Datadog, Inc.

Good day and welcome to the Q4 2025 Data Dog Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1-1. If your question hasn't been answered and you'd like to remove yourself from the queue, please press star 1-1 again. As a reminder, this call may be recorded. I'm now going to turn the call over to Yuka Broderick, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Michelle. Good morning, and thank you for joining us to review Digidog's fourth quarter 2025 financial results, which we announced in our press release issued this morning. Joining me on the call today are Olivier Pommel, Digidog's co-founder and CEO, and David Obstler, Digidog's CFO. During this call, we will make forward-looking statements, including statements related to our future financial performance, our outlook for the first quarter and fiscal year 2026, and related notes and assumptions, our product capabilities, and our ability to capitalize on market opportunities. 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 today and are subject to a variety of risks and uncertainties that could cause actual results to differ materially. For discussion of the material risks and other important factors that could affect our actual results, please refer to our Form 10-Q for the quarter ended September 30, 2025. Additional information will be made available in our upcoming Form 10-K for the fiscal year ended December 31st, 2025, and other filings for the SEC. This information is also available on the Investor Relations section of our website, along with a replay of this call. We will discuss non-GAAP financial measures, which are reconciled to their most directly comparable GAAP financial measures in the tables in our agency, which is available at investors.datadoghq.com. With that, I'd like to turn the call over to Olivier.

Thank you, Gab, and thank you all for joining us this morning to go over what was a very strong Q4 and overall a really productive 2025. Let me begin with this quarter's business drivers. We continue to see broad-based positive trends in the demand environment with the ongoing momentum of cloud migration. We experienced trends across our business, across our product lines, and across our diverse customer base. We saw a continued acceleration of our revenue growth This acceleration was driven in large part by the inflection of our broad-based business outside of the AI-native group of customers we discussed in the past. And we also continue to see very high growth within this AI-native customer group as they go into production and grow in users, tokens, and new products. Our go-to-market teams executed to a record $1.63 billion in bookings, up 37% year-over-year. This included some of the largest deals we've ever made. We signed 18 deals over $10 million in TCV this quarter, of which two were over $100 million, and one was an eight-figure land with a leading AI model company. 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. Regarding our Q4 financial performance and key metrics, Revenue was $953 million, an increase of 29% year-over-year and above the high end of our guidance range. We ended Q4 with about 32,700 customers, up from about 30,000 a year ago. We also ended Q4 with about 4,310 customers with an ARR of $100,000 or more, up from about 3,610 a year ago. These customers generated about 90% of our ARR. And we generated free cash flow of $291 million, with a free cash flow margin of 31%. Turning to product adoption, our platform strategy continues to resonate in the market. At the end of Q4, 84% of customers used two or more products, up from 83% a year ago. 55% of customers use four or more products, up from 50% a year ago. 33% of our customers use six or more products, up from 26% a year ago. 18% of our customers use eight or more products, up from 12% a year ago. And as a sign of continued penetration of our platform, 9% of our customers use 10 or more products, up from 6% a year ago. During 2025, we continue to land and expand with larger customers. As of December 2025, 48% of the Fortune 500 are Datadog customers. We think many of the largest enterprises are still very early in their journey to the cloud. The median Datadog ARR for Fortune 500 customers is still less than half a million dollars, which leaves a very large opportunity for us to grow with these customers. So we're landing more customers and delivering more value, And we also see that with the ARR milestones we're reaching with our products. We continue to see strong growth dynamics with our core three pillars of observability, infrastructure monitoring, APM, and log management, as customers are adopting the cloud, AI, and modern technologies. Today, infrastructure monitoring contributes over $1.6 billion in ARR. This includes innovations that deliver visibility and insights across our customers' environments, whether they are on-prem, virtualized servers, containerized hosts, serverless deployments, or parallelized GPU fleets. Meanwhile, log management is now over $1 billion in AR. And this includes continued rapid growth with FlexLogs, which is nearing $100 million in AR. And our third pillar, the end-to-end suite of APM and DEM products, also crossed $1 billion in AR. This includes an acceleration of our core European product into the mid-30s percent year-over-year and currently our fastest-growing core pillar. We have now enabled our customers with the easiest onboarding and implementation in the market, while delivering unified, deep end-to-end visibility into the applications. Now, remember that even with these three pillars, we're still just getting started, as about half of our customers do not buy all three pillars for us, or at least not yet. Moving on to R&D and what we built in 2025. We released over 400 new features and capabilities this year. That's too much for us to cover today, but let's go over just some of our