Datadog Inc

Previous wording

As of September 30, 2024, we had $337.4 million in cash and cash equivalents and $2.9 billion in marketable securities. We generated revenue of $690.0 million and $547.5 million in the three months ended September 30, 2024 and 2023, respectively, representing year-over-year growth of 26%. For the nine months ended September 30, 2024 and 2023, our revenue was $1,946.5 million and $1,538.7 million, respectively, representing year-over-year growth of 27%. Substantially all of our revenue is from subscription software sales. While we have continued to make significant expenditures and investments, including in personnel-related costs, sales and marketing, infrastructure and operations, we had incurred net income (loss) of $51.7 million and $22.6 million for the three months ended September 30, 2024 and 2023, respectively, and $138.2 million and $(5.4) million for the nine months ended September 30, 2024 and 2023, respectively. Our operating cash flow was $605.4 million and $439.7 million for the nine months ended September 30, 2024 and 2023, respectively. Our free cash flow was $534.1 million and $396.3 million for the nine months ended September 30, 2024 and 2023, respectively. See the section titled “—Liquidity and Capital Resources—Non-GAAP Free Cash Flow” below.

Current wording

As of March 31, 2025, we had $1,079.9 million in cash and cash equivalents and $3.4 billion in marketable securities. We generated revenue of $761.6 million and $611.3 million in the three months ended March 31, 2025 and 2024, respectively, representing year-over-year growth of 25%. Substantially all of our revenue is from subscription software sales. While we have continued to make significant expenditures and investments, including in personnel-related costs, sales and marketing, infrastructure and operations, we had incurred net income of $24.6 million and $42.6 million for the three months ended March 31, 2025 and 2024, respectively. Our operating cash flow was $271.5 million and $212.3 million for the three months ended March 31, 2025 and 2024, respectively. Our free cash flow was $244.4 million and $186.7 million for the three months ended March 31, 2025 and 2024, respectively. See the section titled “—Liquidity and Capital Resources—Non-GAAP Free Cash Flow” below.

Previous wording

Unfavorable conditions in the economy both in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events including elevated inflation and interest rates, the Russian invasion of Ukraine, and the conflict in the Middle East have led to economic uncertainty. Historically, during periods of economic uncertainty and downturns, businesses may slow spending on information technology, which may impact our business and our customers’ businesses.

Current wording

Unfavorable conditions in the economy both in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events including changes in trade policies, such as trade wars, tariffs or other trade restrictions or the threat of such actions, fluctuating inflation and interest rates, conflicts in Ukraine and the Middle East have led to economic uncertainty. Historically, during periods of economic uncertainty and downturns, businesses may slow spending on information technology, which may impact our business and our customers’ businesses.

Previous wording

We believe there is substantial opportunity to continue to grow our customer base. We intend to drive new customer acquisition by continuing to invest significantly in sales and marketing to engage our prospective customers, increase brand awareness and drive adoption of our platform and products. We also plan to continue to invest in building brand awareness within the development and operations communities. As of September 30, 2024, we had approximately 29,200 customers spanning organizations of a broad range of sizes and industries, compared to approximately 26,800 as of September 30, 2023. Our ability to attract new customers will depend on a number of factors, including the effectiveness and pricing of our products, offerings of our competitors and the effectiveness of our marketing efforts.

Current wording

We believe there is substantial opportunity to continue to grow our customer base. We intend to drive new customer acquisition by continuing to invest significantly in sales and marketing to engage our prospective customers, increase brand awareness and drive adoption of our platform and products. We also plan to continue to invest in building brand awareness within the development and operations communities. As of March 31, 2025, we had approximately 30,500 customers spanning organizations of a broad range of sizes and industries, compared to approximately 28,000 as of March 31, 2024. Our ability to attract new customers will depend on a number of factors, including the effectiveness and pricing of our products, offerings of our competitors and the effectiveness of our marketing efforts.

