Dynatrace vs New Relic vs Datadog
Puddin, I covered DT a bit as part of my deep dive into DDOG and its competition, back in mid December.
If you wanted to pick one to own, DDOG stands head and shoulders above the others. DDOG is clearly the fastest grower of the bunch, in both revenue and new customers and customers spending more. Its price reflects that.
Here were the latest numbers I posted then of the top 3 in APM space.
NEWR: Rev 146M +27%, $NER 112% (-1200bps), Custs >100K 906 +15%, Gross Margin 83%, Market cap $4B.
DT: Rev 129M +27%, ARR +44%, Sub Rev +37%, Sub custs 1828 +100%, $NER >120%, Gross Margin 69%, Market cap $7B. [FYI 42% of that customer growth is from custs on their old platform (“Classic”) migrating.]. (I had 35% for sub rev before but checking again it was 37%.)
DDOG: Rev 96M +88% (and accelerating), $NER >130%, Custs 9500 +34%, Custs >100K 793 +93%, Gross Margin 76%, Market cap $10.6B.
New Relic has highest margins and highest rev but market cap is markedly under the others, with low cust growth and rapidly eroding $NER. I have read a bit on why NEWR is in the doldrums, and overall feeling is they were the leaders in APM but let up on the gas and let competition get ahead of them on features. They have a new platform, One, that began to rectify that.
DT tries the “simple” route for monitoring - their agent self identifies apps running, then establishes baseline via AI for you and detects anomalies from there. DT had a on-prem solution that is now migrated to SaaS, which is leading their growing 37% vs 27% overall. 42% of “new” custs are existing ones shifting to new SaaS platform. They should have done this earlier. It gave first New Relic, and now Datadog, a huge opening to take SaaS share early. But DT is now doing well.
DDOG, unlike DT, doesnt have a services segment as it isn’t needed - the agent is so easy to install, customers can onboard themselves. DDOG is “third place” in APM space per Gartner, yet is growing top line OVER TRIPLE THE GROWTH RATE of those top 2. And customers are spending more and more ($NER >130%, high spending custs grew 93%).
Lets extrapolate out growth in a simplistic fashion, taking current growth rate out a year. This is realistic to DDOG as growth is still accelerating, and probably fair to NEWR and DT, who are at least stable solid growers. Plus, to be overly conservative, let’s assume DT moves forward at nearer to their 37% that sub rev is showing (that is masked by Service rev), as ARR is growing faster.
DDOG at 88% rev growth will go from 96M per Q to 180M in a year.
DT at 37% goes from 129M to 177M.
NEWR at 27% goes from 146M to 185M.
DDOG catches up on revenue in a year, and likely never looks back from there as it will still be growing at double the rate from there.
DT may be a good investment, but I doubt the current 35% sub rev entices many here. The ARR growing faster may be showing that growth increases from here. But too many hypergrowth stories to pick from, growing NOW at 40-50% … and beyond…