DDOG - cutting thru the fog of details

You guys are getting lost in the details. Forget about all those details and read what they said in the conference call:

Q - I get you’re not going to give us guidance right now for next year, how should we think about how you’re framing it, and the rate of investment against that opportunity? And along with that how would you characterize the ability to hire in this environment?

A - Right now we are SO EARLY in the opportunity that the way we think about the way we grow our team isn’t directly related to the way we think about the growth we’re going to get next year.

We really think of it in terms of HOW FAST we can grow them (!) while optimizing for both short-term and long-term growth. So WE ARE GROWING THE TEAM AS FAST AS WE CAN basically (!), and we think there’s enough opportunity to justify it.

And that’s true both on the R&D side and on the S&M side, and WE ARE VERY CONVINCED THAT THE OPPORTUNITY IS THERE (!)….

Saul here: (Caps were mine of course) How could they have been more positive, and how could anyone have read that and sold it down to $80 at one point yesterday? I guess the bots don’t read conference calls which gives us a big advantage.

However, remember that the yoy comparisons may not show it for the next two quarters. As they said several times (here are two)

However, while Q3 usage growth was back to pre-COVID levels, the slowdown experienced in Q2 will still be seen in our year-over-year comparisons for a number of quarters.


So the growth we did forego in Q2 is going to be with us in the year-to-year comparison a little bit.

Saul here again: To clarify, they say they are growing almost as fast as before, but that, because of the slowdown in Q2, the year over year numbers are coming off a lower base than they would have been for yoy comparisons, until they get four quarters under their belt.

They are saying that because of Q2 dropping the baseline, you can’t look at yoy revenue growth for this just reported quarter, Q4 or next Q1, but should look at sequential dollars of revenue growth. Then in Q2, year over year revenue growth should return to normal. But that’s just the way I interpret it.

Look at it this way, they grew revenue, in sequential quarters,

$08 million
$13 million
$13 million
$18 million
$17 million — Q1, hit for maybe $2 million in March, assuming they would have hit $19 million
$09 million — Q2, hit for maybe $9 million more (full pandemic panic)
$15 million — Q3, they are almost back in line

What they are saying is that because of the (say) $9 million that they lost in Q2, and perhaps $2 million in the last two weeks of March, this quarter looks light if you look yoy. However if you put that $11 million back into the base they’d be growing off, and imagine they were growing off a base $11 million higher, the yoy, instead of 155/96 = 61%, you get 166/96 = 73% revenue growth.

And that’s even though they were not quite all the way back as far as sequential dollars of growth, at $15 million, although it’s a lot better than Q2’s $9 million. And if they accelerate their sequential growth of revenue to $20 million in Q4, I won’t worry at all about the yoy percentages.

I hope that helps.



Thanks Saul for the insight as always.

If I can get my terms straight here: In 9 months when we compare Q over Q for the year.
In other words Q2-2021 vs Q2-2020
Assuming revenue is back in-line.
Q2-2021 is going ‘look’ like a monster blowout.

I guess I should have also included that they onboarded about 1000 new subscribers this quarter, which up 59% sequentially!!! That means they onboarded 59% more subscribers this quarter than the roughly 630 that they onboarded last quarter, in case anyone had a doubt that business had improved.


I am seeing similar patterns across multiple companies I track. COVID altered corporate spend and business plans throughout many industries. Corporate executives, even companies that were not directly affected by the pandemic, started hoarding cash and cutting expenses out of fear of repeating the 2008/2009 cash crunch.

For companies trying to grow, such as DDOG, hiring in this market is another challenge. Not merely finding qualified candidates, many of whom are likely hunkered down during the pandemic, but training new hires and bringing them up to speed is not so simple either.

DataDog is indispensable once you take the initial leap and start to leverage the insights you gain from using it. I doubt they have much churn. I suspect there is latent demand waiting for markets to stabilize and the pandemic fog to clear.