Previous wording

Our base of customers represents a significant opportunity for further sales expansion. As of September 30, 2024, we had approximately 3,490 customers with annual run-rate revenue, or ARR, of $100,000 or more, representing 88% of our ARR, up from 3,130 customers as of September 30, 2023, representing 86% of our ARR. We monitor our number of customers with ARR of $100,000 or more, and believe it is useful to investors, as an indicator of our ability to grow the number of customers that are exceeding this ARR threshold. We define ARR as the annual run-rate revenue of subscription agreements from all customers at a point in time. We calculate ARR by taking the monthly run-rate revenue, or MRR, and multiplying it by 12. MRR for each month is calculated by aggregating, for all customers during that month, monthly revenue from committed contractual amounts, additional usage, usage from subscriptions for a committed contractual amount of usage that is delivered as used and monthly subscriptions. ARR and MRR should be viewed independently of revenue, and do not represent our revenue under GAAP on a monthly or annualized basis, as they are operating metrics that can be impacted by contract start and end dates and renewal rates. ARR and MRR are not intended to be replacements or forecasts of revenue.

Current wording

Our base of customers represents a significant opportunity for further sales expansion. As of March 31, 2025, we had approximately 3,770 customers with annual run-rate revenue, or ARR, of $100,000 or more, representing 88% of our ARR, up from 3,340 customers as of March 31, 2024, representing 87% of our ARR. We monitor our number of customers with ARR of $100,000 or more, and believe it is useful to investors, as an indicator of our ability to grow the number of customers that are exceeding this ARR threshold. We define ARR as the annual run-rate revenue of subscription agreements from all customers at a point in time. We calculate ARR by taking the monthly run-rate revenue, or MRR, and multiplying it by 12. MRR for each month is calculated by aggregating, for all customers during that month, monthly revenue from committed contractual amounts, additional usage, usage from subscriptions for a committed contractual amount of usage that is delivered as used and monthly subscriptions. ARR and MRR should be viewed independently of revenue, and do not represent our revenue under GAAP on a monthly or annualized basis, as they are operating metrics that can be impacted by contract start and end dates and renewal rates. ARR and MRR are not intended to be replacements or forecasts of revenue.

Previous wording

A further indication of the propensity of our customer relationships to expand over time is our dollar-based net retention rate, which compares our ARR from the same set of customers in one period, relative to the year-ago period. As of September 30, 2024, our trailing 12-month dollar-based net retention rate was in the mid-110%'s. As of September 30, 2023, our trailing 12-month dollar-based net retention rate was in the high-110%'s. The decline in our trailing 12-month dollar-based net retention rate was primarily attributable to slower usage growth from existing customers compared to prior periods, which may be related to the uncertain macroeconomic environment. We calculate dollar-based net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period-end, or the Prior Period ARR. We then calculate the ARR from these same customers as of the current period-end, or the Current Period ARR. Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the point-in-time dollar-based net retention rate. We then calculate the weighted average of the trailing 12-month point-in-time dollar-based net retention rates, to arrive at the trailing 12-month dollar-based net retention rate.

Current wording

A further indication of the propensity of our customer relationships to expand over time is our dollar-based net retention rate, which compares our ARR from the same set of customers in one period, relative to the year-ago period. As of March 31, 2025, our trailing 12-month dollar-based net retention rate was in the high-110%'s. As of March 31, 2024, our trailing 12-month dollar-based net retention rate was mid-110%'s. The increase in our trailing 12-month dollar-based net retention rate was attributable to increased usage growth from existing customers. We calculate dollar-based net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period-end, or the Prior Period ARR. We then calculate the ARR from these same customers as of the current period-end, or the Current Period ARR. Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the point-in-time dollar-based net retention rate. We then calculate the weighted average of the trailing 12-month point-in-time dollar-based net retention rates, to arrive at the trailing 12-month dollar-based net retention rate.

