Q2 2024 Datadog Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the second quarter 2024 Datadog earnings conference call.

Speaker Change: Good day and thank you for standing by. Welcome to the second quarter 2024 Datadog Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again.

Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Yuka Broderick, Vice President of Investor Relations. Please go ahead.

Operator: At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Yuka Broderick. Vice President of Investor Relations, please go ahead.

Yuka Broderick: Thank you, Michelle. Good morning, and thank you for joining us to review Datadog's second quarter 2024 financial results, which we announced in our press release issued this morning. Joining me on the call today are Olivier Pomel, Datadog's co-founder and CEO, and David Obstler, Datadog's president. During this call, we will make forward-looking statements, including statements related to our future financial performance, our outlook for the third quarter and fiscal year 2024 and related notes, our gross margins and operating margins, our product capabilities, our ability to capitalize on market opportunities, and usage optimization trends.

Yuka Broderick: Thank you, Michelle. Good morning, and thank you for joining us to review Datadog's second quarter 2024 financial results, which we announced in our press release issued this morning. Joining me on the call today are Olivier Pomel, Datadog's co-founder and CEO , and David Obstler, Datadog CFO .

Speaker Change: During this call, we will make forward-looking statements, including statements related to our future financial performance, our outlook for the third quarter and fiscal year 2024 and related notes, our gross margins and operating margins, our product capabilities, our ability to capitalize on market opportunities, and usage optimization trends.

Yuka Broderick: The words anticipate, believe, continue, estimate, expect, intend, will, and similar expressions are intended to identify forward-looking statements or similar indications of future expectations. These statements reflect our views only as of today and are subject to a variety of risks and uncertainties that could cause actual results to differ materially. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our Form 10-Q for the quarter ended March 31st, 2024.

Speaker Change: The words anticipate, believe, continue, estimate, expect, intend, will, and similar expressions are intended to identify forward-looking statements or similar indications of future expectations. These statements reflect our views only as of today and are subject to a variety of risks and uncertainties that could cause actual results to differ materially.

Speaker Change: For a discussion of the material risks and other important factors that could affect our actual results, please refer to our Form 10-Q for the quarter ended March 31st, 2024. Additional information will be made available in our upcoming Form 10-Q for the fiscal quarter ended June 30th, 2024, and other filings for the SEC.

Yuka Broderick: Additional information will be made available in our upcoming Form 10-Q for the fiscal quarter ended June 30th, 2024 and other filings with the SEC. This information is also available on the investor relations section of our website, along with a replay of this call. We will also discuss non-GAAP financial measures, which are reconciled to their most directly comparable GAAP financial measures in the tables in our earnings release, which is available at investors.datadoghq.

Speaker Change: This information is also available on the Investor Relations section of our website along with a replay of this call. We will also discuss non-GAAP financial measures, which are reconciled to their most directly comparable GAAP financial measures in the tables in our earnings release, which is available at investors.datadoghq.com.

Olivier Pomel: With that, I'd like to turn the call over to Olivier.

Yuka Broderick: Thanks, Yuka, and thank you all for joining us this morning. We had a very productive second quarter. Let me start with a review of our Q2 financial performance. Revenue was $645 million, an increase of 27% year over year and above the high end of organics. We ended the quarter with about 28,700 customers from about 26,100 a year ago, and we generated free cash flow of $144 million with a free cash flow margin of 22%.

Olivier Pomel: Thanks, Yuka, and thank you all for joining us this morning. We had a very productive second quarter. First, we welcome thousands of Datadog users to our Dash conference in June, where we will announce a broad range of exciting new products and new features for customers to observe, secure, and act in their cloud environment. And we continue to add new customers and help existing ones as they grow in the cloud. Let me start with a review of our Q2 financial performance.

Speaker Change: With that, I'd like to turn the call over to Olivier.

Olivier: Thanks, Yuka, and thank you all for joining us this morning.

Olivier: We had a very productive second quarter. First, we welcomed thousands of Datadog users to our Dash conference in June , where we announced a broad range of exciting new products and new features for customers to observe, secure, and act in their cloud environment.

Olivier: And we continue to add new customers and help existing ones as they grow in the cloud.

Olivier Pomel: Revenue was $645 million, an increase of 27% year over year and above the high end of organics. We ended the quarter with about 28,700 customers, up from about 26,100 a year ago. We had about 3,390 customers with an ARR of $100,000 or more. Up from about 2,990 last year, and these customers generated about 87% of our ARR. And we generated free cash flow of $144 million with a free cash flow margin of 22%.

Speaker Change: Let me start with a review of our Q2 financial performance.

Speaker Change: Revenue was $645 million, an increase of 27% year-over-year and above the high end of our guidance range.

Speaker Change: We ended the quarter with about 28,700 customers, up from about 26,100 a year ago.

Speaker Change: We had about 3,390 customers with an ARR of $100,000 or more, up from about 2,990 last year, and these customers generated about 87% of our ARR.

Speaker Change: And we generated free cash flow of $144 million with a free cash flow margin of 22%.

Olivier Pomel: Turning to Platform Adoption. Our platform strategy continues to resonate in the market. As of the end of Q2, 83% of customers were using two or more products, up from 82% a year ago. 49% of customers were using formal products, up from 45% a year ago.

Speaker Change: Turning to platform adoption, our platform strategy continues to resonate in the market.

Speaker Change: As of the end of Q2, 83% of customers were using two or more products, apart from 82% a year ago.

Speaker Change: 49% of customers were using formal products, up from 45% a year ago.

Unknown Executive: 25% of our customers were using six or more products, up from 21% a year ago. This includes our efforts in digital experience monitoring, an area of observability that includes synthetics and real-world monitoring, or ROM. And both Synthetix and RUM are seeing growing adoption, and each product today represents more than 100 million in ARR, becoming our fourth and fifth products to achieve that milestone.

Olivier Pomel: 25% of our customers were using six or more products, up from 21% a year ago. And 11% of our customers were using eight or more products, up from 7% a year ago. We continue to expand the capabilities of all of our products over time, enabling our customers to solve more of their critical challenges. This includes our efforts in digital experience monitoring, an area of observability that includes synthetics and real-world monitoring, or ROM. Both Synthetix and RUM are seeing growing adoption, and each product today represents more than 100 million in ARR, becoming our fourth and fifth products to achieve that milestone.

Speaker Change: 25% of our customers were using six or more products from 21% a year ago.

Speaker Change: And 11% of our customers were using 8 or more products, up from 7% a year ago.

Speaker Change: We continue to expand the capabilities of all of our products over time, enabling our customers to solve more of their critical challenges.

Speaker Change: This includes our efforts in digital experience monitoring, an area of observability which includes synthetics and real-world monitoring, or ROM.

Speaker Change: And both Synthetix and RUM are seeing growing adoption, and each product today represents more than 100 million in ARR, becoming our fourth and fifth products to achieve that milestone.

Olivier Pomel: We have also been innovating rapidly in this area, with recent capabilities including mobile app testing, future flag testing, user journey visualization, and retention analysis. And with our recent announcement of product analytics at Dash, we are excited to go further and allow our customers to consolidate more of their usage and business insights into Datadog. Now, let's discuss this quarter's business drivers. Overall, the business environment for Datadog was roughly unchanged from last quarter.

Speaker Change: We have also been innovating rapidly in this area with recent capabilities including mobile app testing, feature flag testing, user journey visualization and retention analysis.

Speaker Change: And with our recent announcement of Product Analytics at Dash, we are excited to go further and allow our customers to consolidate more of their usage and business insights into Datadog.

Speaker Change: Now, let's discuss this quarter's business drivers.

Speaker Change: Overall, the business environment for Datadog was roughly unchanged from last quarter.

Olivier Pomel: All customers overall are growing their cloud usage, while some are continuing to be cost-conscious. In Q2, we saw existing customer usage growth that was broadly in line with our expectations and consistent with the overall improved trend that we have experienced over the past several quarters. Our usage growth with existing customers was higher than in the year-ago quarter. And we saw continued healthy growth across our product lines, with newer products growing faster from a smaller base. Finally, churn continues to be low, and gross revenue retention was stable in the mid to high 90s.

Speaker Change: All customers overall are growing their cloud usage, while some are continuing to be cost-conscious.

Speaker Change: In Q2, we saw existing customer usage growth that was broadly in line with our expectations, and consistent with the overall improved trend that we have experienced over the past several quarters.

Speaker Change: Our usage growth with existing customers was higher than in the year-ago quarter.

Unknown Executive: And we saw continued healthy growth across our product lines, with newer products growing faster from a smaller base, highlighting the mission critical nature of our platform for our customers. Moving on to R&D.

