Datadog

Datadog Q3 2024 $DDOG (+0,95%)

Financial results

• Revenue: Datadog reported revenue of $690 million in Q3 2024, an increase of 26% compared to the same period last year.
• Net income: GAAP net income was $51.7 million, compared to $22.6 million in the third quarter of 2023.
• Non-GAAP net income: Non-GAAP net income amounted to USD 165.7 million.

Balance sheet overview

• Total assets: As of September 30, 2024, total assets were $4.63 billion, compared to $3.94 billion at the end of 2023.
• Total liabilities: Total liabilities were US$2.00 billion.
• Equity: Equity increased from USD 2.03 billion to USD 2.63 billion.

Details of the income statement

• Operating income: GAAP operating income was $20 million, representing a GAAP operating margin of 3%.
• Non-GAAP operating income: Non-GAAP operating income was $173 million, with a non-GAAP operating margin of 25%.

Cash flow overview

• Operating cash flow: Net cash flow from operating activities amounted to USD 228.7 million in the third quarter of 2024.
• Free cash flow: Free cash flow amounted to USD 203.6 million, which corresponds to a free cash flow margin of 30%.

Key figures and profitability metrics

• Free cash flow margin: This increased year-on-year from 25% to 30%.
• Non-GAAP net income margin: Non-GAAP net income per diluted share was USD 0.46.

Segment information

• Customer growth: The number of customers with an annual revenue volume (ARR) of USD 100,000 or more increased by 12% to around 3,490.

Competitive position

Datadog was recognized as a Leader in Observability Platforms and Digital Experience Monitoring in the 2024 Gartner Magic Quadrant.

Management forecasts and comments

Management emphasized the strong growth with larger customers and the expansion of platform functions.

Risks and opportunities

• Risks: Competition, potential security breaches and rapid technological change represent potential risks.
• Opportunities: Growth opportunities exist in the expansion of cloud applications and digital transformation.

Summary of the results

Strong elements

• Significant revenue growth of 26% year-on-year
• Increase in the number of valuable customers with high ARR
• Strong improvement in free cash flow margin
• Recognition as a leading provider in relevant industry reports
• Solid increase in equity

Weak elements

• Low GAAP operating margin of only 3%
• High share-based remuneration expenses weigh on net result
• Continued competitive pressure and rapid technological changes as risks
• Potential impact of global tax environment on future tax rates
• High amortization of acquired intangible assets

Earnings next week

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Datadog- The pitbull of data analysis or just 3rd class after all

Company presentation

Datadog and Dynatrace are two of the leading companies in the field of cloud monitoring and observability solutions.

$DDOG (+0,95%) Datadog, founded in 2010 and based in New York City, offers a SaaS-based data analytics platform that monitors a wide range of IT infrastructure components - from servers and databases to tools and services - across a cloud environment.

$DT is also an American company that specializes in software intelligence platforms. It provides comprehensive solutions for monitoring application performance, infrastructure and user experience.

Historical development

Datadog has experienced impressive growth since its foundation:

- 2015: Completion of a Series C financing round that supported expansion into new markets and further development of the product range.

- Continuous expansion of the platform, especially log management and application performance monitoring

- 2020: Acquisition of Undefined Labs to strengthen testing and observability capabilities.

Dynatrace has also undergone a remarkable development, although concrete milestones are not specified in the available information.

Business model and core competencies

Datadog:

- Offers a cloud-based platform for comprehensive monitoring.

- Core competencies: Infrastructure monitoring, application performance monitoring, log management, user experience monitoring and security monitoring.

- Focuses on continuous innovation and customization.

Dynatrace:

- Provides a comprehensive end-to-end observability solution.

- Core competencies: Unified platform for observability, security and business data.

- Focuses on automated provisioning and AI-supported analyses.

Future prospects and strategic initiatives

Both companies focus on continuous innovation and the expansion of their product portfolios in order to meet rapidly changing technologies and customer requirements.

Datadog has accelerated the development of new products and doubled the number of its paid solutions within the last year.

Dynatrace is focused on further developing its AI-powered analytics tools and optimizing the automated deployment of its solutions.

Market position and competition

In a dynamic and highly competitive market in which companies such as $SPLK (in the $CSCO (-0,12%) acquisition), New Relic, Elastic and Hyperscaler are also active, both companies are competing for the leading position.

Datadog is recognized as the market leader for its integrated full-stack monitoring solutions.

Dynatrace is positioned as a leader in end-to-end observability with a particular focus on AI-powered solutions.

Market potential (Total Addressable Market, TAM)

Although exact TAM figures are not provided, it is clear that both companies are operating in a rapidly growing market for cloud monitoring and observability solutions, which is being driven by the increasing digital transformation in various industries.

Share performance

Datadog:

- 1-year performance: 5.7%

- TR since the IPO on 19.09.2019:186.83%

- Currently 19.90% below the 52-week high and 45.61% above the 52-week low.

