What we think about Datadog (DDOG)
Datadog in Three Words: DevOps Observability Cloud
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Background
Datadog is an observability platform for modern information technology infrastructure, providing products for infrastructure monitoring, application performance monitoring, log management, security analytics, and digital experience analytics. Its products are designed for public and hybrid cloud deployments and are well-suited for modern DevOps environments.
The company has performed well in tough macroeconomic conditions. Recent Q1 report was impressive, underscoring the mission-critical value and sustainable growth potential of its comprehensive monitoring, analytics and observability solutions. Revenue jumped 27% year-over-year to $611 million. Profitability also showed major strides, with operating margin expanding to 27% from 18% a year ago. During Q1 2024, Datadog saw usage growth from existing customers that was higher than in Q4. Qualitative commentary during the earnings call suggests that customers are once again spending on their digital transformation plans, with noticeable reduction in “optimization” activity.
While no longer at trough valuations, Datadog’s founder-led culture of innovation, large and underpenetrated addressable market, durable growth, expanding profitability, and competitive advantages position it to extend its observability leadership and deliver market-beating returns for patient investors over the long run.
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