Speaker Change: and we saw continued healthy growth across our product lines, with newer products growing faster from a smaller base.

Speaker Change: Finally, churn continues to be low, and gross revenue retention was stable in the mid to high 90s.

Olivier Pomel: Highlighting the mission critical nature of a platform for our customers. Moving on to R&D. We held our Dash User Conference in late June, and we're excited to announce many new products and features for our users. There's too much for us to cover in detail.

Speaker Change: Highlighting the mission-critical nature of our platform for our customers.

Unknown Executive: We held our Dash User Conference in late June, and we're excited to announce many new products and features for our users. Today, about 2,500 customers use one or more of our AI integrations to get visibility into their increasing use of AI, which increased to over 4% of our ARR in June. We announced the general availability of Data Jobs Monitoring. With this, our data observability set of products is expanding. For our customers using OpenTelemetry, the Datadog agent will embed a fully configurable OpenTelemetry collector, giving hotel customers access to Datadog products such as container, network, and universal service monitoring.

Speaker Change: Moving on to R&D.

Speaker Change: We held our Dash User Conference in late June and we are excited to announce many new products and features for our users.

Olivier Pomel: But let me review just some of the announcements we made in the past three months. In the next generation of AI space, we announced the general availability of LLM observability, which allows application developers and machine learning engineers to efficiently monitor, troubleshoot, and secure LLM applications. With LLM observability, companies can accelerate the deployment of AI applications into production environments and reliably operate and scale them. We have also expanded Bits.ai with new capabilities. As a reminder, Biff AI is Datadog's built-in AI pilot.

Speaker Change: There's too much for us to cover in detail, but let me review just some of the announcements we made in the past three months.

Speaker Change: In the next GEN-AI space, we announce the general availability of LLM observability.

Speaker Change: which allows application developers and machine learning engineers to efficiently monitor, troubleshoot, and secure LLM applications.

Speaker Change: With LLM observability, companies can accelerate the deployment of AI applications into production environments and reliably operate and scale them.

Speaker Change: We also expanded Bits.ai with new capabilities.

Biff AI: As a reminder, Biff AI is a Datadog built-in AI copilot.

Olivier Pomel: In addition to being able to summarize incidents and answer questions, we previewed at Dash the ability for Bits.ai to operate as an agent and perform autonomous investigations. With this capability, this AI proactively surfaces key information and performs complex tasks such as investigating alerts and coordinating incident response. Taking a step back and looking at our customer base, we continue to see a lot of excitement around AI technology. Our customers are telling us that they are leveling up on AI and ramping up experiments with the goal of delivering additional business value with AI. And we can see them doing it.

Speaker Change: In addition to being able to summarize incidents and answer questions, we previewed at DASH the ability for Bits.ai to operate as an agent and perform autonomous investigations.

Speaker Change: With this capability, this AI proactively surfaces key information and performs complex tasks such as investigating alerts and coordinating incident response.

Speaker Change: Taking a step back and looking at our customer base, we continue to see a lot of excitement around AI technologies.

Speaker Change: Our customers are telling us that they are leveling up on AI and ramping up experimentations with the goal of delivering additional business value with AI.

Olivier Pomel: Today, about 2,500 customers use one or more of our AI integrations to get visibility into their increasing use of AI. We also continue to grow our business with AI-native customers, which increased to over 4% of our ARR in June. We see this as a sign of the continuing expansion of this ecosystem and of the value of using Datadog to monitor the production environment. However, I will note that, over time, we think this metric will become less relevant as AI usage in production broadens beyond this group of customers. Last but not least, we announce TOTO, our first foundational model for temporary spawn caps, which delivered state-of-the-art performance on all 11 benchmarks.

Speaker Change: And we can see them doing this. Today, about 2,500 customers use one or more of our AI integrations to get visibility into their increasing use of AI.

Speaker Change: We also continue to grow our business with AI-native customers, which increased to over 4% of our ARR in June .

Speaker Change: We see this as a sign of the continuing expansion of this ecosystem and of the value of using Datadog to monitor the production environment.

Speaker Change: I will note that over time, we think this metric will become less relevant as AI usage in production broadens beyond this group of customers.

Speaker Change: Last but not least, we announce TOTO, our first foundational model for time series forecasting.

Olivier Pomel: In addition to the technical innovations devised by our research team, TOTO derives its record performance from the quality of our training data sets and points to a unique ability to train, build, and incorporate AI models into a platform that will meaningfully improve operations for our customers. Moving on from AI, we have a lot more to show in observability.

Speaker Change: which delivered state-of-the-art performance on all 11 benchmarks.

Speaker Change: In addition to the technical innovations devised by our research team, TOTO derives its record performance from the quality of our training dataset.

Speaker Change: and points to a unique ability to train, build, and incorporate AI models into a platform that will meaningfully improve operations for our customers.

Speaker Change: Moving on from AI.

Olivier Pomel: We announce the general availability of FlexLogs, which extends our logging without limits approach and allows our customers to scale storage and compute separately for cost-efficient log analysis, and our customers can today use our new log workspace for log analysis. Log Workspace is an advanced analytics feature that allows users to connect data sets, build and visualize complex queries, and create reusable, composable views and reports. It is particularly relevant to customers who have previously built sophisticated analysis and workflows in legacy log management tools.

Speaker Change: We have a lot more to show in observability.

Speaker Change: We announce the general availability of FlexLogs, which extends our logging without limits approach and allows our customers to scale storage and compute separately for cost efficiency.

Speaker Change: And our customers can today use our new Log Workspace for log analysis.

Speaker Change: Log Workspace is an advanced analytics feature that allows users to connect datasets, build and visualize complex queries, and create reusable, composable views and reports.

Speaker Change: It is particularly relevant to customers who previously built sophisticated analysis and workflows in legacy log management tools.

Olivier Pomel: We announced the general availability of data jobs monitoring, which allows data engineers to detect and fix issues with their Spark and Databricks workloads and to optimize the cost and performance of their data jobs. Moving and transforming large amounts of data has grown in importance and has become a mission-critical capability for many businesses. This trend, which we believe will continue with the adoption of AI. With this, our data observability set of products is expanding.

Speaker Change: We announced the general availability of data jobs monitoring.

Speaker Change: Which allows data engineers to detect and fix issues with their Spark and Databricks workloads and to optimize the cost and performance of their data jobs.

Speaker Change: Moving and transforming large amounts of data has grown in importance and become a mission-critical capability for many businesses.

Speaker Change: The trend that we believe will continue with the adoption of AI.

Olivier Pomel: Data Jobs Monitoring works alongside our Data Streams Monitoring product, which helps customers understand their queuing pipelines involving components such as Kafka or RabbitMQ. And we're increasingly providing visibility for data lakes and data warehouses such as Snowflake to deliver end-to-end data observability across customers' data resources. Moving on from data observability, we introduced Kubernetes autoscaling to allow customers to optimize forecasts and performance by automatically rightsizing Kubernetes resources. For our customers using OpenTelemetry, the Datadog agent will embed a fully configurable OpenTelemetry collector, giving hotel customers access to Datadog products such as container, network, and universal service monitoring, and offering our customers what we believe will be the best fully managed OpenTele And Shifting left, our new live debugger enables developers to step through code directly in production environments and find the exact root cause of production errors.

Speaker Change: With this, our data observability set of products is expanding.

Speaker Change: Data Jobs Monitoring works alongside our Data Streams Monitoring product, which helps customers understand their queuing pipelines involving components such as Kafka or RabbitMQ.

Speaker Change: And we're increasingly providing visibility for data lakes and data warehouses, such as Snowflakes, to deliver end-to-end data observability across customer data resources.

Speaker Change: Moving on from data observability, we introduced Kubernetes autoscaling to allow customers to optimize forecasts and performance by automatically rightsizing Kubernetes resources.

Speaker Change: For our customers using OpenTelemetry, the Datadog agent will embed a fully configurable OpenTelemetry collector, giving hotel customers access to Datadog products such as container, network, and universal service monitoring, and offering our customers what we believe will be the best fully managed OpenTelemetry experience in the market.

Speaker Change: And shifting left, our new live debugger enables developers to step through code directly in production environments and find the exact root cause of production errors.

Olivier Pomel: As I mentioned earlier, we are building on our success in digital experience monitoring, and we announced Product Analytics, providing in-depth product and user insights for product managers and business owners. In the cloud security space, we launched a new application security capability called code security, which allows our customers to detect and prioritize code-level vulnerabilities in their product and application. We also announced data security, which allows our customers to automatically pinpoint sensitive data, starting in AWS today and expanding to other environments in the future. And for instances where customers can't or don't want to deploy agents, our new agentless scanning capability provides visibility into risks and vulnerabilities within hosts, containers, and serverless functions without requiring agents to be installed.

