that's it for product and engineering. Our teams are very hard at work this quarter, and we're looking forward to sharing many new products and feature announcements at our Dash user conference on June 10th and 11th in New York City. Now let's move on to sales and marketing. As I mentioned earlier, we had a number of great new logo wins and customer expansions this quarter. So let's go through a few of those. First, we landed a seven-figure annualized deal with one of the largest US car manufacturers. This customer has a complex hybrid environment, including on-prem, multiple clouds, in-car IoT, and mobile apps. They expect to unify observability across teams and across all their tech stacks while accelerating root cause analysis. And they are starting with 13 Datadog products, consolidating a dozen tools and rolling out to dozens of business units. Next, we landed a seven-figure annualized deal with a major Latin American bank. They expect to use our unified observability to reduce operational costs and enable autonomy for departments that previously had to depend on specialized teams for visibility. This customer is starting with six set of products and is replacing three existing tools. Next, we landed a seven-figure annualized deal with a major American tech supplies company. This customer struggled with tool sprawl and limited user adoption. With Datadog, they expect to sell over $1 million every year, both in engineering time and avoidance of lost revenue. This customer is starting with 11 Datadog products, including Cloud Theme, and is replacing seven commercial tools. Next, we welcome back an insurance tech customer with a 60-year annualized deal. This customer found that their previous observability tool involved manual workflows and customization, high operational overhead. and use of frustration and alert fatigue. By returning to Datadog, they expect to benefit from Datadog's ease of use and out-of-the-box capabilities while using our built-in usage controls to manage observability and cloud costs. This customer now expects to use FlexLogs, cloud cost management, and OnCall among the 10 products they plan to adopt. Next, we signed a seven-figure annualized expansion with one of the largest US health insurers, This customer is using Datadog across dozens of business units to support millions of customers. More recently, they have been using Datadog to significantly improve customer experience and reduce time consuming and expensive outages. As an example, one team estimated reductions in mean time to resolution from three to four hours down to three to four minutes by using Datadog. With this expansion, this customer is using 17 products in the Datadog platform. including the full Datadog security suite. Finally, we signed a seven-figure expansion as a manualized contract with a leading next-gen AI company. This customer needs to reduce tool fragmentation to keep on top of its hyper-growth in usage and employee headcount. With this expansion, the customer will use five Datadog products and will replace a commercial tool for APM and log management. And that's it. for another productive quarter from our go-to-market teams. Before I turn it over to David for a financial review, let's have a few words on our longer-term outlook. We recognize that there are many cross-currents impacting the global economy right now, but our view of our long-term market opportunities remains unchanged. We continue to believe digital transformation and cloud migration are long-term secular growth drivers of our business as well as critical for every company to deliver value and gain competitive advantage. And we continue to focus on delivering innovation and value to our customers against their mission-critical needs, including their AI efforts. Now, more than ever, we feel ideally positioned to help customers of every size and in every industry to transform, innovate, and drive value through technology adoption. And with that, I will turn it over to our CFO, David.