Datadog Sees 25% Q1 Growth, Hikes Guidance
Datadog (NASDAQ:DDOG) raises its full-year outlook to $3.215 billion$3.235 billion in revenue, driven by 25% Q1 growth and accelerating AI-related product adoption.
In Q1, the cloud observability specialist reported $762 million in revenue, topping guidance and marking a 25% year-over-year increase (3% sequentially), according to CEO Olivier Pomel.
Customer count climbed to 30,500 from 28,000 a year ago, with 3,770 clients now generating at least $100,000 in ARR88% of total ARR. The Flex Logs product hit $50 million ARR in just six quarters, the fastest ramp in Datadog's history, while Database Monitoring nears the same milestone with 60% year-over-year growth and over 5,000 customers. Recent acquisitions of Eppo and Metaplane bolster feature management and data observability suites.
On profitability, CFO David Obstler highlighted $244 million of free cash flow (32% margin) and an 80.3% gross margin, modestly down from 81.7% last quarter as cloud hosting costs rose. Management plans optimizations to offset those pressures. Net revenue retention stayed in the 110% range, while gross retention held steady in the mid-to-high 90s. Billings hit $748 million, up 21% year-over-year.
For Q2, Datadog sees revenue between $787 million and $791 million (22%23% growth) with non-GAAP EPS of $0.40$0.42. Full-year guidance now sits at $3.215 billion$3.235 billion in revenue (up $40 million) with operating income of $625 million$645 million and non-GAAP EPS of $1.67$1.71. Gross margins are expected to stay within historic ranges despite short-term headwinds.
In Q&A, analysts pressed on AI-generated code's implicationsPomel noted that increased AI-written code amplifies the need for observability to validate and monitor dynamic applications. On cloud migration trends, Datadog sees steady growth aligned with hyperscaler reports, and CFO Obstler assured that expanded sales and marketing investments are driving productivity on par with previous cohorts.
Why it matters: The raised guidance and standout product ramps underscore Datadog's ability to translate AI and migration tailwinds into sustained top-line and cash-flow growth.
Investors will look to Q2 earnings in late July for confirmation that new AI offerings and bolt-on acquisitions continue fueling momentum.
This article first appeared on GuruFocus.
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