innovations. We are executing relentlessly on a very ambitious AI roadmap, and we split our AI efforts into two buckets, AI for Datadog and Datadog for AI. So first, let's look at AI for Datadog. These are AI products and capabilities that make the Datadog platform better and more useful for customers. We launched Bits.ai SRE Agent for general availability in December to accelerate root cause analysis and incident response. Over 2000 trial and paying customers have run investigations in the past month, which indicates significant interest and showed great outcomes with Bits.ai SRE. And we're well on our way with Bits.ai Dev Agent which detects code-level issues, generates fixes with production context, and can even help release a monetary fix, and Bix AI Security Agent, which autonomously triages SIEM signals, conducts investigations, and delivers recommendations. The Datadog MCP server is being used by thousands of customers in preview. Our MCP server responds to AI agent and user prompts and uses real-time production data and rich Datadog context to drive troubleshooting, root cause analysis, and automation. And we're seeing explosive growth in MCP usage, with the number of tool calls growing 11-fold in Q4 compared to Q3. Second, let's talk about Datadog for AI. This includes capabilities that deliver end-to-end observability and security across the AI stack. We are seeing an acceleration in growth for observability Over 1,000 customers are using the product, and the number of fans sent has increased 10 times over the last six months. In 2025, we broaden the product to better support application development and integration, adding capabilities such as LLM experiments, LLM playgrounds, LLM prompt analysis, and custom LLM as a judge. And we will soon release our AI Agents Console to monitor usage and adoption of AI agents and coding assistance. We're working with design partners on GPU monitoring, and we are seeing GPU usage increase in our customer base overall. And we're building into our products the ability to secure the AI stack against prompt injection attacks, model hijacking, and data poisoning, among many other risks. Overall, we continue to see increased interest among our customers in next-gen AI. Today, about 5,500 customers use one or more Datadog AI integrations. to send us data about their machine learning, AI, and LLM usage. In 2025, our observability platform delivered deeper and broader capabilities for our customers. We reached a major milestone of more than 1,000 integrations, making it easy for our customers to bring in every type of data they need and engage with the latest technologies from cloud to AI. In log management, we're seeing success with our consolidation motion. During 2025, we saw an increasing demand to replace a large legacy vendor with takeouts in nearly 100 deals for tens of millions of dollars of new revenue. And we improved log management with notebooks, reference tables, log patterns, calculated fields, and an improved lifestyle, among many other innovations. We launched data observability for general availability. Data is becoming even more critical in the AI era. With data observability, We are enabling end-to-end visibility across the entire data lifecycle. We launched storage management last month, providing granular insights into cloud storage and recommendations to reduce spend. We delivered Kubernetes autoscaling so users can quickly identify over-provisioned clusters and deployments and right-size their infrastructure. In the digital experience monitoring area, we launched product analytics to help product designers make better design decisions with clear data about user experience and behavior. And we delivered run without limits, giving front-end teams full visibility into user traffic and performance, and dynamically choosing the most useful sessions to retain. In security, we're seeing increasing traction and are actively displacing existing market-leading solutions with cloud theme in large enterprises. This year, our engineers ship many new capabilities including a tripling of the amount of content packs built into the product. And most importantly, the tight integration with Bits.ai security agent, which has already shown promise as a strong differentiator in the market. We launched Code Security, enabling customers to detect and remediate vulnerabilities in their code and open source libraries from development to production. And we continue to advance our cloud security offering, adding infrastructure as code or IAC security We detect and resolve security issues with Terraform. And we launch our security graphs to identify and evaluate attack paths. In software delivery, in January, we launched Future Flags. They combine with our real-time observability to enable canary rollouts so teams can deploy new code with confidence. And we expect them to gain importance in the future. as they serve as the foundation for automating the validation and release of applications in an AI-agentic development world. We are also building out our internal developer portal, which includes software catalog and scorecard, to help developers navigate infrastructure and application complexity, provide rich context to AI development agents, and ultimately enable a faster release cadence. In cloud service management, we launch on-call and now support over 3,000 customers with their incident response processes. And I already mentioned Bitsaya SRE agents, which pairs with Oncall to accelerate our customer incident resolution. As you can tell, we've been very busy, and I want to thank our engineers for a very productive 2025. And most importantly, I'm even more excited about our plans for 2026. So let's move on to sales and marketing. I want to highlight some of the great deals we closed this quarter. First, we landed an eight-figure annualized deal and our biggest new logo deal