DDOG Q1 FY24 Analyst Q/A
Olivier Pomel, CEO
David Obstler, CFO
Q Optimization and customer behavior. Still seeing same steps and what round are we in?
A We don’t know exactly yet. We see customers taking another bite at their own employees and don’t see end to it or ability to estimate when it will end.
Q On the cost side, how do you think about today vs getting ready for tomorrow?
A This year prioritizing and optimizing efficiency to get returns and get prioritization from those.
Q On cusp of compute cycle and AI. With this new compute cycle we’re about to embark on, what are the implications, puts and takes re: how applications will be built.
A It’s still fairly early to see what the market will look like re: AI. It’s going to drive more compute, cloud migration, need modern architectures to implement AI. Longer term, they see an increase in productivity for software engineers. The more productivity there is, the less they understand the software they produce and the more they become dependent on AI.
Q Any customers who have started optimization now that had not last year?
A April is similar to what they usually see in Q4 and the FY.
Q Looking at the math on the large up-front bill that did not recur, it looks like approximately $65M. Will you recapture that?
A That customer’s cost will be spread out over time. They will get that bill in a more chunked up way than last year. It was a crypro currency who got decimated, and they modified their billing to be a team player with them.
Q Congrats on passing $2B ARR sa one of the fastest SaaS companies to do that. Does optimizing align w/ the hyperscalers say it will normalize in the next couple of/few quarters?
A Nothing to suggest that any particular cloud is recovering from optimization yet. Equally well positioned to capture $ from each of the hyperscalers (AMZN, GOOG, MSFT Azure).
Q Generative AI, is it merely a factor of waiting for these workloads to come on line?
A There’s going to be more productivity and you end up generating more stuff. The way they imagine the future is they see companies developing more stuff for their customers faster.
A Can look at sequential growth of the 3 major cloud providers at 1% growth, DDOG is significantly higher than that.
Q Can you speak to your exposure in Financial Services sector?
A Don’t have exact numbers. It’s been a growing vertical. They have not seen any changes in this vertical. Nothing to report on their end.
Q Expansion deal w/ large Fintech. Can you speak to why DDOG still wins?
A Deliver more value, better and cheaper than competition vs. open source. Remarkably unchanged.
Q What re: Go to market can you do to increase your penetration?
A Expanding sales force in geographies that make sense. Having the right sales force to gain sales.
Q Between the two APM logging please describe size.
A Smaller products grow faster than larger ones per usual.
Q $5M outage, what did you learn from that? Any other repercussions?
A A lifetime of learning in a day. Because of the very wide nature of this incident, they had 500-600 engineers working on this. Not worried it will happen again, rather they are confident they can recover faster in the future and do right by their customers by recovering faster. Used this as a way to strengthen their relationships with their customers.
Q Large customer adds at 130 vs. 240 last quarter.
A 1st qtr is seasonally lowest for new logos. Most of customers in larger customer group aren’t born there.
Q Cloud security mgt sales. How to think about this offering?
A No dramatic change from before. Not only building a point solution, but rather they’re moving in several directions. Go to market not changing. See expansion from observation to security customers. Very pleased w/ customer adoption.
Q Do you see any offsets w/ companies using AI re: observability.
A Don’t believe they’ll see this.
Q Are credits from the outage behind you?
A They’ve provided for this impact in Q1.
Q Is DDOG winning new customers on APM or ____, and where should we be focused re : growth in 17 modules offered by DDOG?
A Doesn’t matter were customers start, they can expand into other modules. Products growing and hard to pick one that’s more popular than others. Everyone expects to see more from AI.