Summary
Datadog reported first-quarter revenue of $363.0 million, up 83% year over year. Gross profit rose 90.0% from the prior-year quarter to $288.6 million, and gross margin was 79.5%, up 3.0 percentage points from the prior-year quarter. GAAP operating income was $10.4 million, compared with an operating loss of $12.8 million a year earlier. Operating margin was 2.9%, up 9.3 percentage points from the prior-year quarter. Net income was $9.7 million, compared with a net loss of $13.1 million in the prior-year quarter. Diluted EPS was $0.03, compared with a loss of $0.04 per diluted share in the prior-year quarter. On a non-GAAP basis, operating income was $83.7 million, operating margin was 23%, and diluted EPS was $0.24. The revenue increase was driven by existing customers, which accounted for approximately 80% of the increase, and new customers, which accounted for the remaining 20%. The gross margin improvement came primarily from increased revenue and cost savings from third-party cloud infrastructure providers.
Cash generation was strong. Operating cash flow was $147.4 million, up from $51.7 million in the prior-year quarter. Free cash flow, a non-GAAP measure, was $129.9 million, compared with $44.5 million a year earlier. Capital expenditures were $9.5 million, up from $1.0 million in the prior-year quarter. Deferred revenue, current portion, was $454.8 million, up 103.4% from the prior-year quarter. Remaining performance obligations were $857.9 million. The company ended the quarter with a large liquidity position, and management said existing cash, cash equivalents, marketable securities, and cash flow from operations should support cash requirements for the next 12 months and beyond.
Customer metrics showed continued expansion. Datadog had about 2,250 customers with ARR of $100,000 or more, up 60% from 1,406 a year earlier. Total customers were approximately 19,800, compared with approximately 15,200 as of March 31, 2021. The dollar-based net retention rate was above 130% as of March 31, 2022 and 2021. About 81% of customers used more than one product, up from about 75% a year earlier. Revenue from outside North America was approximately 28% of total revenue for the three months ended March 31, 2022 and 2021. Product news included the launch of Application Security Monitoring, expansion of the Watchdog AI Engine with Root Cause Analysis and Log Anomaly Detection, and a partnership with Microsoft for the Azure Cloud Adoption Framework.
Management provided second-quarter and full-year 2022 guidance. For the second quarter, revenue is expected between $376 million and $380 million. Non-GAAP operating income is expected between $49 million and $53 million. Non-GAAP net income per share is expected between $0.13 and $0.15, assuming approximately 347 million weighted average diluted shares outstanding. For the full year 2022, revenue is expected between $1.60 billion and $1.62 billion. Non-GAAP operating income is expected between $240 million and $260 million. Non-GAAP net income per share is expected between $0.70 and $0.77, assuming approximately 349 million weighted average diluted shares outstanding. Datadog did not reconcile these non-GAAP expectations to the most directly comparable GAAP measures because of uncertainty around items such as stock-based compensation and employer payroll taxes on equity incentive plans.
The quarter came with familiar risks. Datadog warned that recent rapid growth may not be indicative of future growth, and it has a history of operating losses and a limited operating history. The business depends on existing customers purchasing additional subscriptions and renewing their subscriptions. It also depends on attracting new customers and effectively developing and expanding sales and marketing capabilities. Other named risks include a security breach, interruptions or performance problems with products and platform capabilities, the ability to adapt and respond to rapidly changing technology or customer needs, competitive markets, and risks associated with managing growth. General market, political, economic, and business conditions and the ongoing COVID-19 pandemic could also affect results. Management noted that increased office activity, travel, in-person meetings and events, continued hiring, and capital expenditures for additional office space may increase costs and decrease margins in future quarters.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2022 | Q4 FY2021 | QoQ | Q1 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $363.0M | $326.2M | +11.3% | $198.5M | +82.8% |
| Gross profit | $288.6M | $259.0M | +11.4% | $151.9M | +90.0% |
| Gross margin | 79.5% | 79.4% | +0.1 pp | 76.5% | +3.0 pp |
| Research & development | $150.6M | $133.0M | +13.2% | $79.3M | +90.0% |
| Sales & marketing | $101.2M | $88.9M | +13.8% | $64.4M | +57.2% |
| General & administrative | $26.4M | $28.6M | -7.9% | $21.1M | +25.1% |
| Total operating expenses | $278.2M | $250.6M | +11.0% | $164.7M | +68.9% |
| Operating income (loss) | $10.4M | $8.5M | +23.2% | -$12.8M | +181.2% |
| Operating margin | 2.9% | 2.6% | +0.3 pp | -6.5% | +9.3 pp |
| Net income (loss) | $9.7M | $7.2M | +35.8% | -$13.1M | +174.5% |
| Net margin | 2.7% | 2.2% | +0.5 pp | -6.6% | +9.3 pp |
| Diluted EPS | $0.03 | -$0.07 | +$0.10 | -$0.04 | +$0.07 |
| Net retention rate | 130.0% | 130.0% | ±0.0 pp | 130.0% | ±0.0 pp |
Risks
Future success depends on existing customers purchasing additional subscriptions and renewing, but subscriptions are primarily monthly or annual and customers have no obligation to renew. If customers do not renew or expand, revenue may decline. MD&A reports dollar-based net retention rate was above 130% as of each of March 31, 2022 and 2021.
