Summary
Datadog closed fiscal 2021 with fourth-quarter revenue of $326.2 million, up 83.7% from the prior-year quarter. Gross profit was $259.0 million, up 89.5%, and gross margin reached 79.4%, up 2.4 percentage points. The company reported GAAP operating income of $8.5 million, a swing to a profit from the prior-year quarter, and operating margin of 2.6%, up 7.6 percentage points. Net income was $7.2 million, also a swing to a profit from the prior-year quarter. For the full year, revenue was $1.03 billion, up 70.5%, while gross margin was 77.2%, down 1.2 percentage points. The full-year GAAP operating loss widened to $19.2 million, and the net loss narrowed to $20.7 million, though diluted EPS loss narrowed to $0.07.
Cash generation was a standout. Operating cash flow was $115.8 million in the quarter, up 386.0%, and $286.5 million for the year, up 162.7%. Capital expenditures were $2.4 million in the quarter, up 122.9%, and $9.96 million for the year, up 83.9%. Free cash flow, a non-GAAP measure, was $106.7 million for the quarter and $250.5 million for the year; it is not the same as operating cash flow because it subtracts capital expenditures and capitalized software development costs. Deferred revenue was $372.0 million at December 31, 2021, up 81.6% from a year earlier. Remaining performance obligations were $815.0 million, up 87.7%.
Datadog ended 2021 with 216 customers generating ARR of $1 million or more, up 114% from 101 a year earlier. It had about 2,010 customers with ARR of $100,000 or more, up 63% from 1,228. Those larger customers represented 83% of ARR, up from 78%. Total customers were approximately 18,800, compared with approximately 14,170 at the end of 2020. The dollar-based net retention rate was above 130% at both December 31, 2021 and December 31, 2020. About 78% of customers used more than one product, up from about 72% a year earlier. Product and partnership news included FedRAMP moderate-impact authorization, the launch of Sensitive Data Scanner, a global strategic partnership with AWS, and an integration with Confluent.
Management provided guidance for the first quarter of 2022 and for the full fiscal year 2022. For the first quarter, revenue is expected between $334 million and $339 million, non-GAAP operating income between $36 million and $41 million, and non-GAAP net income per share between $0.10 and $0.12, assuming approximately 348 million weighted average diluted shares outstanding. For the full fiscal year 2022, revenue is expected between $1.51 billion and $1.53 billion, non-GAAP operating income between $160 million and $180 million, and non-GAAP net income per share between $0.45 and $0.51, assuming approximately 350 million weighted average diluted shares outstanding. The company has not reconciled these non-GAAP expectations to the most directly comparable GAAP measures because of uncertainty about items such as stock-based compensation and employer payroll taxes on equity incentive plans.
Risks remain significant. The 10-K and press release cite the company's recent rapid growth as not necessarily indicative of future growth, its history of operating losses, and its limited operating history. The business depends on existing customers buying more subscriptions and products and renewing, and on attracting new customers. Datadog also faces execution risk in expanding sales and marketing, security breach risk, platform interruption and performance problems, rapid technology changes, competitive markets, and the challenge of managing growth. General market, political, economic, and business conditions, plus the ongoing COVID-19 pandemic and any related downturn, could affect results. The company also has non-cancelable purchase commitments of $688.4 million and operating lease obligations of $97.0 million as of December 31, 2021, due primarily over the next five years, and it notes seasonality in new customer bookings, with a higher percentage of new-customer subscription agreements typically signed in the fourth quarter.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2021 | Q3 FY2021 | QoQ | Q4 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $326.2M | $270.5M | +20.6% | $177.5M | +83.7% |
| Gross profit | $259.0M | $207.2M | +25.1% | $136.7M | +89.5% |
| Gross margin | 79.4% | 76.6% | +2.8 pp | 77.0% | +2.4 pp |
| Research & development | $133.0M | $112.7M | +18.1% | $67.7M | +96.5% |
| Sales & marketing | $88.9M | $75.8M | +17.2% | $60.0M | +48.1% |
| General & administrative | $28.6M | $23.5M | +21.6% | $17.9M | +60.2% |
| Total operating expenses | $250.6M | $212.1M | +18.2% | $145.6M | +72.1% |
| Operating income (loss) | $8.5M | -$4.9M | +272.7% | -$8.9M | +194.6% |
| Operating margin | 2.6% | -1.8% | +4.4 pp | -5.0% | +7.6 pp |
| Net income (loss) | $7.2M | -$5.5M | +230.7% | -$16.2M | +144.4% |
| Net margin | 2.2% | -2.0% | +4.2 pp | -9.1% | +11.3 pp |
| Diluted EPS | -$0.07 | -$0.02 | -$0.05 | — | — |
| Customers | 18,800 | — | — | 14,200 | +32.4% |
| Net retention rate | 130.0% | 130.0% | ±0.0 pp | 130.0% | ±0.0 pp |
Risks
FY2021 revenue was $1,028.8 million, up 70.5% year over year, but the 10-K states revenue growth rate is expected to decline as the business matures and that prior growth should not be relied on as an indication of future performance. Continued substantial investments in infrastructure, sales and marketing, research and development, and acquisitions may not produce offsetting revenue growth.
