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Datadog (DDOG - Free Report) reported fourth-quarter 2023 non-GAAP earnings per share (EPS) of 44 cents, which increased 109.5% from the year-ago quarter and beat the Zacks Consensus Estimate by 2.33%.
The company’s net revenues of $589.6 million rose 25.6% year over year and beat the consensus estimate by 4.05%.
The company ended the fourth quarter with 27,300 customers, up from 23,200 in the prior-year period.
In the fourth quarter of 2023, Datadog had 3,190 customers with an annual run rate (ARR) of $100,000 or more, which increased 15% year over year. These customers generated about 86% of the total ARR.
As of the end of the fourth quarter, 83% of customers used two or more products, up from 81% in the year-ago quarter. Additionally, 47% of customers utilized four or more products, up from 42% in the year-ago quarter.
Datadog’s net revenue retention was in the mid-110s in the fourth quarter as customers increased their usage and adopted more products.
Operating Details
In the fourth quarter, Datadog’s adjusted gross margin increased 290 basis points (bps) on a year-over-year basis to 83.4%.
Research & development expenses gained 14.8% on a year-over-year basis to $163.5 million, driven by increased investments in Datadog’s platform. Research & development, as a percentage of revenues, decreased 260 bps to 27.7%.
Sales and marketing expenses rose 5.3% year over year to $132 million. Sales and marketing expenses, as a percentage of revenues, contracted 430 bps to 22.4%.
General & administrative expenses increased 8.6% year over year, reaching $29.9 million in the reported quarter. General & administrative expenses, as a percentage of revenues, contracted 80 bps to 5.1%.
Datadog reported a non-GAAP operating income of $166.7 million compared with $83.1 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2023, Datadog had cash, cash equivalents, restricted cash and marketable securities of $2.6 billion compared with $2.3 billion as of Sep 30, 2023.
Operating cash flow was $220.2 million in the reported quarter, up from $152.8 million reported in the previous quarter.
Free cash flow during the quarter was $201.3 million compared with $138.2 million in the prior quarter.
Guidance
For the first quarter of 2024, Datadog anticipates revenues between $587 million and $591 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 band of $128-$132 million.
For 2024, Datadog anticipates revenues between $2.555 billion and $2.575 billion. Non-GAAP EPS is projected between $1.38 and $1.44. Non-GAAP operating income is expected to be in the range of $535-$555 million.
Zacks Rank & Stocks to Consider
Currently, Datadog carries a Zacks Rank #3 (Hold).
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Datadog (DDOG) Q4 Earnings Beat Estimates, Revenues Rise Y/Y
Datadog (DDOG - Free Report) reported fourth-quarter 2023 non-GAAP earnings per share (EPS) of 44 cents, which increased 109.5% from the year-ago quarter and beat the Zacks Consensus Estimate by 2.33%.
The company’s net revenues of $589.6 million rose 25.6% year over year and beat the consensus estimate by 4.05%.
Datadog, Inc. Price, Consensus and EPS Surprise
Datadog, Inc. price-consensus-eps-surprise-chart | Datadog, Inc. Quote
Quarter Details
The company ended the fourth quarter with 27,300 customers, up from 23,200 in the prior-year period.
In the fourth quarter of 2023, Datadog had 3,190 customers with an annual run rate (ARR) of $100,000 or more, which increased 15% year over year. These customers generated about 86% of the total ARR.
As of the end of the fourth quarter, 83% of customers used two or more products, up from 81% in the year-ago quarter. Additionally, 47% of customers utilized four or more products, up from 42% in the year-ago quarter.
Datadog’s net revenue retention was in the mid-110s in the fourth quarter as customers increased their usage and adopted more products.
Operating Details
In the fourth quarter, Datadog’s adjusted gross margin increased 290 basis points (bps) on a year-over-year basis to 83.4%.
Research & development expenses gained 14.8% on a year-over-year basis to $163.5 million, driven by increased investments in Datadog’s platform. Research & development, as a percentage of revenues, decreased 260 bps to 27.7%.
Sales and marketing expenses rose 5.3% year over year to $132 million. Sales and marketing expenses, as a percentage of revenues, contracted 430 bps to 22.4%.
General & administrative expenses increased 8.6% year over year, reaching $29.9 million in the reported quarter. General & administrative expenses, as a percentage of revenues, contracted 80 bps to 5.1%.
Datadog reported a non-GAAP operating income of $166.7 million compared with $83.1 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2023, Datadog had cash, cash equivalents, restricted cash and marketable securities of $2.6 billion compared with $2.3 billion as of Sep 30, 2023.
Operating cash flow was $220.2 million in the reported quarter, up from $152.8 million reported in the previous quarter.
Free cash flow during the quarter was $201.3 million compared with $138.2 million in the prior quarter.
Guidance
For the first quarter of 2024, Datadog anticipates revenues between $587 million and $591 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 band of $128-$132 million.
For 2024, Datadog anticipates revenues between $2.555 billion and $2.575 billion. Non-GAAP EPS is projected between $1.38 and $1.44. Non-GAAP operating income is expected to be in the range of $535-$555 million.
Zacks Rank & Stocks to Consider
Currently, Datadog carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer & Technology sector are BlackLine (BL - Free Report) , Arista Networks (ANET - Free Report) and Badger Meter (BMI - Free Report) . While BlackLine sports a Zacks Rank #1 (Strong Buy), Arista Networks and Badger Meter carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of BlackLine have lost 3.5% in the year-to-date period. The long-term earnings growth rate for BL is 50.56%.
Shares of Arista Networks have gained 13.7% in the year-to-date period. The long-term earnings growth rate for ANET is 20.15%.
Shares of Badger Meter have lost 7.3% in the year-to-date period. The long-term earnings growth rate for BMI is 12.27%.