$12 billion is just a lot for a company that surpassed $300m in TTM revenue less than 24 hours ago!
Me too Bear. Still keeping a position. They’re great. But it’s upside from here right? DataDog checks all the boxes but market cap getting ahead of itself, maybe? Will the multiple continue to expand beyond 40? 45?
But that means more potential if we’re right about the company.
That’s the thesis anyways. I see what Elastic is doing. The totality of where Elastic is used is amazing. Without going through the full list, dozens of companies use Elastic in their product offerings. And then many many more use Elastic in a home grown solution to accomplish these use cases. So Elastic has invested (heavily) recently and currently to make their platform do all of these things out of the box. And that investment has gone side by side with massive scale out of their hosted Elasticsearch Service. As well as building out personnel and infrastructure as they see enormous opportunity to go and get. These efforts succeed or fail. There is risk, but much opportunity.
But just looking at SaaS. Comparable quarter to current is $10M. They did $17.5M in SaaS last quarter up $4M+ sequentially. So if they only add $2.5M this quarter, SaaS accelerated to 100% growth (from 71%). Is that not worth the investment?. And because it comes from $10M, it’s easy to visualize the growth. Each million over $2.5M is 10% more growth.
Below is a discussion on ESTC spending, sorry to high Jack the DDOG thread.
Now, turning to profitability, which is non-GAAP, gross profit in the first quarter was $65.7 million, representing a gross margin of 73.3%. Total subscriptions gross margin was 80.2%, up slightly sequentially. We are tracking well relative to our expectations. In the near term, we will continue to invest in our SaaS business, which will remain a modest headwind to gross margin overall.
Turning now to operating expenses. We remain focused on investing to drive top-line growth. As a reminder, we changed the timing of certain events and hosted our global all-hands meeting in Orlando in May. This was reflected in all the operating expense lines. This shift in timing towards Q1 does not impact the full-year expense total.
Sales and marketing expense in Q1 was $47.1 million, up 65% year over year, representing 52% of total revenue. Our overall approach to sales and marketing investments remains unchanged. We will continue to add sales capacity and expand market coverage as we drive growth and expect to realize leverage gradually over the longer term as we scale.
R&D expense in Q1 was $29.4 million, up 76% year over year, representing 33% of total revenue. As we said before, we are increasing our investments in R&D this year as we continue to invest heavily in both existing and new products and features.