Speaker Change: As I mentioned earlier, we are building up on our success in digital experience monitoring and we announce product analytics, providing in-depth product and user insights for product managers and business owners.

Speaker Change: In the cloud security space, we launched a new application security capability called Code Security, which allows our customers to detect and prioritize code-level vulnerability in their product and applications.

Unknown Executive: We also announced data security, which allows our customers to automatically pinpoint sensitive data, starting in AWS today and expanding to other environments in the future. A modern on-call experience with paging and incident management workflows fully integrated with observability. And we added some exciting new customers while expanding with many more. They also anticipate better management and predictability of their observability costs, thanks to products such as FlexLogs. This customer also expects net savings of half a million dollars every year by switching to Datadog. With this expansion, they have chosen Datadog as their enterprise-wide observability provider. YoungBing has more than 25 years of product, technology, and engineering experience.

Speaker Change: We also announced data security, which allows our customers to automatically pinpoint sensitive data, starting in AWS today and expanding to other environments in the future.

Speaker Change: And for instances where customers can't or don't want to deploy agents, our new agent-led scanning capability provides visibility into risks and vulnerabilities within hosts, containers, and serverless functions without requiring agents to be installed.

Olivier Pomel: Finally, in the cloud service management space, we're going further to allow customers to take action directly within the Datadog platform. We announced the general availability of AppBuilder, which lets teams rapidly create self-service low-code applications and integrate them securely into their monitoring stack. And we introduced Datadog On Call, a modern on-call experience with paging and incident management workflows fully integrated with observability. So let's move on now to sales and marketing

Speaker Change: Finally, in the cloud service management space, we're going further to allow customers to take action directly within the Datadog platform.

Speaker Change: We announce the general availability of AppBuilder, which lets teams rapidly create self-service low-code applications and integrate them securely into their monitoring stacks.

Speaker Change: And we introduce Datadog OnCall, a modern on-call experience with paging and incident management workflows fully integrated with observability.

Olivier Pomel: We again saw strong execution from our go-to-market teams this quarter, and we added some exciting new customers while expanding with many more. So let's go through a few examples.

Speaker Change: So let's move on now to sales and marketing.

Speaker Change: We again saw strong execution from our go-to-market team this quarter, and we added some exciting new customers while expanding with many more.

Olivier Pomel: First, we landed our largest ever new logo win, a multi-year deal with a total contract value of in the tens of millions of dollars with one of the largest banks in South America. This customer was using a commercial observability product, as well as open source tools, but didn't have full stack visibility. With Datadog, they will enable end-to-end observability, and they expect to transition to modern infrastructure. To modern infrastructure, sorry, it's confidence. They also anticipate better management and predictability of their observability costs, thanks to products such as FlexLogs.

Speaker Change: So let's go through a few examples.

Speaker Change: First, we landed our largest ever new logo win, a multi-year deal with total contract value in the tens of millions of dollars with one of the largest banks in South America.

Speaker Change: This customer was using a commercial observability product, as well as open source tools, but didn't have full stack visibility.

Speaker Change: With Datadog, they will enable end-to-end observability, and they expect to transition to modern infrastructure with confidence.

Speaker Change: They also anticipate better management and predictability of their observability costs, thanks to products such as FlexLogs.

Olivier Pomel: Next, we signed a seven-figure annualized land deal with one of the world's largest travel management companies. This company was using a commercial log management tool but found it expensive and complex to support. They also worried about stability as the tool would crash and cause fire drills across the organization.

Speaker Change: Next, we signed a seven-figure annualized land deal with one of the world's largest travel management companies.

Speaker Change: This company was using a commercial log management tool, but found it expensive and complex to support.

Speaker Change: They also worried about stability as the tool would crash and cause fire drills across the organization.

Olivier Pomel: By moving to Datadog and replacing this tool, they expect to drive significant savings with log management and will benefit from a unified platform across infrastructure monitoring and APM. Next, we landed a seven-figure annualized deal with a security software company. This customer felt they were overspending on their commercial loading tool, and lack of visibility led to issues catching incidents with users notifying them first of outages.

Speaker Change: By moving to Datadog and replacing this tool, they expect to drive significant savings with log management and will benefit from a unified platform across infrastructure monitoring and APM.

Speaker Change: Next, we lend you the seven-figure annualized land with a security software company.

Speaker Change: This customer felt they were overspending on their commercial learning tool, and lack of visibility led to issues catching incidence, with users notifying them first of outages.

Olivier Pomel: This customer is now adopting the Datadog Unified platform across all three pillars and displacing one commercial and two open source tools in the process. This customer also expects net savings of half a million dollars every year by switching to Datadog. Next, we signed a seven-figure annual expansion with a leading central bank in Europe.

Speaker Change: This customer is now adopting the Datadog Unified platform across all three pillars and displacing one commercial and two open source tools in the process.

Speaker Change: This customer also expects net savings of half a million dollars every year by switching to Datadog.

Speaker Change: Next, we signed a seven-figure annual expansion with the leading central bank in Europe .

Olivier Pomel: This institution became a Datadog customer three years ago to enable its ambitious plan to move half of its applications to the cloud over a couple of years. And they have been increasing their usage of Datadog as they move into the cloud, displaceing two commercial observability tools which they use in their on-premise environment. They have now adopted a total of 17 Datadog products. Next, we signed a 70-year annualized expansion with a large American insurance company.

Speaker Change: This institution became a Datadog customer three years ago to enable its ambitious plan to move half of its applications to the cloud over a couple of years.

Speaker Change: And they have been increasing their usage of Datadog as they moved into the cloud, displacing two commercial observability tools, which they use in their on-premise environment.

Speaker Change: They have now adopted a total of 17 Datadog products.

Speaker Change: Next, we signed a 70-year annualized expansion with a large American insurance company.

Olivier Pomel: This customer had been using Datadog for full-stack observability at one business unit, and with this expansion, they have chosen Datadog as their enterprise-wide observability provider. In comparing Datadog to the performance of other tools, this customer measured stronger developer adoption and fewer incidents with Datadog. And in displacing its legacy APM and log management, they expect to save over $1 million annually on tool costs alone.

Speaker Change: This customer had been using Datadog for full-stack observability at one business unit.

Speaker Change: With this expansion, they have chosen Datadog as their enterprise-wide observability provider.

Speaker Change: In comparing us to the performance of other tools, this customer measured stronger developer adoption and fewer incidents with Datadog.

Speaker Change: And in displacing its legacy APM and log management, they expect to save over $1 million annually on tool costs alone.

Olivier Pomel: Finally, we signed a high 70-figure annualized expansion with a leading online gambling and entertainment platform. This longtime customer uses Datadog as its strategic observability partner. Enabling full visibility across infrastructure, applications, logs, networks, and their public front end, with users spanning from hands-on keyboard engineers all the way to their C-level executives. This renewal supports this customer's expansion into new use cases, to have security embedded into the operations by using all of our cloud security products, to build a culture of cost accountability with cost management, and to take action using incident management and workflow automation. To date, this customer has adopted And that's it for another Productive Quarter from Mobile2Market.

Speaker Change: Finally, we signed a high 70-year annualized expansion with a leading online gambling and entertainment platform.

Speaker Change: This long-time customer uses Datadog as its strategic observability partner.

Speaker Change: Enabling full visibility across infrastructure, applications, logs, networks, and their public front-end, with users spanning from hands-on keyboard engineers all the way to their C-level executives.

Speaker Change: this renew pports his customers's expansion into new use cases

Speaker Change: to our security embedded into the operations by using all of our classically products

Speaker Change: To build a culture of cost-accountability with cost-management.

Speaker Change: entertake action at le incident management and walk automation

Speaker Change: And this customer, to date, has adopted 19 products in the Datadog platform.

Olivier Pomel: Now let me say a few words on our longer-term outlook. Overall, we continue to see no change to the multi-year trend toward digital transformation and cloud migration. We are seeing continued experimentation with new technologies, including next-gen AI. And we believe this is just one of the many factors that will drive greater use of the cloud and next-gen infrastructure, as indicated by our many announcements at our DAG Uniform.

Speaker Change: And that's it for another Productive Quarter from Ogle2MarketTeams.

Speaker Change: Now let me say a few words on our longer term outlook.

Speaker Change: Overall, we continue to see no change to the multi-year trend towards digital transformation and cloud migration.

Speaker Change: We are seeing continued experimentation with new technologies including next-gen AI and we believe this is just one of the many factors that will drive greater use of the cloud and next-gen infrastructure.

