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Datadog (DDOG - Free Report) reported second-quarter 2023 non-GAAP earnings per share (EPS) of 36 cents, which increased 50% from the year-ago quarter, beating the Zacks Consensus Estimate for earnings by 28.6%.
The company’s net revenues of $509.5 million increased 25.4% year over year and beat the consensus estimate by 1.82%.
Quarter Details
The company ended the second quarter with 26,100 customers, up from 21,200 in the prior-year period.
In the second quarter of 2023, Datadog had 2,990 customers with ARR of $100,000 or more, which increased 24% year over year. These customers generated about 85% of the total ARR.
As of the second-quarter end, 82% of customers used two or more products, up from 79% in the year-ago quarter. Additionally, 45% of customers utilized four or more products, up from 37% in the year-ago quarter.
Datadog’s dollar-based retention rate was more than 120% in the second quarter as customers increased their usage and adopted more products.
In the second quarter, Datadog’s adjusted gross margin increased 50 basis points (bps) on a year-over-year basis to 81.3%.
Research & development expenses gained 30.3% on a year-over-year basis to $158.4 million, driven by increased investments in Datadog’s platform. Research & development, as a percentage of revenues, increased 120 bps to 31.1%.
Sales and marketing expenses increased 24% year over year to $120.1 million. Sales and marketing expenses, as a percentage of revenues, contracted 30 bps to 23.6%.
General & administrative expenses increased 15.8% year over year, reaching $29 million in the reported quarter. General & administrative expenses, as a percentage of revenues, contracted 50 bps to 6.2%.
Datadog reported a non-GAAP operating income of $106.4 million compared with $84.7 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Jun 30, 2023, Datadog had cash, cash equivalents, restricted cash and marketable securities of $2.2 billion compared with $2 billion as of Mar 31.
Operating cash flow was $153.2 million in the reported quarter, up from $133.8 million in the first quarter.
Free cash flow during the quarter was $141.7 million compared with $116.3 million in the first quarter.
Guidance
For the third quarter of 2023, Datadog anticipates revenues between $521 million and $525 million. Non-GAAP EPS is expected to be in the range of 33-35 cents. Non-GAAP operating income is expected to be in the range of $98-$102 million.
For 2023, Datadog anticipates revenues between $2.05 billion and $2.06 billion. Non-GAAP EPS is expected to be between $1.30 and $1.34. Non-GAAP operating income is expected to be in the range of $390-$400 million.
Zacks Rank & Stocks to Consider
Currently, Datadog carries a Zacks Rank #3 (Hold).
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Datadog (DDOG) Q2 Earnings Beat Estimates, Revenues Rise Y/Y
Datadog (DDOG - Free Report) reported second-quarter 2023 non-GAAP earnings per share (EPS) of 36 cents, which increased 50% from the year-ago quarter, beating the Zacks Consensus Estimate for earnings by 28.6%.
The company’s net revenues of $509.5 million increased 25.4% year over year and beat the consensus estimate by 1.82%.
Quarter Details
The company ended the second quarter with 26,100 customers, up from 21,200 in the prior-year period.
In the second quarter of 2023, Datadog had 2,990 customers with ARR of $100,000 or more, which increased 24% year over year. These customers generated about 85% of the total ARR.
As of the second-quarter end, 82% of customers used two or more products, up from 79% in the year-ago quarter. Additionally, 45% of customers utilized four or more products, up from 37% in the year-ago quarter.
Datadog’s dollar-based retention rate was more than 120% in the second quarter as customers increased their usage and adopted more products.
Datadog, Inc. Price, Consensus and EPS Surprise
Datadog, Inc. price-consensus-eps-surprise-chart | Datadog, Inc. Quote
Operating Details
In the second quarter, Datadog’s adjusted gross margin increased 50 basis points (bps) on a year-over-year basis to 81.3%.
Research & development expenses gained 30.3% on a year-over-year basis to $158.4 million, driven by increased investments in Datadog’s platform. Research & development, as a percentage of revenues, increased 120 bps to 31.1%.
Sales and marketing expenses increased 24% year over year to $120.1 million. Sales and marketing expenses, as a percentage of revenues, contracted 30 bps to 23.6%.
General & administrative expenses increased 15.8% year over year, reaching $29 million in the reported quarter. General & administrative expenses, as a percentage of revenues, contracted 50 bps to 6.2%.
Datadog reported a non-GAAP operating income of $106.4 million compared with $84.7 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Jun 30, 2023, Datadog had cash, cash equivalents, restricted cash and marketable securities of $2.2 billion compared with $2 billion as of Mar 31.
Operating cash flow was $153.2 million in the reported quarter, up from $133.8 million in the first quarter.
Free cash flow during the quarter was $141.7 million compared with $116.3 million in the first quarter.
Guidance
For the third quarter of 2023, Datadog anticipates revenues between $521 million and $525 million. Non-GAAP EPS is expected to be in the range of 33-35 cents. Non-GAAP operating income is expected to be in the range of $98-$102 million.
For 2023, Datadog anticipates revenues between $2.05 billion and $2.06 billion. Non-GAAP EPS is expected to be between $1.30 and $1.34. Non-GAAP operating income is expected to be in the range of $390-$400 million.
Zacks Rank & Stocks to Consider
Currently, Datadog carries a Zacks Rank #3 (Hold).
Investors interested in the broader Zacks Computer & Technology sector can also consider some better-ranked stocks like NVIDIA (NVDA - Free Report) , Cisco Systems (CSCO - Free Report) and Rekor Systems (REKR - Free Report) . NVIDIA sports a Zacks Rank #1 (Strong Buy), while Cisco Systems and Rekor Systems carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NVIDIA shares have gained 210.9% year to date. NVDA is set to report its second-quarter 2023 results on Aug 23.
Cisco Systems shares have gained 11.3% year to date. CSCO is set to report its fourth-quarter fiscal 2023 results on Aug 16.
Rekor Systems shares have gained 122.5% year to date. REKR is set to report its second-quarter 2023 results on Aug 14.