Previous wording

Our success is dependent on our ability to sustain innovation and technology leadership in order to maintain our competitive advantage. We believe that we have built a highly differentiated platform that will position us to further extend the adoption of our platform and products. Datadog is frequently deployed across a customer’s entire infrastructure, making it ubiquitous. Datadog is a daily part of the lives of developers, operations engineers and business leaders. We employ a land-and-expand business model centered around offering products that are easy to adopt and have a very short time to value. Our efficient go-to-market model enables us to prioritize significant investment in innovation. We have demonstrated the success of our platform approach, through expansion beyond our initial infrastructure monitoring solution to include over 20 products. Approximately 83% of our customers were using more than one product as of September 30, 2024, up from approximately 82% a year earlier. Additionally, as of September 30, 2024, approximately 49% of our customers were using more than four products, up from approximately 46% a year earlier, approximately 26% of our customers were using more than six products, up from approximately 21% a year earlier, and approximately 12% of our customers were using more than eight products, up from approximately 8% a year earlier. We believe these metrics indicate strong expansion of product adoption across our platform.

Current wording

Our success is dependent on our ability to sustain innovation and technology leadership in order to maintain our competitive advantage. We believe that we have built a highly differentiated platform that will position us to further extend the adoption of our platform and products. Datadog is frequently deployed across a customer’s entire infrastructure, making it ubiquitous. Datadog is a daily part of the lives of developers, operations engineers and business leaders. We employ a land-and-expand business model centered around offering products that are easy to adopt and have a very short time to value. Our efficient go-to-market model enables us to prioritize significant investment in innovation. We have demonstrated the success of our platform approach, through expansion beyond our initial infrastructure monitoring solution to include over 20 products. Approximately 83% of our customers were using more than one product as of March 31, 2025, up from approximately 82% a year earlier. Additionally, as of March 31, 2025, approximately 51% of our customers were using more than four products, up from approximately 47% a year earlier, approximately 28% of our customers were using more than six products, up from 23% a year earlier, and approximately 13% of our customers were using more than eight products, up from 10% a year earlier. We believe these metrics indicate strong expansion of product adoption across our platform.

Previous wording

We believe there is a significant opportunity to expand usage of our platform outside of North America. Revenue, as determined based on the billing address of our customers, from regions outside of North America was approximately 30% of our total revenue for each of the nine months ended September 30, 2024 and 2023. In addition, we have made and plan to continue to make significant investments to expand geographically, particularly in EMEA and APAC. Although these investments may adversely affect our operating results in the near term, we believe that they will contribute to our long-term growth. Beyond North America, we now have sales presence internationally, primarily in Amsterdam, Dublin, London, Paris, Seoul, Singapore, Sydney, and Tokyo.

Current wording

We believe there is a significant opportunity to expand usage of our platform outside of North America. Revenue, as determined based on the billing address of our customers, from regions outside of North America was approximately 30% of our total revenue for each of the three months ended March 31, 2025 and 2024. In addition, we have made and plan to continue to make significant investments to expand geographically, particularly in EMEA and APAC. Although these investments may adversely affect our operating results in the near term, we believe that they will contribute to our long-term growth. Beyond North America, we now have sales presence internationally, primarily in Amsterdam, Dublin, London, Paris, Seoul, Singapore, Sydney, and Tokyo.

Previous wording

Research and development expense consists primarily of personnel costs for our engineering, service and design teams. Additionally, research and development expense includes contractor fees, depreciation and amortization and allocated overhead costs. We expect that our research and development expense will increase in absolute dollars as our business grows, particularly as we incur additional costs related to continued investments in our platform.

Current wording

Research and development expense consists primarily of personnel costs for our engineering, service and design teams. Additionally, research and development expense includes contractor fees, depreciation and amortization and allocated overhead costs. Research and development costs are expensed as incurred, with the exception of certain software development costs which are eligible for capitalization. We expect that our research and development expense will increase in absolute dollars as our business grows, particularly as we incur additional costs related to continued investments in our platform.

