Summary
Datadog's second quarter revenue was $406.1 million, up 73.9% from the prior-year quarter. Year-to-date revenue reached $769.2 million, up 78.0%. The company added customers with larger commitments. About 2,420 customers had ARR of $100,000 or more as of June 30, 2022, up 54% from 1,570 a year earlier. These customers represented 85% of ARR, up from 80%. Total customers were approximately 21,200, compared with 16,400 a year earlier. Dollar-based net retention rate remained above 130%. About 79% of customers used more than one product, up from 75%. Management attributed 80% of the revenue increase to existing customers and 20% to new customers. Product momentum included the launch of Observability Pipelines, general availability of Audit Trail, and support for OpenTelemetry Protocol. Datadog launched Container Monitoring, Application Performance Monitoring, and Security for Kubernetes users. The company released the third edition of its State of Serverless report. Datadog was named a Leader in the 2022 Gartner Magic Quadrant for Application Performance Monitoring and Observability. The company also appointed Titi Cole to its board of directors.
Profitability improved. GAAP operating loss was $3.1 million, narrower than the prior-year quarter. GAAP operating margin was -0.8%, up from the prior-year quarter. Gross margin was 79.8%, up 4.3 percentage points. GAAP net loss was $4.9 million, or $0.02 per diluted share, compared with a net loss in the prior-year quarter. For the first six months, GAAP net income was $4.9 million, a swing to profit from a net loss in the prior-year period. GAAP diluted EPS for the six months was $0.01. On a non-GAAP basis, operating income was $84.7 million and operating margin was 21%. Non-GAAP gross margin was 81%. Non-GAAP net income per diluted share was $0.24. Operating cash flow for the quarter was $73.0 million, and free cash flow was $60.2 million. For the first six months, operating cash flow was $220.3 million, up 113.2% from the prior-year period. Free cash flow for the first six months was $190.1 million. Capital expenditures were $6.0 million. Deferred revenue was $444.25 million, up 67.9% from the prior-year quarter. Remaining performance obligations were $881.4 million.
For the third quarter of 2022, Datadog expects revenue between $410 million and $414 million. Non-GAAP operating income is expected between $51 million and $55 million. Non-GAAP net income per share is expected between $0.15 and $0.17, assuming approximately 347 million weighted average diluted shares. For the full year 2022, revenue is expected between $1.61 billion and $1.63 billion. Non-GAAP operating income is expected between $255 million and $275 million. Non-GAAP net income per share is expected between $0.74 and $0.81, assuming approximately 347 million weighted average diluted shares. The company did not reconcile these non-GAAP expectations to GAAP because of uncertainty around stock-based compensation and employer payroll taxes on equity incentive plans.
Risks. The company's forward-looking statements list several risks. Recent rapid growth may not be indicative of future growth. Datadog has a history of operating losses and a limited operating history. The business depends on existing customers purchasing additional subscriptions and renewing their subscriptions, and on attracting new customers. The company must effectively develop and expand its sales and marketing capabilities. Other risks include security breaches, interruptions or performance problems, rapid technological change, competitive markets, and managing growth. General market, political, economic, and business conditions, including concerns about reduced economic growth and associated decreases in information technology spending, could affect results. The COVID-19 pandemic and any related economic downturn could also impact the business. The company noted that increased office activity, travel, in-person meetings, hiring, and capital expenditures may raise costs and reduce margins in future quarters. In July 2022, Datadog agreed to extend its New York headquarters lease and lease new floors, with a minimum commitment of $182.3 million.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $406.1M | $363.0M | +11.9% | $233.5M | +73.9% |
| Gross profit | $324.2M | $288.6M | +12.4% | $176.5M | +83.7% |
| Gross margin | 79.8% | 79.5% | +0.3 pp | 75.5% | +4.3 pp |
| Research & development | $177.7M | $150.6M | +18.0% | $94.8M | +87.5% |
| Sales & marketing | $115.3M | $101.2M | +13.9% | $70.4M | +63.7% |
| General & administrative | $34.4M | $26.4M | +30.3% | $21.1M | +62.6% |
| Total operating expenses | $327.4M | $278.2M | +17.7% | $186.3M | +75.7% |
| Operating income (loss) | -$3.1M | $10.4M | -130.1% | -$9.9M | +68.2% |
| Operating margin | -0.8% | 2.9% | -3.6 pp | -4.2% | +3.5 pp |
| Net income (loss) | -$4.9M | $9.7M | -150.1% | -$9.4M | +47.9% |
| Net margin | -1.2% | 2.7% | -3.9 pp | -4.0% | +2.8 pp |
| Diluted EPS | -$0.02 | $0.03 | -$0.05 | -$0.03 | +$0.01 |
| Net retention rate | 130.0% | 130.0% | ±0.0 pp | 130.0% | ±0.0 pp |
Risks
Unfavorable global economic conditions, inflation, rising interest rates, and the war in Ukraine and related sanctions could reduce information technology spending and disrupt the industry events Datadog uses to generate sales. The filing notes current quarter revenue was up 73.9% versus the prior-year quarter, but these conditions may negatively affect future growth.
