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Datadog (DDOG) Q1 Earnings Top Estimates, Revenues Rise Y/Y

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Datadog (DDOG - Free Report) reported first-quarter 2021 non-GAAP earnings of 6 cents per share that beat the Zacks Consensus Estimate by 100% and remained unchanged year over year.

The company reported net revenues of $198.5 million, well above the guided range of $185 million to $187 million. Also, the figure beat the consensus mark by 6.6% and increased 51.3% from the year-ago quarter.

Datadog, Inc. Price, Consensus and EPS Surprise

Datadog, Inc. Price, Consensus and EPS Surprise

Datadog, Inc. price-consensus-eps-surprise-chart | Datadog, Inc. Quote

Quarter Details

Steady customer additions as well as continued growth of existing customers drove the top line in the first quarter.

Notably, the company had more than 15,200 customers at the end of the first quarter, up from 11,500 in the year-ago quarter. Moreover, Datadog added 1,000 customers sequentially.

Of these customers, 1,437 have an annual run rate (ARR) of $100K or more, up 49.7% year over year. These customers generate about 75% of total ARR.

As of the end of the first quarter, 75% of customers were using two or more products, up 63% year over year. Additionally, 25% of customers were using four or more products, up from 12%.

Markedly, Datadog’s dollar-based retention rate was above 130% in the first quarter, driven by increased usage and adoption of existing and new products.

The company benefited from robust adoption of its cloud-based monitoring and SaaS-based data analytics platform.

During the first quarter, Mendix, a Siemens business and global leader in low-code application development for the enterprise, selected Datadog as the company’s exclusive cloud observability platform for monitoring its multi-cloud microservices environment.

Additionally, the company delivered additional product innovations. These include Logs Outliers powered by Watchdog Insights, Core Web Vitals for Browser Tests, a new user interface for Log Explorer, enhanced AWS serverless tracing, the ability to monitor .NET runtime metrics and new detection rules for Security Monitoring for Okta, Kubernetes, and Azure.

Moreover, the company acquired Timber Technologies, the developer of Vector, a vendor-agnostic, high-performance observability data pipeline, which helps customers to collect, enrich, and transform logs, and other observability data both on-premises and in cloud environments.

Operating Details

In the first quarter, Datadog’s adjusted gross margin contracted 300 basis points (bps) on a year-over-year basis to 77.2%.

Research & development, as a percentage of revenues, expanded 430 bps to 30.9%, driven by increased investments in Datadog’s platform.

Sales and marketing expenses, as a percentage of revenues, contracted 370 bps to 28.3%. General & administrative expenses, as a percentage of revenues, contracted 110 bps to 8%.

Datadog reported non-GAAP operating income of $19.6 million, up 19.7% year over year.

Balance Sheet & Cash Flow

As of Mar 31, 2021, Datadog had cash, cash equivalents and marketable securities of $1.6 billion million compared with $1.5 billion as of Dec 31, 2020.

Operating cash flow was $51.7 million in the reported quarter compared with $23.8 million in the previous quarter.

Free cash flow during the quarter was $44.5 million compared with $16.6 million reported in the previous quarter.

Guidance

For the second quarter of 2021, Datadog anticipates revenues between $211 million and $213 million. Non-GAAP earnings are expected between 3 cent and 4 cents per share.

Non-GAAP operating income is expected to be in the range of $9 million to $11 million.

For full-year 2021, Datadog anticipates revenues between $880 million and $890 million. Non-GAAP earnings are expected between 13 cents and 16 cents per share.

Non-GAAP operating income is expected to be in the range of $45 million to $55 million.

Zacks Rank & Stocks to Consider

Currently, Datadog carries a Zacks Rank #3 (Hold).

Agilent Technologies (A - Free Report) , Dell Technologies (DELL - Free Report) and NVIDIA (NVDA - Free Report) are some better-ranked stocks in the broader computer and technology sector, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Agilent, NVIDIA and Dell are set to report their earnings results on May 25, 26 and 27, respectively.

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