Previous wording

General and administrative expense consists primarily of personnel costs and contractor fees for finance, legal, human resources, information technology and other administrative functions. In addition, general and administrative expense includes non-personnel costs, such as legal, accounting and other professional fees, hardware and software costs, certain tax, license and insurance-related expenses and allocated overhead costs.

Current wording

General and administrative expense consists primarily of personnel costs for finance, legal, human resources, and other administrative functions. In addition, general and administrative expense includes non-personnel costs, such as legal, accounting and other professional fees, hardware and software costs, certain tax, license and insurance-related expenses and allocated overhead costs. We expect that our general and administrative expense will increase in absolute dollars as our business grows.

Previous wording

Other income, net consists of interest income, primarily due to income earned on money market funds included in cash and cash equivalents and on marketable securities, partially offset by interest expense due on the 2025 Notes and amortization of premiums on our marketable securities.

Current wording

Other income, net consists of interest income, primarily due to income earned on money market funds included in cash and cash equivalents and on marketable securities, partially offset by interest expense due on the Notes and amortization of premiums on our marketable securities.

Previous wording

Revenue increased by $142.5 million, or 26%, for thethree months ended September 30, 2024 compared to thethree months ended September 30, 2023. Approximately 75% of the increase in revenue was attributable to growth from existing customers, and the remaining 25% was attributable to growth from new customers.

Current wording

Revenue increased by $150.3 million, or 25%, for thethree months ended March 31, 2025 compared to thethree months ended March 31, 2024. Approximately 75% of the increase in revenue was attributable to growth from existing customers, and the remaining 25% was attributable to growth from new customers.

Previous wording

Cost of revenue increased by $34.4 million, or 33%, for thethree months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase was primarily due to an increase of $28.6 million in third-party cloud infrastructure hosting and software costs and an increase of $4.8 million in personnel costs and other related costs as a result of increased headcount.

Current wording

Cost of revenue increased by $47.5 million, or 43%, for thethree months ended March 31, 2025 compared to the three months ended March 31, 2024. This increase was primarily due to an increase of $42.8 million in third-party cloud infrastructure hosting and software costs and an increase of $5.7 million in personnel costs and other related costs as a result of increased headcount.

Previous wording

Our gross margin decreased by 1% for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily as a result of increased spend with our third-party cloud infrastructure providers.

Current wording

Our gross margin decreased for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily as a result of increased spend with our third-party cloud infrastructure providers.

Previous wording

Research and development expense increased by $51.6 million, or 21%, for thethree months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase was primarily due to an increase of $38.4 million in personnel costs including allocated overhead costs for our engineering, product and design teams as a result of increased headcount and an increase of $12.8 million in cloud infrastructure-related investments.

Current wording

Research and development expense increased by $71.1 million, or 26%, for thethree months ended March 31, 2025 compared to the three months ended March 31, 2024. This increase was primarily due to an increase of $54.2 million in personnel costs including allocated overhead costs for our engineering, product and design teams as a result of increased headcount and an increase of $16.2 million in cloud infrastructure-related investments.

Previous wording

Sales and marketing expense increased by $99.4 million, or 22%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This increase was primarily due to an increase of $75.8 million in personnel costs including allocated overhead costs for our sales and marketing organization as a result of increased headcount and increased variable compensation for our sales personnel and an increase of $21.3 million in advertising, sales, marketing and promotional activities.

Current wording

Sales and marketing expense increased by $40.4 million, or 23%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This increase was primarily due to an increase of $29.6 million in personnel costs including allocated overhead costs for our sales and marketing organization as a result of increased headcount and increased variable compensation for our sales personnel and an increase of $8.4 million in advertising, sales, marketing and promotional activities.