Datadog competes with large vendors such as IBM, Microsoft, Cisco, Splunk, Elastic, New Relic, Dynatrace, and native cloud monitoring from AWS, GCP, and Microsoft Azure; some have greater resources and may lower prices. Sales through cloud provider marketplaces could reduce direct customer relationships and profit margins.
Risk factors disclose a July 2016 unauthorized access incident that exfiltrated customer credentials and personal information, and warn that ransomware and supply chain attacks are increasingly prevalent and difficult to avoid. A breach could cause customer loss, litigation, fines, and significant remediation costs.
Future success depends on existing customers renewing and expanding subscriptions, but terms are primarily monthly or annual and customers have no renewal obligation. Deferred revenue was up 67.9% versus the prior-year quarter and RPO was $881.4 million, yet the filing cites customer weakness, competition, pricing, inflation, and war in Ukraine as factors that could reduce renewals or expansion.
The conditional conversion feature of the 0.125% Convertible Senior Notes due 2025 was triggered during the quarter ended March 31, 2022. If holders convert, Datadog may need to settle in cash, and accounting rules could require reclassifying all or part of the principal as a current liability, reducing net working capital.
MD&A states that as Datadog increases office activity, travel, in-person events, hiring, and capital expenditures for office space, costs and expenses may increase and margins may decrease in future quarters. Current quarter gross margin was 79.8%, up from 75.6% in the prior-year quarter, but future margin risk is explicit.
Datadog targets enterprise customers, where sales cycles are longer, requirements are more complex, upfront sales costs are substantial, and initial deployments may be limited with no guarantee of broad expansion. This can increase variability and reduce predictability of bookings and revenue.
Stringent and changing privacy laws, including GDPR, CCPA, CPRA, and cross-border data transfer restrictions, could increase compliance costs, lengthen European sales cycles, and require additional data processing capabilities in Europe. The filing also notes uncertainty around Standard Contractual Clauses and other transfer mechanisms.
Success depends on executive officers and key employees, including Olivier Pomel, Alexis Lê-Quôc, and David Obstler, and competition for SaaS engineers and sales professionals is intense. Declining perceived value or volatility of equity awards could impair recruiting and retention.
International expansion involves political and economic instability, sanctions, Brexit, tax, data privacy, labor, and currency risks. Revenue outside North America was 28% in each six-month period, and as of June 30, 2022, approximately 39% of full-time employees were outside the United States, with 34% of those in France.
Revenue was up 73.9% in the quarter and 78.0% year to date, but the risk factors state recent rapid growth may not be indicative of future growth and Datadog expects its revenue growth rate to decline as the business matures. The company also had an accumulated deficit of $147.2 million as of June 30, 2022.
Subscription agreements typically contain service-level commitments. Failure to meet uptime and response-time requirements could require service credits, subscription terminations, refunds, and reduced renewals, harming revenue and reputation.
SaaS KPIs
All quarters →Total Customers
Free Cash Flow
Non-GAAP Operating Margin
Free Cash Flow Margin
Customers Using More Than One Product
Customers with ARR of $100,000 or more
Non-GAAP Gross Margin
Dollar-Based Net Retention Rate
Non-GAAP Operating Income
Customers with ARR of $100,000 or more (as % of ARR)
Summary, forecast, risks and KPIs are extracted from Datadog, Inc.'s SEC filings for Q2 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.