Olivier Pomel: We are delivering rapid innovation at scale. And we are helping our customers every day to deploy and scale the modern environment with confidence across observability, digital experience, cloud security, cloud service management, software delivery, and product analytics. Finally, I'd like to welcome two new leaders to our team. Yanbing Li is joining us as our Chief Product Officer. Yanbing has more than 25 years of product, technology, and engineering experience.

Speaker Change: As indicated by our many announcements at our Diary Conference.

Speaker Change: we are delivering rapidinnovation at scale and we are helping our customers every day to deploy and scale and moder environment with confidence cost observability digital experience class security class service management software delivery and product netics

Olivier Pomel: Spanning enterprise software, cloud infrastructure, and AI at companies such as VMware, Google, and Aurora, she will lead our product team's efforts to expand the Datadog platform. And David Gallo-Reeves is joining us as our Chief People Officer. David has more than 20 years of HR experience at tech companies and large-scale, high-visibility enterprises such as Sigma, Wells Fargo, and Walmart. He will help us drive the next chapter of growth and scale at Datadog. With that, I will turn it over to our CFO, David.

Speaker Change: finally i'd like to lcome two new leaders to our team

yendingly: Yanbing Li, he's joining us as our Chief Product Officer.

Yendingly: yyounging has more than twenty-five years of product technology and engineering experience spending enterprise software part infrastruure on a i at companies such as vmwhere google and aurora

Yendingly: She will lead our product team's efforts to expand the Datadog platform.

Speaker Change: and David Gallo-Reeves is joining us as our Chief People Officer.

David Gallo-Reeves: David has more than 20 years of HR experience at tech companies and large-scale high visibility enterprises such as Sigma, Wells Fargo, or Walmart.

Yendingly: It will help us drive the next chapter of growth and scale at Datadog.

Speaker Change: With that, I will turn it over to our CFO , David.

Unknown Executive: Q2 revenues were $645 million, up 25% year-over-year and up 6% quarter-over-quarter. The overall trend we saw was consistent with our expectations and focused on optimization. Regarding our retention metric, our net revenue retention percentage was in the mid-110s in Q2, similar to the past couple quarters, and billing's duration was roughly flat versus a year ago. As we said before, contract duration has generally been increasing as customers choose more multi-year deals.

David Obstler: Q2 revenues were $645 million, up 25% year-over-year and up 6% quarter-over-quarter. To dive into some of the drivers of the Q2 revenue growth, first, regarding usage growth from existing customers. The overall trend we saw was consistent with our expectations.

David: thank the liva good morning to all q two revenues was were six hundred and forty-five million dollars of twenty-five percent year-over-year and up six percent quarter -over quarter

Speaker Change: To dive into some of the drivers of the Q2 revenue growth, first, regarding usage growth from existing customers.

Speaker Change: the in the overall trend we saw was consistent with our expectations

David Obstler: In Q2, we saw usage growth from existing customers that was higher than usage growth in the year-ago quarter. And as we look across the first half of 2024, our usage growth was higher than the first half of 2023. And we are seeing solid growth across our products. Our three pillar products continue to increase in customer penetration and usage, and our newer products across observability, cloud security, and cloud service management are ramping up.

Speaker Change: In Q2, we saw usage growth from existing customers that was higher than usage growth in the year-ago quarter.

Speaker Change: And as we look across the first half of 2024, our usage growth was higher than the first half of 2023.

Speaker Change: And we are seeing solid growth across our products.

Speaker Change: Our three-pillar products continue to increase in customer penetration and usage, and our newer products across observability, cloud security, and cloud service management are ramping.

David Obstler: Regarding usage growth by customer size in Q2, we saw strong performance amongst our largest customers who spend multiple millions of dollars with us annually as they continue to return to growth and strike a balance between new deployments and Focus on Optimization. As we look at usage growth by segment, we saw the strongest growth with our enterprise customers, where year-over-year growth in usage has accelerated over the past several quarters. Over the same period, we have seen more steady year-over-year growth trends amongst our SMB and mid-market customers. As a reminder, we define enterprise as customers with 5000 employees or more, mid market as customers with 1000 to 5000 employees, and SMB as customers with less than 1000 employees.

Speaker Change: Regarding usage growth by customer size in Q2,

Speaker Change: We saw strong performance amongst our largest customers, who spend multiple millions of dollars with us annually, as they continue to return to growth and strike a balance between new deployment and focus on optimization.

Speaker Change: As we look at usage growth by segment, we saw the strongest growth with our enterprise customers where year-over-year growth in usage has accelerated over the past several quarters.

Speaker Change: Over the same period, we have seen more steady year-over-year growth trends amongst our SMB and mid-market customers.

Speaker Change: As a reminder, we define enterprise as customers with 5,000 employees or more, mid-market as customers with 1,000 to 5,000 employees,

Speaker Change: and SMB as customers with less than 1,000 employees.

David Obstler: Regarding our retention metrics. Our net revenue retention percentage was in the mid 110s in Q2, similar to the past couple quarters. But remember, this is a trailing 12-month measure, and we see an increase in recent quarters as we look at the NRR quarterly trend. And finally, our trailing 12-month gross revenue retention percentage remains stable in the mid to high 90s.

Speaker Change: Regarding our retention metrics, our net revenue retention percentage was in the mid-110s in Q2, similar to the past couple quarters.

Speaker Change: but remember this is a trailing twelve months measure and we see an increase in recent quarters as we look at the n quarterly trend

Speaker Change: And finally, our trailing 12-month gross revenue retention percentage remained stable in the mid to high 90s.

David Obstler: Now moving on to our financial results. Billings were $667 million, up 28% year over year and similar to the trailing 12 months of billing year over year growth. Billing's duration was roughly flat versus a year ago. However, remaining Performance Obligations, or RPO, was $1.79 billion, up 43% year over year. As we said before, contract duration has generally been increasing as customers choose more multi-year deals, and contract duration increased modestly in the year over year period relative to a year ago.

Speaker Change: Now moving on to our financial results.

Speaker Change: Billings were $667 million, up 28% year-over-year, and similar to the trailing 12-month billing year-over-year growth.

Speaker Change: Billing's duration was roughly flat versus a year ago.

Speaker Change: Remaining Performance Obligations, or RPO, was $1.79 billion, up 43% year-over-year.

Speaker Change: As we said before, contract duration has generally been increasing as customers choose more multi-year deals.

Speaker Change: And contract duration increased modestly in the year-over-year period relative to a year ago.

David Obstler: Current RPO growth was in the mid-30s percent year over year. We continue to believe revenue is a better indicator of our business trends than billings and RPO, as those can fluctuate on a quarterly basis relative to revenue based on the timing of invoicing and the duration of customer contracts. Now, let's review some of the key income statement results. Unless otherwise noted, all metrics are non-GAAP.

Speaker Change: Current RPO growth was in the mid-30s percent year-over-year.

Speaker Change: yeah

Speaker Change: We continue to believe revenue is a better indicator of our business trends than billings and RPO, as those can fluctuate on a quarterly basis relative to revenue based on the timing of invoicing and the duration of customer contracts.

Speaker Change: Now let's review some of the key income statement results.

David Obstler: We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release. Gross profit in the quarter was $530 million, representing a gross margin of 82.1%. This compares to a gross margin of 83.3% in the last quarter and 81.3% in the year-ago quarter. Our Q2 OPEX grew 21% year-over-year and increased from 14% year-over-year growth last quarter. As we mentioned last quarter, Q2 OPEX included $11 million in expenses related to our Dash User Conference. And as we've discussed, we are investing in headcount in 2024. And the growth in OPEX reflects our execution on hiring in sales and marketing and R&D so far this year.

Speaker Change: Unless otherwise noted, all metrics are non-GAAP . We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release.

Speaker Change: Gross profit in the quarter was $530 million, representing a gross margin of 82.1%. This compares to a gross margin of 83.3% in the last quarter and 81.3% in the year ago quarter.

Speaker Change: Our Q2 OPEX grew 21% year-over-year and increased from 14% year-over-year growth last quarter.

Unknown Executive: As we mentioned last quarter, Q2 OPEX included $11 million in expenses related to our Dash User Conference. Q2 operating income was $158 million, or a 24% operating margin, compared to 27% last quarter and 21% in the year-ago quarter. As a reminder, we base our guidance on trends observed in recent months and apply conservatism to these growth trends. And non-GAAP net income per share is expected to be in the range of $1.62 to $1.66 per share, based on approximately 360 million weighted average diluted shares. Outstanding. I want to thank you.

Speaker Change: As we mentioned last quarter, Q2 OPEX included $11 million in expenses related to our DASH user conference.

Speaker Change: And as we've discussed, we are investing in headcount in 2024, and the growth in OPEX reflects our execution on hiring in sales and marketing and R&D so far this year.

