It’s an amazing quarter and forward guidance growth of 74% is amazing as well, but would love to understand the perspective from the board member do we consider this to be growth slowing down.
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This isn’t a knock on the person that wrote this, so please don’t take it that way.
I keep seeing this theme of, in my opinion, unrealistic growth expectations, especially as a company scales.
I have been knocking on DDOG for a while just on valuation - I just feel too much is baked in. My opinion, and have been wrong since about their IPO, so there’s that.
But in terms of numbers and execution, I am not sure who has been better in past few years.
ZM doesn’t count, imo, because so much of the demand was artificially created and pulled forward. Sure, DDOG probably got a covid/digital transformation bump, but I think that was more in stock price sentiment than in actual rev growth tied to pandemic.
No debt, quite a bit of cash, huge FCF, profitable, and growing at scale, while broadening their product set.
My only knock, outside of stock price, is I am still not quite sure how mission-critical they are yet. Monitoring vs managing. Monitoring vs prevention/remediation. Would like them to go buy SentinelOne or curious what other moves they can make to increase their optionality.
If they beat and raise rest of year, as normal, they finish at what…$1.7-1.8b?
Let’s say growth “slows” to 50% on average for the following 2 years after.
2023 about $2.7b
2024 about $4b
This is where they start looking like an entrenched ServiceNow type of company.
You can assume multiple compression as their growth rate slows, but I think NOW is a great comparable to track against, both in terms of revenue and mkt cap and both being in similar Enterprise SaaS space.
If the world was made up of nothing but well-executing SaaS companies, they can’t ALL grow at 50% forever, because there is still a finite amount of realistic TAM (and client budgets) to go after. So I think the better approach is not to ask “are they slowing from 80% to 74% and is that bad” but rather “who else is growing this fast, at this size, and still has this much more room to continue to grow at a high rate for years?”.
Some company will come along and be the next ZM or next DDOG, but right now, not sure who else out there I would take. SNOW is complicated, BILL seems to be in a more competitive situation, MNDY definitely isn’t mission critical. Probably, the next DDOG hasn’t gone public yet.
Dreamer