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Datadog (NASDAQ:DDOG) Reports Upbeat Q4, Stock Jumps 17.1%


Adam Hejl /
2022/02/10 7:09 am EST
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Cloud monitoring software company Datadog (NASDAQ:DDOG) beat analyst expectations in Q4 FY2021 quarter, with revenue up 83.7% year on year to $326.1 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $336.5 million at the midpoint, 9.99% above what analysts were expecting. Datadog made a GAAP profit of $7.16 million, improving on its loss of $16.1 million, in the same quarter last year.

Is now the time to buy Datadog? Access our full analysis of the earnings results here, it's free.

Datadog (DDOG) Q4 FY2021 Highlights:

  • Revenue: $326.1 million vs analyst estimates of $291.4 million (11.9% beat)
  • EPS (non-GAAP): $0.20 vs analyst estimates of $0.11 ($0.09 beat)
  • Revenue guidance for Q1 2022 is $336.5 million at the midpoint, above analyst estimates of $305.9 million
  • Management's revenue guidance for upcoming financial year 2022 is $1.52 billion at the midpoint, beating analyst estimates by 8.18% and predicting 47.7% growth (vs 66% in FY2021)
  • Free cash flow of $106.6 million, up 86.8% from previous quarter
  • Customers: 2,010 customers paying more than $100,000 annually
  • Gross Margin (GAAP): 79.4%, up from 76.9% same quarter last year

"We are pleased with our fourth quarter performance, as we demonstrated excellent revenue growth and continued business efficiencies," said Olivier Pomel, co-founder and CEO of Datadog.

Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ:DDOG) is a software as a service platform that makes it easier to monitor cloud infrastructure and applications.

Cloud infrastructure monitoring is becoming a competitive space and Datadog is competing with offerings from New Relic (NYSE:NEWR), Elastic (NYSE:ESTC), Splunk (NASDAQ:SPLK), monitoring tools made by the cloud providers themselves and up and coming startups like Better Stack.

Sales Growth

As you can see below, Datadog's revenue growth has been incredible over the last year, growing from quarterly revenue of $177.5 million, to $326.1 million.

Datadog Total Revenue

This was another standout quarter with the revenue up a splendid 83.7% year on year. On top of that, revenue increased $55.7 million quarter on quarter, a very strong improvement on the $36.9 million increase in Q3 2021, and a sign of re-acceleration of growth, which is very nice to see indeed.

Guidance for the next quarter indicates Datadog is expecting revenue to grow 69.4% year on year to $336.5 million, improving on the 51.2% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $1.52 billion at the midpoint, growing 47.7% compared to 66% increase in FY2021.

There are others doing even better than Datadog. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

Large Customers Growth

You can see below that at the end of the quarter Datadog reported 2,010 enterprise customers paying more than $100,000 annually, an increase of 210 on last quarter. That is quite a bit more contract wins than last quarter and quite a bit above what we have typically seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

Datadog customers paying more than $100,000 annually

Key Takeaways from Datadog's Q4 Results

Sporting a market capitalization of $48.5 billion, more than $1.55 billion in cash and with positive free cash flow over the last twelve months, we're confident that Datadog has the resources it needs to pursue a high growth business strategy.

We were impressed by how strongly Datadog outperformed analysts’ revenue expectations this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. On the other hand, it was a little less exciting that the revenue guidance for next year indicated the growth will be slowing down. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The company is up 17.1% on the results and currently trades at $182.3 per share.

Datadog may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.