David Obstler: Q2 operating income was $158 million, or a 24% operating margin, compared to 27% last quarter and 21% in the year-ago quarter. Now turning to the balance sheet and cash flow statements, we ended the quarter with $3 billion in cash, cash equivalents, and marketable security. Cash flow from operations was $164 million in the quarter, and after taking into consideration capital expenditures and capitalized software, free cash flow was $144 million, for a free cash flow margin of 22%. Now for our outlook for the third quarter and fiscal year 2024. First, our guidance philosophy remains unchanged.

Speaker Change: Q2 operating income was $158 million, or a 24% operating margin, compared to 27% last quarter and 21% in the year-ago quarter.

Speaker Change: Now turning to the balance sheet and cash flow statements, we ended the quarter with $3 billion in cash, cash equivalents, and marketable securities.

Speaker Change: Cash Flow from Operations

Speaker Change: was $164 million in the quarter.

Speaker Change: And after taking into consideration capital expenditures and capitalized software, free cash flow was $144 million for a free cash flow margin of 22%.

Speaker Change: Now for our outlook for the third quarter and the fiscal year 2024.

David Obstler: As a reminder, we base our guidance on trends observed in recent months and apply conservatism to these growth trends. For the third quarter, we expect revenues to be in the range of $660 to $664 million, which represents 21% year over year growth. Non-GAAP operating income is expected to be in the range of $146 to $150 million, which implies an operating margin of 22 to 23 percent. And non-GAAP net income per share is expected to be $0.38 to $0.40 per share based on approximately 360 million weighted average diluted shares.

Speaker Change: First, our guidance philosophy remains unchanged.

Speaker Change: As a reminder, we base our guidance on trends observed in recent months and apply conservativism on these growth trends.

Speaker Change: For the third quarter, we expect revenues to be in the range of $660 to $664 million, which represents 21% year-over-year growth.

Speaker Change: non-GAAP operating income is expected to be in the range of $146-$150 million, which implies an operating margin of 22-23%.

Speaker Change: And non-GAAP net income per share is expected to be $0.38 to $0.40 per share based on approximately 360 million weighted average diluted shares. Outstanding.

David Obstler: For the fiscal year 2024, we expect revenue to be in the range of $2.62 to $2.63 billion, which represents 23 to 24% year over year growth. Non-GAAP operating income is expected to be in the range of $620 to $630 million, which implies an operating margin of 24%. And non-GAAP net income per share is expected to be in the range of $1.62 to $1.66 per share, based on approximately 360 million weighted average diluted shares.

Speaker Change: For the fiscal year 2024, we expect revenue to be in the range of $2.62-$2.63 billion, which represents 23-24% year over growth.

Speaker Change: non-GAAP operating income is expected to be in the range of $620 to $630 million, which implies an operating margin of 24%.

Speaker Change: non-GAAP net income per share is expected to be in the range of $1.62 to $1.66 per share.

Speaker Change: Based on approximately 360 million weighted average diluted chairs. Outstanding.

David Obstler: Additional notes to our guidance. We expect net interest and other income for the fiscal year 2024 to be approximately $125 million. Next, we expect to pay cash taxes in the range of 20 to $25 million, and we will continue to apply a 21% non-gap tax rate for 2024 and going forward. Finally, we continue to expect capital expenditures and capitalized software together to be in the 3 to 4% of revenues range in fiscal 2024.

Speaker Change: Some additional notes to our guidance, we expect net interest and other income for the fiscal year 2024 to be approximately $125 million.

Speaker Change: Next, we expect to pay cash taxes in the range of $20 million to $25 million, and we continue to apply a 21 percent non-GAAP tax rate for 2024 and going forward.

Speaker Change: Finally, we continue to expect capital expenditures and capitalized software together to be in the 3-4% of revenues range in fiscal 2024.

David Obstler: And now, to conclude. As Ali mentioned, we are pleased with our execution in the first half of 2024 and plan to continue to help our customers observe, secure, and act in their modern cloud environment. I want to thank Datadogs worldwide for their efforts in that. And with that, we will open up the call for questions. Operator, let's begin the Q&A. Thank you.

Speaker Change: And now to conclude.

Speaker Change: As Ali mentioned, we are pleased with our execution in the first half of 2024 and plan to continue to help our customers observe, secure, and act in their modern cloud environments.

Ali: I want to thank Datadogs worldwide for their efforts in this.

Speaker Change: And with that, we will open up the call for questions. Operator, let's begin the Q&A. Thank you. If you would like to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced.

Operator: Thank you. If you would like to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for our first question. And our first question is going to come from the line of Sanjit Singh on behalf of the Morgan Family. Your line is open. Please go ahead.

Speaker Change: To withdraw your question, please press star 11 again. One moment for our first question.

Operator: And our first question is going to come from the line of Sanjit Singh with the Morgan Family. Your line is open. Please go ahead.

Speaker Change: And our first question is going to come from the line of Sanjit Singh with Morgan Family. Your line is open. Please go ahead.

Sanjit Singh: Yeah, thank you for taking the questions and congrats on Q2. I wanted to get your assessment of the sort of demand environment, the spend environment, and your description of how the usage trends played out by end market and mid market versus enterprise was super helpful. You know, Microsoft had noted that they saw some weaker usage trends in June. I just want to get a sense of if you look across your geographies or even across some of your key verticals, anything that stood out as sort of positive or negative in June going into July in terms of usage trends.

Sanjit Singh: Yeah, thank you for taking the questions and congrats on Q2.

Sanjit Singh: I wanted to get your assessment of the sort of demand environment and spend environment.

Speaker Change: and your description of like how the usage trends.

Speaker Change: Microsoft had noted that they saw some weaker usage trends in June , just want to get a sense of if you look across your geographies or even across some of your key verticals, anything that stood out sort of positive, negative in June going into July in terms of the usage trends. Thank you.

Olivier Pomel: Yeah, we, thanks, Sanjit. And hello.

Speaker Change: yes we thanks suny hellolow again i think you've noted we said that we experienced strength in our enterprise segment and stability in our ssmb segment

Speaker Change: and that continued throughout the quarter as far as the more recent trends.

Speaker Change: for what we're seeing towards the end of the quarter and also in July. Very similar trends to what we saw in Q2 and for the first half of the year, so continuation.

David Obstler: Again, I think you've noted, we said that we experienced strength in our enterprise segment and stability in our SMB segment. And that continued throughout the quarter, as far as the more recent trends are concerned. For, what we're seeing towards the end of the quarter and also in July, very similar trends to what we saw in Q2. And for the first half of the year, so a continuation of higher usage growth than we saw in the comparable periods in the previous year.

Speaker Change: of higher usage growth than we saw in the comparable periods in the previous year.

Olivier Pomel: Understandable. And then Ali, maybe for you, I know at Investor Day, you sort of outlined the sort of thoughts and strategy on M&A and sort of identified the criteria. It's not like your CorpDev team sees a lot of opportunities, but the bar was pretty high with the message from the investor a couple of months ago. I wanted just to sort of double check your latest thinking on the M&A strategy with respect to potentially looking at more strategic, more transformational, larger-scale deals. Has anything sort of changed in the way you view M&A as part of the Datadog growth strategy? So no, there's no...

Speaker Change: Ununderstood. And then, Ollie, maybe for you, I know at the Investor Day, you sort of

Ollie: Outlined the sort of thoughts and strategy on M&A and sort of identified the criteria that sounds like

Ollie: Your corp desk team sees a lot of opportunities, but the bar was...

Speaker Change: I wanted to sort of double check your latest thinking on the M&A strategy with respect to potentially looking at more strategic, more transformational, larger size deals. Has anything sort of changed in the way you view M&A as part of the Datadog growth strategy?

Olivier Pomel: So, no, there's no change to the way we see things. Because we have this platform strategy where we're building a consolidator and bringing together many different use cases into one shared platform, we have very broad interests and a very ambitious roadmap in many different directions. So, as a result, we cast a very wide net when it comes to M&A. There are many possible potential fits for us. So, historically, we've been very successful in doing a lot of small and medium-sized deals.

Speaker Change: So, no, there's no change to the way we see things, you know, because we have this platform strategy.

Speaker Change: we're building a con leid da and we're bring together many different skatedes into onech platform we have very broad interest in the very ambusious will ap main differentdireions so as a result we a very w net you know when it comes to emminate the many possible potential fats in or for us

Speaker Change: so historically we've been very successful with doing a lot of small and mediumside ide at any point in time we're going to look at

Olivier Pomel: At any point in time, we're going to look at a lot of deals that might be small or big, but we expect the bigger deals to be fewer and far between, as the bar is very high for those. And today, we're also not looking into anything that would be very material to the business.

