Cloud monitoring software company Datadog (NASDAQ:DDOG) beat analysts' expectations in Q3 FY2023, with revenue up 25.4% year on year to $547.5 million. On top of that, next quarter's revenue guidance ($566 million at the midpoint) was surprisingly good and 4.1% above what analysts were expecting. Turning to EPS, Datadog made a non-GAAP profit of $0.45 per share, improving from its profit of $0.23 per share in the same quarter last year.
Is now the time to buy Datadog? Find out by reading the original article on StockStory.
Datadog (DDOG) Q3 FY2023 Highlights:
- Revenue: $547.5 million vs analyst estimates of $524.2 million (4.5% beat)
- EPS (non-GAAP): $0.45 vs analyst estimates of $0.34 (33.5% beat)
- Revenue Guidance for Q4 2023 is $566 million at the midpoint, above analyst estimates of $543.9 million
- Free Cash Flow of $138.2 million, similar to the previous quarter (big beat vs. expectations of $83 million)
- Customers: 3,130 customers paying more than $100,000 annually
- Gross Margin (GAAP): 81.1%, up from 78.6% in the same quarter last year
Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ:DDOG) is a software-as-a-service platform that makes it easier to monitor cloud infrastructure and applications.
Cloud infrastructure monitoring is becoming a competitive space and Datadog is competing with offerings from New Relic (NYSE:NYSE:NEWR), Elastic (NYSE:NYSE:ESTC), Splunk (NASDAQ:SPLK), monitoring tools made by the cloud providers themselves and up and coming startups.
Sales GrowthAs you can see below, Datadog's revenue growth has been exceptional over the last two years, growing from $270.5 million in Q3 FY2021 to $547.5 million this quarter.
This quarter, Datadog's quarterly revenue was once again up a very solid 25.4% year on year. On top of that, its revenue increased $38.1 million quarter on quarter, a very strong improvement from the $27.7 million increase in Q2 2023. This is a sign of re-acceleration of growth and great to see.
Next quarter's guidance suggests that Datadog is expecting revenue to grow 20.6% year on year to $566 million, slowing down from the 43.9% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 17.9% over the next 12 months before the earnings results announcement.
Large Customers Growth This quarter, Datadog reported 3,130 enterprise customers paying more than $100,000 annually, an increase of 140 from the previous quarter. That's quite a bit more contract wins than last quarter and about the same as what we've seen in past quarters, demonstrating that the business has the sales momentum required to drive continued growth. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is running smoothly.
Key Takeaways from Datadog's Q3 Results With a market capitalization of $25.9 billion, a $2.3 billion cash balance, and positive free cash flow over the last 12 months, we're confident that Datadog has the resources needed to pursue a high-growth business strategy.
This was a classic "beat and raise quarter". We were impressed by Datadog's significant improvement in new large contract wins this quarter. This helped contribute to the revenue beat. Additionally, non-GAAP operating profit and adjusted EPS both beat handily. We were also glad next quarter's revenue guidance came in higher than Wall Street's estimates. Full year guidance was raised across the board. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The stock is up 18.7% after reporting and currently trades at $94.49 per share.
The author has no position in any of the stocks mentioned in this report.
