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Datadog (DDOG) Q2 Earnings Top Estimates, Revenues Rise Y/Y

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Datadog DDOG reported second-quarter 2021 non-GAAP earnings of 9 cents per share that beat the Zacks Consensus Estimate by 200% and surged 80% year over year.

The company reported net revenues of $233.5 million that beat the consensus mark by 10.1% and soared 66.8% year over year.

Quarter Details

Steady customer additions, as well as continued growth of existing customers, drove the top line in the second quarter. Datadog had more than 16,400 customers at the end of the second quarter, up from 12,100 in the year-ago quarter.

Of these customers, 1,610 have an annual run rate (ARR) of $100K or more, up 59% year over year. These customers generate about 80% of total ARR.

Datadog, Inc. Price, Consensus and EPS Surprise

Datadog, Inc. Price, Consensus and EPS Surprise
Datadog, Inc. Price, Consensus and EPS Surprise

Datadog, Inc. price-consensus-eps-surprise-chart | Datadog, Inc. Quote

As of the end of the second quarter, 75% of customers were using two or more products, up 68% year over year. Additionally, 28% of customers were using four or more products, up from 15% in the year-ago quarter.

Markedly, Datadog’s dollar-based retention rate was above 130% in the second quarter, driven by increased usage and adoption of existing and new products.

During the quarter, the company launched the Datadog Cloud Security Platform, adding full-stack security context to Datadog's deep observability capabilities. The company also made Cloud Security Posture Management and Cloud Workload Security generally available.

Operating Details

In the second quarter, Datadog’s adjusted gross margin contracted 350 basis points (bps) on a year-over-year basis to 76.3%.

Research & development, as a percentage of revenues, expanded 310 bps to 30.4%, driven by increased investments in Datadog’s platform.

Sales and marketing expenses, as a percentage of revenues, declined 660 bps to 26.1%. General & administrative expenses, as a percentage of revenues, declined 230 bps to 6.6%.

Datadog reported non-GAAP operating income of $30.9 million, up 101.2% year over year.

Balance Sheet & Cash Flow

As of Jun 30, 2021, Datadog had cash, cash equivalents and marketable securities of $1.4 billion compared with $1.6 billion as of Mar 31, 2021.

Operating cash flow was $51.7 million in the reported quarter, unchanged from the previous quarter.

Free cash flow during the quarter was $42.3 million compared with $44.5 million reported in the previous quarter.

Guidance

For the third quarter of 2021, Datadog anticipates revenues between $246 million and $248 million. Non-GAAP earnings are expected between 5 cents and 6 cents per share.

Non-GAAP operating income is expected to be in the range of $18 million to $20 million.

For full-year 2021, Datadog anticipates revenues between $938 million and $944 million. Non-GAAP earnings are expected between 26 cents and 28 cents per share.

Non-GAAP operating income is expected to be in the range of $87 million to $93 million.

Zacks Rank & Stocks to Consider

Currently, Datadog carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the broader technology sector include Avnet AVT, CyberArk Software CYBR and Agilent Technologies A. While Avnet sports a Zacks Rank #1 (Strong Buy), both CyberArk and Agilent carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Avnet, CyberArk and Agilent are set to report their earnings results on Aug 11, 12 and 17, respectively.


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