Previous wording

General and administrative expense increased by $8.9 million, or 7%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This increase was primarily due to an increase in personnel costs including allocated overhead costs as a result of increased headcount, partially offset by a decrease in legal expenses and other professional services.

Current wording

General and administrative expense increased by $15.7 million, or 35%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This increase was primarily due to an increase of $9.2 million in personnel costs including allocated overhead costs as a result of increased headcount, and an increase of $3.2 million in legal and other professional services expenses.

Previous wording

Other income, net increased by $7.3 million, or 26%, for thethree months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase was primarily driven by an increase of $11.3 million in interest income, mainly due to income earned from investments in marketable securities.

Current wording

Other income, net increased by $10.0 million, or 29%, for thethree months ended March 31, 2025 compared to the three months ended March 31, 2024. This increase was primarily driven by an increase of $15.3 million in interest income, mainly due to income earned from investments in marketable securities. This amount was partially offset by a decrease of $3.7 million in other income mainly due to fluctuations related to foreign currency exchange rates.

Previous wording

Our largest source of operating cash is cash collection from sales of subscriptions to our customers. Our primary uses of cash from operating activities are for personnel expenses, hosting expenses, facility expenses, and marketing expenses. We have generated positive cash flows from operations during the nine months ended September 30, 2024 and 2023. When assessing sources of liquidity, we also include cash and cash equivalents of $337.4 million and marketable securities of $2.9 billion as of September 30, 2024. We believe that our existing cash and cash equivalents, marketable securities and cash flow from operations will be sufficient to support our cash requirements for the next 12 months and beyond.

Current wording

Our largest source of operating cash is cash collection from sales of subscriptions to our customers. Our primary uses of cash from operating activities are for personnel expenses, hosting expenses, facility expenses, and marketing expenses. We have generated positive cash flows from operations during the three months ended March 31, 2025 and 2024. When assessing sources of liquidity, we also include cash and cash equivalents of $1.1 billion and marketable securities of $3.4 billion as of March 31, 2025. We believe that our existing cash and cash equivalents, marketable securities and cash flow from operations will be sufficient to support our cash requirements for the next 12 months and beyond.

Previous wording

Our working capital requirements are principally comprised of workforce salaries, bonuses, commissions, and benefits and, to a lesser extent, cancellable and non-cancelable licenses and services arrangements that are integral to our business operations, and operating lease obligations. Our principal commitments consist of purchase commitments for business operations, operating lease obligations, and obligations to pay the 2025 Notes’ coupons and principal. Purchase commitments for business operations are primarily related to cloud hosting and other software-based services. In June 2020, we issued $747.5 million aggregate principal amount of the 2025 Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

Current wording

Our working capital requirements principally consist of workforce salaries, bonuses, commissions, and benefits and, to a lesser extent, cancellable and non-cancelable licenses and services arrangements that are integral to our business operations, and operating lease obligations. Our principal commitments consist ofpurchase commitments for business operations, operating lease obligations, and obligations to pay the Notes’ coupons andprincipal. Purchase commitments for business operations are primarily related to cloud hosting and other software-based services.

Previous wording

During the nine months ended September 30, 2024, there have been no material changes outside the ordinary course of business to our contractual obligations and commitments, as disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report.

Current wording

During the three months ended March 31, 2025, there have been no material changes outside the ordinary course of business to our contractual obligations and commitments, as disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report.

Previous wording

Net cash provided by operating activities for the nine months ended September 30, 2024 increased $165.6 million compared to the nine months ended September 30, 2023, primarily driven by an increase in non-cash charges of $63.0 million, an increase in accrued expenses and other current liabilities of $62.5 million, and a decrease in accounts receivable of $22.0 million. The increase in non-cash charges related primarily to an increase of $57.7 million in stock-based compensation as we continued to increase headcount to support the growth of the business. The increase in cash provided by operating activities was partially offset by a decrease in deferred revenue of $70.8 million and a decrease in accounts payable of $48.7 million.