Unknown Executive: A lot of deals that might be small or big. We expect the bigger deals to be fewer and far between, as the bar is very high for those. And today, we're also not looking into anything that would be very material to the business.

Speaker Change: A lot of deals that might be small or big. We expect the bigger deal to be fewer and far between, as the bar is very high for those. And today, we're also not looking into anything that would be very material to the business.

Operator: Thank you, and one moment as we move on to our next question. And our next question comes from the line of Raimo Lenschow with Barclays. Your line is open. Please go ahead.

Operator: Thank you, and one moment as we move on to our next question. And our next question comes from the line of Raimo Lenschow with Barclays. Your line is open. Please go ahead.

Speaker Change: Understood. Thank you all.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: And our next question comes from the line of Raimo Lenschow with Barclays. Your line is open, please go ahead.

Raimo Lenschow: Perfect, thank you. Has there been any impact, or what are you seeing in terms of a reaction from customers around the CrowdStrike outage? Because that's obviously an event that affected the whole industry. You guys, I'm sure, kind of saw some of the ramifications there. Just talk a little bit about how that impacted you in the quarter, but also what it means for customer conversations. Thank you.

Raimo Lenschow: Perfect, thank you.

Raimo Lenschow: Have there been any impact or what are you seeing in terms of as a reaction from customers around the CrowdStrike outage because that's obviously a event that impacted the whole industry. You guys I'm sure kind of saw some of their ramifications there. Just talk a little bit about how that impacted you in the quarter but also what it means to customer conversation. Thank you.

Olivier Pomel: Yeah, so I mean, obviously, this is something that was very much in the news, it was very visible, it was particularly visible because it affected devices that are in the airport kiosks, basically, and point of sales that are in the field and, you know, in front of consumers, and was, you know, pretty much everywhere at once. So, you know, a very visible incident. That being said, you know, in the grand scheme of observability, that keeps it very unremarkable.

Speaker Change: Yeah, so I mean obviously this is something that...

Speaker Change: It was very much in the news. It was very visible. It was particularly visible.

Speaker Change: It affected devices that are in airport kiosks, basically, and point of sale that are in the field and in front of consumers and pretty much everyone wants.

Olivier Pomel: So the cross-track event is very visible to everyone everywhere, but every single day, there are hundreds or thousands of companies that are having that cross-track moment because they've updated software, either third-party software or software they've built, and they cause large business disruptions like network issues, and that's what we deal with, you know, pretty much all the time. So, you know, what you see in the public eye is really a reflection of the value we provide every single day to our customers when it comes to preventing these issues and whenever those issues happen, to remade their, their dynamics extremely quickly.

Speaker Change: Very busy bullying student.

Speaker Change: That being said, you know, in the grand scheme of observability, like, it's very unremarkable.

Speaker Change: So the cross-track event is very visible to everyone everywhere.

Speaker Change: But every single day, there's a hundred or a thousand companies that are having that cross track moment.

Speaker Change: because they were very software either thir party stware also to subjective bubuildt and they go large business disruption largenet issues and that's what we deal with in a pretty much all the time

Speaker Change: So, you know, what you see in the public eye is really a reflection of the value we provide every single day to our customers, you know, when it comes to preventing those issues and whenever those issues happen, to remediate them extremely quickly.

Speaker Change: So, of course, you know, we had all of the interactions you can imagine with our customers around it, you know, in terms of how they use our product to come back online, debug and everything, even though the fix in that case was very, very manual, you know, there was really no good way to automate it.

Unknown Attendee: Thank you, and congratulations from me as well.

Olivier Pomel: It feels like you mentioned logs quite a bit on this earnings call. Do you see any change, like your product is getting more mature, and the innovation that is coming through is obviously kind of very visible, but do you see a change in the market with the kind of recent movements in terms of vendors that that kind of opens up a little bit more from your perspective? Thank you, and congratulations from me as well.

Speaker Change: But again, we see that every single day. That's what we do.

Speaker Change: okay but then the maybe it would just me but it did feel like you mentioned logcks quite a bit on this earnings call and do you see any change like your product is getting more mature and the innovation that is coming through us obviously kind a very visible but do you see a change in the market with kind of recent movements

Speaker Change: in terms of vendors that that kind of opens up a little bit more from your perspective. Thank you and congrats from me as well.

Olivier Pomel: Yeah, we definitely think there's going to be more opportunity in the future, which is why we're investing heavily both in terms of making logs economical to scale, you know, that's FlexLogs in particular, and also going further in terms of the sophistication of the functionality we can offer to customers so they can build very complex processes around those. So we talked about log workspace in the call too. Log workspace is particularly interesting for customers who have used other platforms and have built pipelines, basically that, you know, post-process a lot of log data. And so we would build that for them. And that's been very well received so far. So all of that is in the service of going after these opportunities.

Speaker Change: Yeah, we definitely think there's going to be more opportunity in the future, which is why we're investing heavily, both in terms of making logs economical to scale, you know, flex logs in particular,

Speaker Change: And also going further in terms of the sophistication of the functionality we can offer to customers so they can build very complex processes around those. So we talked about Log Workspace also in the call. Log Workspace.

Speaker Change: It's particularly interesting for customers who have used other platforms and have built pipelines basically that, you know, post-process a lot of logs data. And so we would build that for them. And that's been very well received so far. So all of that is in service of going after these opportunities.

Operator: Thank you, and one moment for our next question. And our next question is going to come from the line of Mark Murphy with JPMorgan. Your line is open. Please go ahead. Thank you so much.

Speaker Change: that expected

Operator: And our next question is going to come from the line of Mark Murphy with JPMorgan. Your line is open. Please go ahead.

Speaker Change: Thank you and one moment for our next question.

Speaker Change: And our next question is going to come from the line of Mark Murphy with J.P. Morgan. Your line is open. Please go ahead.

Mark Murphy: Thank you so much, and I'll add my congratulations. Olivier, it's great to see the announcement of LLM observability reaching GA. I think we're all looking at this tremendous wave of hyperscaler commitments that are going to be ramping up in the second half of this year, and it's all for the training of these next-gen AI models. And since you're more exposed to the – excuse me, since you're less exposed to that training and you're more driven by the inferencing, I'm wondering if you could just help us understand how the spending pattern or activity changes as the AI models go live and reach the inferencing stage. I'm basically looking for any way to assess how much spending is ultimately going to develop into inferencing where you have an opportunity.

Mark Murphy: Thank you so much and I'll add my congrats. Olivier, it's great to see the announcement of LLM observability reaching GA. I think we're all looking at

Speaker Change: This tremendous wave of hyperscaler commitments are going to be ramping in the second half of this year.

Speaker Change: and it's all fefor framing of these next in a i models and since you're more exposed to the see to be since or less expposed to that trainingand you're more driven by the inferenencing

Speaker Change: I'm wondering if you could just help us understand how the spending pattern or activity changes as the AI models go live and reach the inferencing stage. I'm basically looking for any way to assess how much spending is ultimately going to develop into the inferencing where you have an opportunity.

Olivier Pomel: We do see customers that are increasingly going into production, and we have a few of those. We named a couple as early customers of LLM observability. I think the two we named were WHOOP, the fitness band, and Appfolio.

Speaker Change: Yeah, I mean, look, the...

Speaker Change: in general it's still early we do see customers that are growing including into production and we have a few of thosei mean we meant a couple as early customers of of ability i think the two we name where look

Speaker Change: the fitness ban and

Olivier Pomel: We see many more that are lining up and that are going to do that. But in the grand scheme of things, looking at the whole market, it's still very early. I would say the best proxy you can get from the future demand there is the growth of the model providers and the AI natives because they tend to be the ones that are currently being used to provide AI functionality in other applications and largely in production environments. And so I would say they are the harbinger of what's to come.

Speaker Change: atortfolio

Speaker Change: and we see many more than are lending up andthat i'm going to do that

Speaker Change: But in the grand scheme of things, looking at the whole market, it's still, you know, very early. I would say the best proxy you can get...

Speaker Change: From the future demand there is the growth of the model providers and the AI native, because they tend to be the ones that currently are being used to provide, you know, AI functionality into other applications and largely in production environments. And so I always said they are the harbinger of what's to come.

David Obstler: Okay, and then as a quick follow-up, maybe for David, a couple of the consumption model software companies recently commented that in June and July, they were seeing more cloud cost control or optimization, specifically among digital natives. And so your results are solid. But I don't think you mentioned that. But could you just comment on how the optimization activity is kind of trending out between digital natives and enterprises heading into the back half?

