Datadog Beats Profit Expectations Amid Cybersecurity, AI Growth

Continued demand for Datadog Inc.’s cybersecurity and artificial intelligence features helped the company beat earnings expectations in the third quarter.

The software publisher today job adjusted net income of 46 cents per share for the quarter ended September 30, above the consensus estimate of 39 cents. Datadog sales also exceeded expectations. Its turnover increased by 26% year-on-year, to reach $690 million, while the market expected $662.6 million.

The early morning report didn’t excite investors much, as the stock closed today down just over 1%.

New York-based Datadog was launched in 2010 with the initial goal of helping businesses monitor their technology infrastructure for technical issues. Since its IPO six years ago, the company has expanded into many adjacent segments. It can now help customers detect not only infrastructure malfunctions, but also breach attempts, faulty software updates, and a whole host of other issues.

Datadog’s product portfolio currently includes 23 different tools. The company disclosed today, these 15 offerings generate more than $10 million in annual recurring revenue as of the third quarter. The list includes several offerings from Datadog’s cybersecurity portfolio, a major focus of its product development efforts.

The company introduced most of its breach prevention tools in recent years. Some are designed to help developers find vulnerabilities in their code. Datadog’s other cybersecurity tools scan cloud infrastructure for misconfigured security settings, identify malicious activities, and perform related tasks.

It highlighted machine learning workloads as another source of growth, saying AI vendors accounted for 6% of its annualized recurring revenue in the third quarter, up from 2.5% a year earlier. Additionally, approximately 3,000 customers use its platform to resolve technical issues in their AI applications.

The company is also prioritizing other use cases as part of its growth efforts. In the third quarter, the company launched a tool that administrators can use to monitor workloads running on OCI, Oracle Corp.’s cloud platform. The tool collects telemetry through built-in integrations with over 20 OCI services.

“We have continued to expand our platform to help our customers observe, secure and act on their critical cloud applications,” said co-founder and CEO Olivier Pomel.

Datadog found that approximately 3,490 organizations spend $100,000 or more each year on its software. These expenses are often spread across several products: around 83% of the software company’s customers use at least two products side by side. More than a quarter use six or more products.

For the current quarter, Datadog expects adjusted earnings of 42 to 44 cents per share on revenue of $709 million to $713 million. Reaching the high end would allow Datadog to achieve annual revenue of $2.66 billion.

Picture: Data Dog