to date with one of the largest AI financial model companies. This customer had a fragmented observability stack and cumbersome monitoring workflows leading to poor productivity. This is a consolidation of more than five open source, commercial, hyperscaler, and in-house observability tools into the unified Datadog platform. that has returned meaningful time to developers and has enabled a more cohesive approach to observability. This customer is experiencing very rapid growth. The data log allows them to focus on product development and supporting their users, which is critical to their business success. Next, we welcome back a customer that was a European data company in a nearly seven-figure annualized deal. These customers' log-focused observability solution had poor user experience and integrations, which led to limited user adoption and gaps in coverage. By returning to Datadog and consolidating seven observability tools, they expect to reduce tooling overhead and improve engineering productivity with faster incident resolution. It will adopt nine Datadog products at the start, including some of our newer products, such as FlexLog, Observability Pipeline, Cloud Cost Management, better observability, and on-call. Next, we signed an eight-figure annualized expansion with a leading e-commerce and digital payments platform. These customers' products have an enormous reach, and its commercial APM solution had scaling issues, lacked correlation across silos, and had a pricing model that was difficult to understand or predict. With this expansion, they are standardizing on Datadog APM using OpenTelemetry, so their teams can correlate metrics, traces, and logs to detect and resolve issues faster. And they have already seen meaningful impact, with a 40% reduction in resolution times by their own estimates. This customer has adopted 17 products across the platform. Next, we signed a 70-year annualized expansion for an 80-year annualized deal with a Fortune 500 food and beverage retailer. This long-time customer uses a Datadog platform across many products, but still has over 30 other observability tools and embarked on consolidating for cost savings and better outcomes. With this expansion, Datadog Log Management and FlexLogs would replace a legacy logging product for all ops use cases, with expected annual savings in millions of dollars. This customer is expanding to 17 Datadog products. Next, We signed a seven-figure annualized expansion with a leading healthcare technology company. This company was facing reliability issues, impacting clinicians during critical workflows, and putting customer trust at risk. The customer will consolidate six tools and adopt seven deadlock products, including LLM observability, to support their AI initiatives, as well as Bits AI SRE agents to further accelerate a reticent response. Next, we signed an eight-figure annualized expansion more than quadrupling their annualized commitment with a major Latin American financial services company. Given its successful tool consolidation projects and rapid adoption of Datadog products across all of its teams, this customer renewed early with us while expanding to additional products, including data observability, CI visibility, database monitoring, and observability pipelines. With Datadog, These customers showed measurable improvements in cost, efficiency, customer experience, and conversion rates across multiple lines of business. That proof of value led them to broaden their commitment with us and have firmly established Datadog as their mission-critical observability partner. Last and not least, we signed a seven-figure annualized expansion for an eight-figure annualized deal with a leading fintech company. With this expansion, The customer is moving their log data onto our unified platform, so teams can correlate telemetry in one place and save between hours and weeks in time to resolution for incidents. This customer has obtained 19 Datadog products across the platform, including all three pillars, as well as digital experience, security, software delivery, and service management. And that's it for our wins. Congratulations to our entire go-to-market organization for a great 2025 and a record with Q4. It was inspiring to see the whole team at our sales kickoff last month and really exciting to embark on a very ambitious 2026. Before I turn it over to David for financial review, I want to say a few words on our longer term outlook. There is no change to our overall view that digital transformation and cloud migration are long-term secular growth drivers for our business. So we continue to extend our platform to solve our customers' problems from end to end across their software development, production, data stack, user experience, and security needs. Meanwhile, we're moving fast in AI by integrating AI into the Datadog platform to improve customer value and outcome, and by building products to observe, secure, and act across our customers' AI stacks. In 2025, we executed very well to deliver for our customers against their most complex mission-critical problems, Our strong financial performance is an output of that effort. And we're even more excited about 2026 as we are starting to see an inflection in AI usage by our customers into the application and as our customers begin to adopt AI innovations, such as our Biz AI SRE agent. To hear about all that in detail and much more, I welcome you all to join us at our next Investor Day this Thursday in New York between 1 and 5 p.m. I'll be joined by our product and go-to-market leaders to share how we are serving our customers, how we innovate to broaden our platform, and how we are delivering greater value with AI. For more details, please refer to the press release announcing the event or head to investors.data.hq.com. And with that, I will turn it over to our CFO, David. Thanks, Olivier.