Speaker Change: Okay, and then as a quick follow-up,

Speaker Change: Maybe for David, a couple of the consumption model software companies had recently commented that

Speaker Change: in june in july they werere seeing more cloud cost control or optimizations specifically among the digital natves and so your results are solid idon't think you mentioned that but could you just comment on how the optimization activity is kind of trening out between the digital atives and the enterprises having it into the back half

David Obstler: Yeah, as you know, we said that, so you look at the time series, the peak of the optimization was in Q2, Q3 last year, and we've had, you know, a time series of higher usage growth for our clients, month to month since then, and that's continued through the first half of the year and into July. It's the usage growth, as we talked about, which is stronger in the enterprise and in the larger users.

Speaker Change: Yeah, as you know, we've said that, so you look at the time series, the peak of the optimization was

Speaker Change: in q two q three last year and we've had a time series of higher usage growth for a clients month to month

Speaker Change: And that's continued through the first half of the year and into July . The usage growth, as we talked about, is stronger in the enterprise and in the larger users.

David Obstler: But it has been fairly stable in the SMB. So we're seeing, you know, some more when you look at the chart in the line, enterprise, being, you know, usage growth being higher than it had been for SMBs being stable. For us, we add

Speaker Change: but it has been fairly stable in the ssmb so we're seeing some more when you look at the chart in the line enterprise being usage growth being higher than it had been and s m b being stable for us i would have the

Olivier Pomel: And, you know, for us, I would add that the Digital natives are largely SMB mid-market. They're not enterprise. And even when you look at the digital native, there are two stories, depending on whether you talk about the AI natives or the others. The AI natives are inflecting in a way that the others are not at this point. So today we see higher growth from AI natives and from traditional enterprises, and stable growth but not accelerating from the rest of the pack.

Speaker Change: to deal y is are large largely sm bi ammid market they're not enterprise

Speaker Change: And even when you look at the visual native, there's two stories depending on whether you talk about the AI natives or the others. The AI natives are inflecting in a way that the others are not at this point.

Speaker Change: So today we see this higher growth from AI and AIDS and from traditional enterprises and stable growth but not accelerating from the rest of the pack.

Operator: Thank you, and one moment for our next question. And our next question is going to come from the line of Kasthuri Rangan with Goldman Sachs. Your line is open. Please go ahead.

Speaker Change: thank you very much

Speaker Change: Thank you and one moment for our next question.

Speaker Change: And our next question is going to come from the line of Kasthuri Rangan with Goldman Sachs. Your line is open. Please go ahead.

Kasthuri Rangan: Hello, thank you very much. Ali, you mentioned, I think, during the call, there's been a repeated instance of enterprises growing faster than SMBs. I'm curious, why is that the case? And is this, is this something of a change in the trend? Have you seen SMBs actually showing better usage trends in the past? And what could cause SMBs to start to pick up consumption? What are the things that are holding back their consumption? What could be the unlocks from Datadog's side?

Kasthuri Rangan: Hello. Thank you very much. Ali, you mentioned, I think, on the call, there's been a repeated instance of enterprise growing faster than SMB. I'm curious, why is that the case, and is this

Mark Murphy: This is something of a change in the trend. Have you seen SMBs actually showing better usage trends in the past? And what could cause the SMBs to start to pick up consumption? What are the things that are holding back their consumption? And what could be the unlocks from Datadog's side? Because the enterprises are doing well, so obviously the product portfolio is being well received. So what's topping SMBs?

Speaker Change: This is something of a change in the trend. Have you seen SMBs actually showing better usage trends in the past?

Speaker Change: And what could cause the SMBs to start to pick up consumption? What are the things that are holding back?

Olivier Pomel: Because the enterprises are doing well, so obviously, the product portfolio is being well received. So what's topping SMBs?

Speaker Change: that their consumption and what could be the unlocks from Datadog's side because the enterprise is doing well. So obviously the product portfolio is being well received. So what's topping the S&B? Thank you so much once again.

David Obstler: Thank you so much.

Speaker Change: Yeah, I don't know that there's, there's...

Olivier Pomel: Yeah, I don't know that there's That much of a trend just yet to look at or, you know, there's too much to say at this point. You know, this is just the way the numbers came out, you know, over the past quarter or so. I would say, look, there are many reasons why SMBs could be more careful, you know, in terms of the macro environment, you know, the fact that they're less, maybe less, there's less immediate runway with consolidation, things like that, you know, compared to the larger enterprises, and some of them maybe are further along also in that large journey.

Speaker Change: that much of a trend just yet to look at or you know there's too much to say at this point.

Speaker Change: This is just the way the numbers came out over the past quarter or so. I would say, look, there's many reasons why the SMBs could be more careful in terms of the macro environment, you know, the fact that they are less, maybe less...

Speaker Change: There's less runaway, immediate runaway with consolidation, like things like that, you know, compared to the larger enterprises. And some of them maybe are further along also in that large journey.

Olivier Pomel: So the growth there is more tied to their overall growth, as opposed to the speed of transition into next gen and cloud environments. So these are all potential factors. But look, there's no, at this point, I wouldn't call it a major, super important difference. I think we'll, we'll see what this looks like.

Speaker Change: so the close there is more tight to their overall growth as opposed to the spel of transition into negen in comemon environments so this develo potential factors but look there's no at this point i wouldn't call it i

Speaker Change: a major superimportant difference i think ' when you looks like in the two quarters

David Obstler: Got it. And one for David, if I could, how strong is the delta between enterprise... Consumption growth versus SMB. Are we talking orders of magnitude or meaningful percentage or a big percentage? No, no, we're just, we're just, we're just talking about a few points in different trends. That's it.

Speaker Change: And one for David, if I could, how strong is the delta between enterprise...

Unknown Executive: Thank you so much.

Speaker Change: consumption real versus s sm b the already talking

Unknown Executive: Consumption Growth Versus SMB. Are we talking orders of magnitude or meaningful percentages or a big percentage? No, no, we're just we're just we're just we're just talking about a few points in different trends. That's it.

David Gallo-Reeves: orders of magnitude or meaningful percentage or a big percentage no no just just is talking about a few poin in different trends that's it

Operator: Now we're just we're just basically commenting on the line. And you know, as we said, you know, they have been around each other. And we're really commenting more on, as Ali mentioned, enterprise, things like they may have been more careful, you know, in the increase of spending; consolidation continues to be a factor in going to a common platform. But, as Ali mentioned, these are sort of comments on the way things are evolving, but we still have pretty similar metrics in all the different segments.

Unknown Executive: Now, we're just we're just basically commenting on the line. And you know, as we said, you know, they have been around each other. And we're really commenting more on, as Ali mentioned, enterprise, things like they may have been more careful, you know, in the increase of spending; consolidation continues to be a factor in going to a common platform. But, as Ali mentioned, these are sort of comments on the way things are evolving, but we still have pretty similar metrics in all the different segments.

Speaker Change: Now, we're just basically commenting on the line, you know, as we said, you know, they have been around each other's,

Speaker Change: And we're really commenting more on, as Ali mentioned, enterprise, things like they may have been more careful, you know, in the increase of spending, consolidation continues to be a factor in going to a common platform.

Speaker Change: But as Ali mentioned, these are sort of comments on the way things are evolving, but we still have pretty similar metrics in all the different segments.

Operator: Thank you. We know that it's something that we know because we are a little bit counterintuitive in that when you look at the overall market, the enterprise is where we have the most mature competition, the most scale competition, and we're doing better in that party is growing faster than I would call it the less competitive side of the market. But again, not too much to read into it just yet; we're just informing you of the trends. Thank you so much.

Unknown Executive: Thank you. We know that it's something that we noted because we are a little bit counterintuitive in that when you look at the overall market, the enterprise is where we have the most mature competition, the most scale competition, and we're doing better in that party is growing faster than I would call it the less competitive side of the market. Thank you so much.

Speaker Change: We know that it's something that we noted because we, you know, it's a little bit counterintuitive in that when you look at the overall market, the enterprise is where we have the most mature competition, the most scaled competition, and we're doing better, that party is scaling faster than I would call it the less competitive side of the market.

Speaker Change: But again, not too much to read into it just yet. We're just informing you of the trends.

Operator: Thank you and one moment as we move on to our next question.

Kirk Materne: Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Kirk Materne with Evercore ISI. Your line is open. Please go ahead.

Speaker Change: Wonderful. Thank you so much.

Speaker Change: Thank you, and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Kirk Maturin with Evercore ISI. Your line is open. Please go ahead.

Unknown Attendee: Yeah, thanks very much. And my congratulations on the quarter.

Kirk Materne: Yeah, thanks very much. And my congratulations on the quarter.