- 84% of analysts recommend the share as a buy (60% "Strong Buy", 24% "Buy").

Dynatrace:

- 1-year performance: 5, %

- TR since the IPO on 01.08.2019 : 113.42%

- Currently 16.99% below the 52-week high and 28.76% above the 52-week low.

- 77 % of analysts recommend the share as a buy (57 % "Strong Buy", 20 % "Buy").

Despite short-term fluctuations, both companies are performing positively overall.

Development

Both companies are recording continuous sales growth, with Datadog showing significantly stronger growth momentum than Dynatrace. As a result, Datadog's turnover is currently around one billion US dollars higher than that of Dynatrace. Nevertheless, the growth rates of both companies are still impressive and are expected to remain at a high level in the coming years.

Looking at the distribution of sales by country, it is clear that Datadog concentrates its sales heavily on North America, while Dynatrace is much better diversified internationally.

Despite this difference in geographic focus, Datadog's focus on North America could be seen as a strategic advantage, as the data business in the US is generally more valuable than in many international markets. The strong foothold in North America provides Datadog with a solid foundation to capitalize on the high demand and lucrative business opportunities in the region.

Internationalization should not be difficult for Datadog due to its existing successful model. With its proven product range and high level of innovation, the company is well positioned to gain a foothold on a global level and grow in other markets.

As with sales, Datadog's gross profit is also higher than that of Dynatrace. The gross margins of both companies are almost the same, although Dynatrace had a higher margin at the beginning.

The Annual Recurring Revenue (ARR) of Datadog is currently twice as high as that of Dynatrace, which underlines Datadog's strong growth momentum and market position.

A higher ARR means that Datadog is able to grow recurring revenue faster and effectively leverage long-term customer relationships. This growth may have been driven by successful expansion into new markets and the introduction of additional products and services. A high ARR is also a sign of strong demand and high customer satisfaction, which could be due to the broad offering and versatility of the Datadog platform.

Dynatrace, although also with solid growth rates and a stable ARR, remains smaller compared to Datadog. Nevertheless, it shows that both companies have strongly focused their business models on recurring revenues, which is an important indicator of sustainable growth and financial stability in a competitive market.

Despite the smaller revenues, it shows that Dynatrace has a better EPS than Datadog.

FCF is positive for both

Part 2: https://getqu.in/wuxnDJ/

Datadog- The pitbull of data analysis or just 3rd class after all

Part 1:https://getqu.in/YpHawB/

The stock-based compensation (stock-based compensation) has grown faster at $DT has grown faster than at Datadog, but the absolute volume of stock-based compensation at Datadog is currently twice as high. This shows that $DDOG (+0,95%) Dynatrace is relying more heavily on granting share options to employees in order to attract and retain talent - a strategy that is particularly widespread in the technology sector.

At Dynatrace, share-based remuneration is also increasing, but the company has already started to buy back shares from time to time

The net debt / EBITDA is negative for both, but even better for datadog

According to the EV/EBITDA multiple (Enterprise Value to EBITDA), Dynatrace is currently more attractively valued than Datadog, but in this case the attractiveness of Dynatrace according to EV/EBITDA is less meaningful in the current comparison. This is due to the fact that both companies are in different growth phases and with different strategic priorities. Datadog is investing aggressively in growth and expansion, which leads to a higher EV/EBITDA multiple, while Dynatrace is pursuing a more profitability-oriented approach and thus appears more attractive in this ratio.

In terms of capital efficiency, Dynatrace has performed much better in the recent past. The company has apparently been able to utilize its resources more effectively and achieve a better return on capital employed. However, capital efficiency has not yet been the main focus for either company.

If both companies were to focus more on optimizing their capital efficiency, it is likely that Datadog would end up outperforming due to its faster growth momentum and market strategy to date. Datadog has shown that it is willing to invest in its future development to further extend its market leadership. If the company combines this growth strategy with a stronger focus on capital efficiency, it could further consolidate its position.

Therefore, one should not yet attach too much importance to current capital efficiency.

Conclusion

Looking at the remaining providers in the observability and cloud monitoring market, it is clear that apart from the large hyperscalers such as $AMZN (+0,25%) , $MSFT (-0,1%) and $GOOGL (+0,9%) which nevertheless need to be mentioned here, only a few specialized companies remain. $SPLK would be very interesting in this context, but is currently in the process of being acquired by Cisco, which is why it is not included in this comparison.

Of the remaining providers, Dynatrace and Datadog stand out in particular. Although the two companies do not offer exactly the same solutions, they have significant overlaps in their service offerings.

Both companies entered the market almost simultaneously and went public at around the same time. Nevertheless, Datadog has developed much more dynamically than Dynatrace since then. The founders of Datadog are still heavily involved in the company and still hold significant shares, which is a sign of long-term confidence in the company and its growth strategy.