The market is competitive with larger vendors including IBM, Microsoft, Cisco, Splunk, Elastic, and native cloud provider solutions from AWS, GCP, and Microsoft Azure. Competitors may lower prices, and sales through cloud provider marketplaces could reduce direct customer relationships and profit margins.
Datadog has previously been the target of a cyber-attack; in July 2016 an unidentified third party gained unauthorized access to and exfiltrated data from certain infrastructure resources, including a database storing customer credentials. Ransomware and supply chain attacks are increasing, and remote work may pose additional data security risks.
During the quarter ended March 31, 2022, the conditional conversion feature of the 2025 Notes was triggered, allowing holders to convert at any time during specified periods. If holders convert and the company cannot satisfy the obligation solely with Class A common stock, it may need cash settlement, adversely affecting liquidity, or reclassify the principal as a current liability and materially reduce net working capital.
Unfavorable global economic conditions, inflation, rising interest rates, and reductions in information technology spending could limit growth. The filing notes these conditions can disrupt key industry events that the company relies on to generate sales.
The war in Ukraine and related political and economic responses such as sanctions may exacerbate unfavorable economic issues and trends especially in Europe, affecting customers, renewals, and international operations.
Datadog targets enterprise customers, and sales to these customers involve longer sales cycles, more complex requirements, substantial upfront costs, and less predictability. These factors may be exacerbated as the customer base grows to encompass larger enterprises. The company had approximately 2,250 customers with ARR of $100,000 or more as of March 31, 2022, up from 1,406 as of March 31, 2021.
MD&A warns that as Datadog increases office activity globally, travel, in-person meetings and events, hiring, and capital expenditures for additional office space, costs and expenses may increase and margins may decrease in future quarters. Gross margin rose to 79.5% in the current quarter from 76.5% in the prior-year quarter, up 3.0 pp.
The company plans significant investments to expand in EMEA and APAC, which may adversely affect near-term operating results. Revenue outside North America was 28% of total revenue for both the three months ended March 31, 2022 and 2021, and international operations carry risks including political instability, regulatory burdens, and currency fluctuations.
Datadog is subject to stringent and changing data privacy and security laws, including EU GDPR, Standard Contractual Clauses for cross-border transfers, CCPA, and CPRA. Compliance costs, potential fines, and longer sales cycles in Europe could harm the business.
Success depends on executive officers and key employees in research and development and sales and marketing. Competition for engineers and experienced sales professionals is intense, and the perceived value and volatility of equity awards may affect recruiting and retention.
Datadog outsources substantially all infrastructure relating to its cloud solution to third-party hosting services. Any disruption, capacity limitation, or service termination at these providers could impede onboarding, damage reputation, and harm results.
Subscription agreements typically contain service-level commitments. Failure to meet uptime and response time requirements could require service credits, subscription terminations, or refunds, lowering revenue and harming reputation.
Historical seasonality produces a higher percentage of new customer bookings and renewals in the fourth quarter. This seasonality may continue and become more pronounced as the company targets larger enterprise customers.
SaaS KPIs
All quarters →Total Customers
Free Cash Flow
Non-GAAP Operating Margin
Customers Using More Than One Product
Customers with ARR of $100,000 or more
Dollar-Based Net Retention Rate
Summary, forecast, risks and KPIs are extracted from Datadog, Inc.'s SEC filings for Q1 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.