Datadog ( DDOG Quick Quote DDOG - Free Report) reported second-quarter 2022 non-GAAP earnings of 24 cents per share, which beat the Zacks Consensus Estimate by 100%. The bottom line also increased 166.7% from the year-ago quarter. The company’s net revenues of $406.1 million surpassed the consensus mark by 7.43%. The figure increased 73.9% year over year. Quarter Details
Steady customer additions drove the top line in the second quarter. Datadog had more than 21,200 customers at the end of the second quarter, up from 16,400 in the year-ago quarter.
Of these customers, 2,420 have an annual run rate (ARR) of $100K or more, up from 1,570 in the year-ago quarter. These customers generate about 85% of the total ARR. As of the end of the second quarter, 79% of customers used two or more products, up from 75% in the year-ago quarter. Additionally, 37% of customers utilized four or more products, up from 28% in the year-ago quarter. Datadog’s dollar-based retention rate was above 130% in the second quarter, driven by increased usage and adoption of existing and new products. Operating Details
In the second quarter, Datadog’s adjusted gross margin increased 450 basis points (bps) on a year-over-year basis to 80.8%.
Research & development expenses increased 71.1% on a year-over-year basis to $121.6 million, driven by increased investments in Datadog’s platform. Research & development, as a percentage of revenues, contracted 50 bps to 29.9%. Sales and marketing expenses increased 59.1% year over year to $96.9 million. Sales and marketing expenses, as a percentage of revenues, declined 220 bps to 23.9%. General & administrative expenses were up year over year by 61.3%, reaching $25 million in the reported quarter. General & administrative expenses, as a percentage of revenues, contracted 50 bps to 6.2%. Datadog reported non-GAAP operating income of $83.8 million compared with $32.2 million in the year-ago quarter. Balance Sheet & Cash Flow
As of Jun 30, 2022, Datadog had cash, cash equivalents and marketable securities of $1.7 billion compared with $1.6 billion as of Mar 31, 2022.
Operating cash flow was $73 million in the reported quarter, down from $147 million reported in the previous quarter. Free cash flow during the quarter was $60.2 million compared with $130 million in the prior quarter. Guidance
For the third quarter of 2022, Datadog anticipates revenues between $410 million and $414 million. The Zacks Consensus Estimate for the same is pegged at $378.05 million.
Non-GAAP earnings are expected to be 15-17 cents per share. The consensus mark for earnings is pegged at 14 cents per share. Non-GAAP operating income is expected in the range of $51 million to $55 million. For 2022, Datadog anticipates revenues between $1.61 billion and $1.63 billion. The Zacks Consensus Estimate for the same is pegged at $1.61 billion Non-GAAP earnings are expected to be between 74 cents and 81 cents. The Zacks Consensus Estimate for earnings stands at 72 cents per share. Non-GAAP operating income is expected in the range of $255 million to $275 million. 2Q22 Highlights
Datadog announced the launch of Observability Pipelines. This new product enables organizations to take greater control of their data so they can reliably scale their observability practices.
The company achieved AWS Education Competency Status. This status recognizes that Datadog has demonstrated technical proficiency and success in building solutions that support mission-critical workloads of customers in the higher education, K-12 primary/secondary, research and publishing sectors. Datadog announced OpenTelemetry Protocol Support. This new capability brings the full monitoring capabilities of the Datadog platform to OpenTelemetry-instrumented applications, without the need to install a separate OpenTelemetry collector. Datadog launched Container Monitoring, Application Performance Monitoring and Security to help Kubernetes users effectively monitor and secure Kubernetes environments. Zacks Rank & Stocks to Consider
Currently, Datadog carries a Zacks Rank #4 (Sell).
Datadog’s shares have declined 37.9% compared with the Zacks Computer and Technology sector’s fall of 46.5% in the year-to-date period.
Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like
Keysight Technologies ( KEYS Quick Quote KEYS - Free Report) , ASE Technology ( ASX Quick Quote ASX - Free Report) and Asure Software ( ASUR Quick Quote ASUR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Keysight Technologies has lost 19.9% in the year-to-date period. KEYS’ long-term earnings growth rate is currently projected at 9.1%. ASE technology has lost 24.6% in the year-to-date period. The long-term earnings growth rate for ASX is currently projected at 23.1%. Asure Software has lost 32.3% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.