Another decisive argument is Datadog's strong focus on research and development. Datadog invests almost half of its turnover in R&D (Research & Development) in order to continuously improve its products, create more added value for customers and secure and expand its market position. This consistent approach to innovation has already borne fruit and is reflected in the company's impressive growth rate.

Although both companies are on a par in many metrics, I see Datadog as the "Dawg in the house". Another advantage of Datadog is its independence and flexibility, which allows it to focus specifically on its core business - unlike the large hyperscalers, which are less agile due to their extensive and often complex structures.

In addition, many customers value Datadog's independence from the large cloud providers. In a market where hyperscalers already dominate the infrastructure, Datadog's focus on monitoring in the cloud is a convincing differentiation. Customers prefer independent providers that are not dependent on their own strategy and have the expertise to focus on a specific area.

All in all, these factors suggest that Datadog is in a strong position to continue to grow and consolidate its place as market leader, despite the challenges posed by hyperscalers.

Hello everyone,

I've been a silent reader here for a long time, but now I'd like to share my portfolio for opinions, suggestions or even criticism.

I've been on the stock market for a good 3 years and have already learned a few lessons, especially with leveraged KO certificates in 2022 and hyped stocks like Xiaomi, Powertab or Alibaba.

At the end of 2023, I reached the milestone of €25,000 and am still in the process of adding to my portfolio. 2023 according to TR an annual performance of 33%, so it may well continue ;-).

Now to my portfolio and some thoughts on it:

ETF share approx. 29% with monthly savings installments of €300-500:

• S&P 500 (mon. 200-400€) = I personally prefer the MSCI World or an All-World ETF, nothing works in the global economy without the USA
• NASDAQ 100 = currently at a standstill, was saved before the S&P and continues to be a pleasure
• MSCI EM IMI (mon. €60) = performance slightly down, may be increased again after improvement in China
• Global Clean Energy (mon. 40€) = strong -30%, but does not want to write off the sector yet, therefore only savings rate (strongly) reduced

Share of derivatives approx. 6%:

• as already described above, had to pay some learning money in 2022 with knocked out certificates. Subsequently reduced the proportion in the portfolio significantly, but still on the lookout for good opportunities (most recently with LVMH)
• Bought leverage certificates of the big tech companies at the beginning of 2023 and sold them at the end of 2023 with a good profit (usually 80-120% profit)

Share of equities approx. 65%:

• I am well aware of a cluster risk due to the selection of my ETF's and stocks. My focus is on tech companies (Cybersec. $CRWD, (+0,3%) cloud $NET (+0,87%)
  $ZS (-0,65%), big data $DDOG (+0,95%) and big tech) and I am currently extremely satisfied with this
• In addition, some consumer goods stocks, because I come from the industry professionally and sometimes hold a lot of the companies (e.g. Pepsico, P&G)
• China shares (Alibaba, Tencent) bought in the hype and are down quite a bit, but I'm still holding the shares and hope for a (small) recovery at some point (hahaha)
• Otherwise a wild mix of companies such as Linde, D.R. Horton, Danaher etc.

Plans for the stock year 2024:

• 1. shares of ETF's to be steadily increased
• 2. take advantage of good entry opportunities to buy shares or derivatives
• 2a) Increase the proportion of existing shareholdings (e.g. Amazon)
• 2b.) Expand portfolio with companies on the watchlist (currently at the top of my list are Arista Networks, ASML, BlackRock, Eli Lilly, Palo Alto Networks)

I'm currently debating whether plan 2a) or 2b) is the right one. I would be happy to hear your opinion.

VG Sören

All my posts broken down by single share, comparisons, theory and opinions.

Newsletter & Blog

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Classification

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The share for opis? https://getqu.in/HKAf7p/

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Is the ❄️ melting away or growing into an iceberg https://getqu.in/FundGB/

$ASML (+0,47%)
: The best technology company in Europe- The brains behind every smart chip https://getqu.in/JWXYkC/

$DDOG (+0,95%)
The pit bull of data analysis https://getqu.in/YpHawB/

$AFX (+1,69%)
: The share that catches the eye 🔍 https://getqu.in/oDGSmr/

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: Of sorcerers and cyberpunks - the masters of the digital worlds 🏙️ https://getqu.in/dYjIcI/

🏎 $FWONK
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💶$AMUN (+0,07%)
: Europe's financial architect - Is he building the most solid fortunes? 🏗️ https://getqu.in/Erlpxb/

$IVSA
AB: A Swedish investment powerhouse with vision https://getqu.in/kI1lgD/

📊$MSCI (-0,09%)
: More than just indices - the secret data king of the financial markets 👑 https://getqu.in/8IdYUC/

Man and machine $MUM (+0,29%)
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Genmab A/S $GMAB (+0,32%)
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Prosus NV- The Tencent Play $PRX (-0,96%)
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• Theory

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Annuity

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Bond valuation

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Stock valuation

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Market efficiency

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Portfolio theories

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