Future success depends on existing customers purchasing additional subscriptions and renewing subscriptions, and subscription terms are primarily monthly or annual with no renewal obligation. MD&A reports dollar-based net retention above 130% as of December 31, 2021 and 2020, and 83% of ARR from customers with ARR of $100,000 or more, so any deterioration in expansion or renewal would harm future revenue.
Datadog targets enterprise customers, where sales cycles are longer, less predictable, and require substantial upfront investment before wide deployment. The company plans to continue expanding its direct sales force domestically and internationally, and failure to hire, develop, integrate, and retain effective sales personnel could prevent anticipated revenue growth.
Datadog competes across infrastructure monitoring, APM, log management, and cloud monitoring with IBM, Microsoft, SolarWinds, Cisco, New Relic, Dynatrace, Splunk, Elastic, and native AWS, GCP, and Microsoft Azure offerings, many with greater resources. The 10-K also notes increasing sales through cloud provider marketplaces could reduce direct commercial relationships and profit margins.
The company is subject to stringent and changing privacy laws, including EU GDPR, cross-border transfer rules and SCCs, CCPA and CPRA, Brazil's General Data Protection Law, China's Personal Information Protection Law, and Canada's Digital Charter Implementation Act. Non-compliance could lead to regulatory actions, substantial fines, injunctions, longer European sales cycles, and significant expense to maintain data processing capabilities in Europe.
The 10-K discloses a July 2016 unauthorized access and exfiltration of data from certain infrastructure, including a database storing customer credentials for Datadog and third-party integrations, some of which included confidential and personal information. It also notes remote work during COVID-19 may pose additional data security risks, including increased phishing and spam emails experienced during 2020, and rising ransomware and supply chain attacks.
Revenue outside North America was approximately 28% of total revenue for FY2021 compared to 25% for FY2020, and approximately 39% of full-time employees were outside the United States, 39% of whom were in France. Further expansion in EMEA and APAC may adversely affect near-term operating results and carries Brexit, tax, labor, currency, and local compliance risks.
Cost of revenue increased 80% in FY2021 to $234.2 million, and gross margin decreased to 77% from 78%, primarily due to the timing and amount of investments to expand third-party cloud infrastructure capacity. If cloud hosting and software costs continue to rise faster than revenue, gross margins may be pressured.
The conditional conversion feature of the 2025 Notes was triggered during FY2021, entitling holders to convert the notes at specified times. If holders convert, Datadog may need to settle in cash, which could adversely affect liquidity, or reclassify a portion of the notes as current rather than long-term, materially reducing net working capital.
The ongoing COVID-19 pandemic and new variant strains could continue to disrupt in-person marketing, sales cycles, international expansion, and customer spending, and could cause an economic downturn that reduces customer spending or impairs contractual performance. Datadog also states that guidance is speculative and may be revised if it fails to meet expectations.
Datadog reported a net loss of $20.7 million for FY2021 and an accumulated deficit of $152.1 million as of December 31, 2021. It expects costs and expenses to increase in future periods and may not achieve or sustain profitability if revenue growth does not offset rising operating expenses.
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
Non-GAAP Gross Margin
Dollar-Based Net Retention Rate
Non-GAAP Operating Income
Customers with ARR of $1 million or more
Summary, forecast, risks and KPIs are extracted from Datadog, Inc.'s SEC filings for Q4 FY2021 (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.