Current wording

Net cash provided by operating activities for the three months ended March 31, 2025 increased $59.3 million compared to the three months ended March 31, 2024, primarily driven by an increase in non-cash charges of $38.5 million, a decrease in accounts receivable of $48.7 million, and an increase in accrued expenses and other current liabilities of $13.1 million. The increase in non-cash charges related primarily to an increase of $29.2 million in stock-based compensation as we continued to increase headcount to support the growth of the business. The increase in cash provided by operating activities was partially offset by a decrease in deferred revenue of $20.6 million and an increase in deferred contract costs of$8.9 million.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2024 increased $70.1 million compared to the nine months ended September 30, 2023, primarily driven by a increase of $134.1 million in the purchases of marketable securities, a decrease of $36.4 million in proceeds from the sale of marketable securities, and an increase in the capitalization of software development costs of $18.0 million. The increase in cash used in investing activities was partially offset by an increase of $122.4 million in proceeds from maturities of marketable securities.

Current wording

Net cash used in investing activities for the three months ended March 31, 2025 increased $182.2 million compared to the three months ended March 31, 2024, primarily driven by an increase of $333.0 million in the purchases of marketable securities. The increase in cash used in investing activities was partially offset by an increase of $154.3 million in proceeds from maturities of marketable securities.

Previous wording

Net cash provided by financing activities for the nine months ended September 30, 2024 decreased $9.7 million compared to the nine months ended September 30, 2023, primarily due to a decrease in proceeds from the exercise of stock options of $12.2 million. The decrease in cash provided by financing activities was partially offset by an increase in proceeds from the issuance of Class A common stock under the ESPP of $2.5 million.

Current wording

Net cash provided by financing activities for the three months ended March 31, 2025 decreased $0.5 million compared to the three months ended March 31, 2024, primarily due to a decrease in proceeds from the exercise of stock options of $0.5 million.

Previous wording

We report our financial results in accordance with GAAP. To supplement our condensed consolidated financial statements, we provide investors with the amount of free cash flow, which is a non-GAAP financial measure. Free cash flow represents net cash provided by operating activities, reduced by capital expenditures and capitalized software development costs, if any. Free cash flow is a measure used by management to understand and evaluate our liquidity and to generate future operating plans. The reduction of capital expenditures and amounts capitalized for software development facilitates comparisons of our liquidity on a period-to-period basis and excludes items that we do not consider to be indicative of our liquidity. We believe that free cash flow is a measure of liquidity that provides useful information to our management, board of directors, investors and others in understanding and evaluating the strength of our liquidity and future ability to generate cash that can be used for strategic opportunities or investing in our business. Nevertheless, our use of free cash flow has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Further, our definition of free cash flow may differ from the definitions used by other companies and therefore comparability may be limited. You should consider free cash flow alongside our other GAAP-based financial performance measures, such as net cash used in operating activities, and our other GAAP financial results.

Current wording

We report our financial results in accordance with GAAP. To supplement our condensed consolidated financial statements, we provide investors with the amount of free cash flow, which is a non-GAAP financial measure. Free cash flow represents net cash provided by operating activities, reduced by capital expenditures and capitalized software development costs, if any. Free cash flow is a measure used by management to understand and evaluate the strength of our liquidity and future ability to generate cash that can be used for strategic opportunities or investing in our business. The reduction of capital expenditures and amounts capitalized for software development facilitates comparisons of our liquidity on a period-to-period basis and excludes items that we do not consider to be indicative of our liquidity. Nevertheless, our use of free cash flow has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Further, our definition of free cash flow may differ from the definitions used by other companies and therefore comparability may be limited. You should consider free cash flow alongside our other GAAP-based financial performance measures, such as net cash used in operating activities, and our other GAAP financial results.

Previous wording

There have been no material changes to our critical accounting policies from those disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report.

Current wording

There have been no material changes to our critical accounting policies from those disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report, except as noted below.