Datadog Inc (DDOG) Reports Solid Revenue Growth and Free Cash Flow in Q4 and Fiscal Year 2023
Q4 Revenue Growth: Datadog Inc (NASDAQ:DDOG) reported a 26% year-over-year increase in fourth-quarter revenue, reaching $590 million.
Fiscal Year Revenue: For the fiscal year 2023, revenue rose by 27% to $2.13 billion.
Operating Cash Flow & Free Cash Flow: Operating cash flow stood at $660 million for the fiscal year, with free cash flow reaching $598 million.
Net Income Per Share: GAAP net income per diluted share was $0.14 for the fiscal year, while non-GAAP net income per diluted share was $1.32.
Customer Growth: The number of $1 million+ ARR customers grew to 396, marking a 25% increase from the previous year.
Guidance for Q1 and Fiscal Year 2024: Revenue is projected to be between $587 million and $591 million for Q1 2024, with non-GAAP net income per share estimated between $0.33 and $0.35.
On February 13, 2024, Datadog Inc (NASDAQ:DDOG), a leading cloud-native company specializing in analyzing machine data, released its 8-K filing, revealing its financial results for the fourth quarter and fiscal year ended December 31, 2023. The company, known for its comprehensive SaaS platform that integrates and automates various monitoring and security capabilities, reported strong financial performance characterized by robust revenue growth and an expanding base of large customers.
Financial Performance and Challenges
Datadog's revenue for the fourth quarter grew by 26% year-over-year to $590 million, while the fiscal year revenue saw a 27% increase, reaching $2.13 billion. This growth underscores the company's success in attracting and retaining customers, particularly larger enterprises, as evidenced by the 25% increase in customers with an annual recurring revenue (ARR) of $1 million or more. Despite this success, Datadog reported a GAAP operating margin of (2)% for the fiscal year, reflecting the competitive nature of the cloud services industry and the ongoing investments in research and development, as well as sales and marketing efforts.
Operating cash flow was a highlight, with $660 million reported for the fiscal year, alongside a strong free cash flow of $598 million. These figures are particularly important for a SaaS company like Datadog, as they demonstrate the company's ability to generate cash from its core operations, which is crucial for funding growth initiatives and potential strategic investments.
Key Financial Metrics
Datadog's balance sheet remains robust, with cash, cash equivalents, restricted cash, and marketable securities totaling $2.6 billion as of December 31, 2023. The company's ability to maintain a strong cash position provides it with the flexibility to navigate market uncertainties and invest in product development and market expansion.
From an earnings perspective, Datadog reported a GAAP net income per diluted share of $0.15 for the fourth quarter and $0.14 for the fiscal year. On a non-GAAP basis, net income per diluted share was $0.44 for the fourth quarter and $1.32 for the fiscal year, after adjusting for an assumed provision for income taxes based on a long-term projected tax rate of 21%.
These earnings metrics are crucial for investors as they provide insight into the company's profitability and operational efficiency. Non-GAAP measures are often used by investors to assess a company's underlying performance by excluding non-recurring items and stock-based compensation, which can vary significantly from period to period.
Forward-Looking Outlook and Strategic Developments
Looking ahead to the first quarter and fiscal year 2024, Datadog provided guidance that anticipates continued revenue growth. For the first quarter, revenue is expected to be between $587 million and $591 million, with non-GAAP operating income projected between $128 million and $132 million. The company also forecasts non-GAAP net income per share to be in the range of $0.33 to $0.35, assuming approximately 357 million weighted average diluted shares outstanding.
For the full fiscal year 2024, Datadog expects revenue to range from $2.555 billion to $2.575 billion, with non-GAAP operating income between $535 million and $555 million. Non-GAAP net income per share is projected to be between $1.38 and $1.44, assuming around 361 million weighted average diluted shares outstanding.
The company's strategic focus on innovation and customer needs in the areas of Observability, Cloud Security, Software Delivery, and Cloud Service Management is poised to drive future growth. Datadog's expanded partnership with Google Cloud and the release of new security features and support for AWS serverless applications highlight the company's commitment to enhancing its platform capabilities.
As Datadog continues to evolve and expand its product offerings, the company's financial health and strategic direction will remain key factors for investors and industry observers alike. With a solid financial foundation and a clear vision for the future, Datadog is well-positioned to capitalize on the growing demand for cloud-native monitoring and security solutions.
For more detailed information, investors and stakeholders are encouraged to review the full earnings release and financial statements available in the 8-K filing.
Explore the complete 8-K earnings release (here) from Datadog Inc for further details.
This article first appeared on GuruFocus.
