Datadog tops earnings expectations amid cybersecurity, AI growth

Continued demand for Datadog Inc.’s cybersecurity and artificial intelligence features helped the company top earnings expectations in the third quarter.

The software maker today posted adjusted net income of 46 cents per share for the three months ended Sept. 30, topping the 39-cent consensus estimate. Datadog’s sales likewise exceeded expectations. Its revenue grew 26% year-over-year, to $690 million, whereas the market had anticipated $662.6 million.

The early-morning report didn’t move investors much, as the stock closed up today a little over 1%.

New York-based Datadog launched in 2010 with an initial focus on helping enterprises monitor their technology infrastructure for technical issues. Since its public offering six years ago, the company has expanded into numerous adjacent segments. It can now help customers spot not only infrastructure malfunctions but also breach attempts, faulty software updates and a range of other issues.

Datadog’s product portfolio currently comprises 23 different tools. The company disclosed today that 15 offerings generate more than $10 million in annual recurring revenue as of the third quarter. The list includes several of the offerings in Datadog’s cybersecurity portfolio, a major focus of its product development efforts.

The company introduced most of its breach prevention tools in the past few years. Some are designed to help developers find vulnerabilities in their code. Datadog’s other cybersecurity tools scan cloud infrastructure for misconfigured security settings, identify malicious activity and perform related tasks.

It pointed to machine learning workloads as another source of growth, saying that AI providers accounted for 6% of its annualized recurring revenue in the third quarter, up from 2.5% a year earlier. Additionally, about 3,000 customers use its platform to troubleshoot technical issues in their AI applications.

The company is also prioritizing other use cases with its growth efforts. In the third quarter, it launched a tool that administrators can use to monitor workloads running on OCI, Oracle Corp.’s cloud platform. The tool collects telemetry through built-in integrations with more than 20 OCI services.

“We continued to broaden our platform to help our customers observe, secure, and act on their mission-critical cloud applications,” said co-founder and Chief Executive Officer Olivier Pomel.

Datadog disclosed that about 3,490 organizations spend $100,000 or more on its software annually. That spending is often divided among multiple products: Some 83% of the software maker’s customers use at least two products side by side. More than a quarter use six products or more.

For the current quarter, Datadog is forecasting adjusted earnings of 42 to 44 cents per share on between $709 million and $713 million in revenue. Reaching the high end of the range would put Datadog on track to achieve full-year sales of $2.66 billion. 

Image: Datadog