Summary
- Datadog (DDOG) has emerged from the pandemic as one of the most well-suited businesses for this environment.
- Datadog has rapidly expanded its product offering from infrastructure metrics to a much broader portfolio. It now offers a series of products with great potential.
- The vast majority of businesses are realizing the importance of an online presence, and the increased migration to cloud services will go hand in hand with Datadog’s business growth.
Introduction
Datadog (NASDAQ:DDOG) has emerged from the pandemic as one of the most well-suited businesses for this environment and managed to maintain strong growth despite the challenges. Q1 results were surprisingly robust, and the stock has appreciated 50% since then. High-quality products offering, improving customer funnel, and accelerated digitalization trends are three solid reasons to believe this company has a bright future ahead.
What The Company Does
Datadog provides a series of products which give companies extensive visibility over their cloud and network infrastructure status. Dashboards and visualization tools allow engineers to monitor and build their infrastructure with ease and speed. These tools provide several important benefits to companies. For example, engineers can predict traffic spikes and prevent servers downtime, manage and improve performance, ensure that new servers are running smoothly compared to peers, reduce risk during cloud migration and much more. Generally speaking, Datadog allows companies to quickly isolate and address issues in systems that are getting more and more complex.
Figure 1 - APM Product overview - Source: Datadog
1) A Great Product
Datadog has rapidly expanded its product offering from infrastructure metrics to a much broader portfolio. It now offers a series of products, such as APM for monitoring, troubleshooting, and optimization of applications performance, LOGS for automatic collection and easy navigation of logs from all services, applications, and platforms, and Synthetics for detection and alert of users’ issues.
The quality of the product offering appears to be excellent. Many large companies have posted very positive reviews, and this is confirmed by the high retention rate numbers as well as the significant cross-selling and up-selling rates. At Q1, Datadog dollar-based net retention rate was above 130%, driven by customers increased usage and adoption of new products. Moreover, the number of customers using two or more products increased from 32% to 63% YoY, and 5% since last quarter. Datadog’s product quality and robustness are also highlighted by the growing number of customers with ARR above $100,000, which is has increased 89% from last year to 960 customers.
An interesting recent addition the product offering is the Security Monitor product. The accelerated shift to a digital world has increased companies’ focus on cybersecurity, and the nature of this product is well suited to capture on this trend.