Unknown Attendee: Lydia, I was wondering if you could talk a little bit more about the LLM observability product Mark referenced. When people are thinking about bringing LLMs into their organization, do they want the observability product in place already? Or are they testing out LLMs and then bringing you on after the fact? I'm just wondering. You know, sort of a chicken and egg question. I'm wondering if you're someone they want to talk to before they start moving things into production, or it's after they get something going; they bring you in after the fact.

Olivier Pomel: Lydia, I was wondering if you could talk a little bit more about the LLM observability product Mark referenced. When people are thinking about bringing LLMs into their organization, do they want the observability product in place already? Or are they testing out LLMs and then bringing you on after the fact? I'm just wondering. You know, sort of a chicken and egg question. I'm wondering if you're someone they want to talk to before they start moving things into production, or it's after they get something going; they bring you in after the fact.

Kirk Maturin: Yeah, thanks very much, and I'll add my congrats on the quarter. Olivia, I was wondering if you could just talk a little bit more about the LLM observability product Mark referenced.

Speaker Change: when people are thinking about bring on lms into the organization

Speaker Change: Did they want the observability product in place already, or are they testing out LLMs and then bringing you on after the fact? I'm just wondering, you know, it's sort of a chicken and egg question. I'm wondering if you're someone they want to talk to before they start moving things into production, or it's after they get something going, they bring you in after the fact?

Olivier Pomel: Yeah, I think so. The first thing I'd say is that we expect this market to change a lot over time because it is far from being mature. And so a lot of things that might happen today in a certain way might happen, you know, in two years in a very, very different form. That being said, the way it works typically is that customers build applications using developer tools. And there's a whole industry that has emerged around developer tools for and playgrounds and things like that for LLMs.

Speaker Change: Yeah, I think so.

Speaker Change: So, the first thing I'd say is we expect this market to change a lot over time because it is far from being mature, and so a lot of things that might happen today in a certain way might happen, you know, in two years in a very, very different form.

Speaker Change: That being said, the way it works typically is customers build applications using developer tools. And there's a whole industry that has emerged around developer tools for and playgrounds and things like that for LLM. And so they use

Olivier Pomel: And so they use not one but 100 different things to do that, which is fairly similar to what you might find on the IDE side or code editor side, you know, for the more traditional development, lots of different, very fragmented environments on that side. When they start connecting the LLM to the rest of the application, then they start to need visibility that includes the other components, you know, because the LLM doesn't work in a vacuum; it's plugged into a front end, it works with authentication and security, it connects to other systems and databases and other services to get the data.

Speaker Change: not one but one different things to do that which is no fairly similar to what you might find on the

Speaker Change: id side or codedated icside you know for the motraditional development ts of different fragment environment on that side

Speaker Change: when they start connecting the eleland to the rest of the application that start to need

Speaker Change: like visibt that includes the other comppointon know le king vacuum kes plloged into a front it s authentication and security it workth with a connects to obviouslysystem that a bas isiness our services to get the dataand and at that point then need need to be integrated with the rest of the observabity

Olivier Pomel: And at that point, they needed to be integrated with the rest of the observability. For the customers that use the LLM observability product, they use us for the rest, all the rest of their stack, and it would make absolutely no sense for them to operate their LLMs in isolation, completely separately, and not have visibility across the whole application. So it's a, at that point, it's a no brainer that they need everything to be integrated into production.

Speaker Change: for the customer that use an oobservabity product that use us for the rest all the rest of their stack

Speaker Change: It would make absolutely no sense for them to operate their LLMs in isolation, completely separately, and not have the visibility across the whole application. So, at that point, it's a no-brainer that they need everything to be integrated in production.

David Obstler: That's helpful. And then David, we can kind of infer your sort of implied guidance for 4Q.

Unknown Attendee: That's helpful. And then David, we can kind of infer your sort of implied guidance for 4Q.

Speaker Change: That's helpful. And then, David, we can kind of infer your sort of implied guidance for 4Q. I was just wondering, you know, some of the elections in Europe have come up in a couple other calls in terms of anything that have been distractions. I was just wondering if you had any thoughts on how you think the U.S. election might impact

Kirk Materne: I was just wondering, you know, some of the elections in Europe have come up in a couple other calls in terms of being things that have been distractions. I was just wondering if you had any thoughts on how you think the US election might impact usage, if at all, or if you had any thoughts on that. I realize you guys were a lot smaller last time we had a presidential election.

Speaker Change: usage if at all or if you have any thoughts on that i really you guys were a lot smaller less some better presidential election

David Obstler: Yeah, I mean, we're, no, we are not forecasters like that. As you know, usage growth has many factors. The effect of the election on the operation of modern cloud applications is not something that has been, you know, a very significant change in usage patterns, for instance, in the European elections, and we wouldn't anticipate it here as well. No, no, in fact, the only impact on us of the election. The U.S. election is coming up, so we're trying not to schedule our earnings calls on the same date.

Speaker Change: yeah i mean where're know we are not forecasters like that as you know uses growth has many factors the effect of the election on the operation of modern cloud applications is not something that has been you know a very significant

Speaker Change: change in usage patterns and for instance in the european elections and we wouldn't anticipate any years well twenty five the only the only impact on ess of the

Kirk Materne: Yeah, we'd appreciate it. Thank you. Thanks, guys. Thank you.

Speaker Change: us seedction trying scheduled on earning calls on the sunday appreciate thanks guys thank you thank you and one moment as we move on to our next question

Operator: Thank you, and one moment as we move on to our next question. And our next question comes from the line of Fatima Boolani with Citi. Your line is open. Please go ahead.

Unknown Attendee: I was just wondering, you know, some of the elections in Europe have come up in a couple other calls in terms of any things that have been distractions. I was just wondering if you had any thoughts on how you think the US election might impact usage, if at all, or if you had any thoughts on that. I realize you guys were a lot smaller last time we had a presidential election.

Operator: And our next question comes from the line of Fatima Boolani with Citi. Your line is open. Please go ahead.

Speaker Change: And our next question comes from the line of Fatima Boolani with Citi. Your line is open, please go ahead.

Fatima Boolani: Good morning. Thank you for taking my questions. Ali, I wanted to start with you.

Fatima Boolani: Good morning. Thank you for taking my questions. Ali, I wanted to start with you. You and David both talked about improving usage trends, but I wanted to take a step back and ask you, have you seen the quality of the usage improve by virtue of or by extension of your introduction of the cloud cost management SKUs? You talked about the Kubernetes with the auto scaling and then the original cloud cost management SKUs. So I'm wondering if it's maybe a serious correlation that now that customers have that much more visibility into.

Olivier Pomel: You and David both talked about improving usage trends, but I wanted to take a step back and ask you, have you seen the quality of the usage improve by virtue of or by extension of your introduction of the cloud cost management SKUs? You talked about Kubernetes with auto scaling and then the original cloud cost management SKU. So I'm wondering if it's maybe a spurious correlation that now that customers have that much more visibility into the mechanics of what they're spending with you, they're actually more inclined to drive usage because it's higher fidelity. Just any commentary on that would be helpful. And then I have a follow-up question for David, please.

Speaker Change: the mechanics of what they're spending with you, they're actually more inclined to drive usage because it's higher fidelity, just any commentary on that would be helpful. And then I have a follow up for David, please.

Fatima Boolani: Yeah, I mean, look, in general, customers have invested a lot in understanding their spend, whether that's on us or on their cloud providers. And as a result, you can say that there's less, you know, call it the overhang of things customers are spending and you don't understand, which is always, you know, bad in the long term. So I think customers understand much better the value of what they're getting in the cloud in general this year than they did two years ago before this whole, you know, optimization movement started.

Ali: Yeah, I mean, look, in general, customers have invested a lot in understanding their spend, whether that's on us on their cloud providers. And as a result, you know, you can say that there's less

David Gallo-Reeves: ah youknow

David Gallo-Reeves: Overhang of things customers are spending and they don't understand, you know, which is always, you know, bad in the long term, you know, so I think customers understand much better the value of what they're getting in the cloud in general this year than they did two years ago before this whole, you know, optimization movement started.

Fatima Boolani: And they want more, you know, in terms of visibility into what their spending would actually create value for them and, you know, where they can optimize in the future. So that's definitely a virtual cycle that we are embarking on with our customers in terms of building the right products for that.

Ali: and they want more or in terms of three ibility into what understand would actually create value for them

Speaker Change: and where they can optimize in the future so that's definitely a visual cycle that we be embaron we look cusmersin terms of building the right products for that

David Obstler: I appreciate that. And David, as you all kind of roll out more what I would call resource-intensive or compute-intensive SKUs like logs, flex logs, and log workspaces, I'm wondering if you can shed a little bit of light on how some of the gross margin characteristics differ by product pillar. I'm just looking at kind of some of the sequential compression gross margins. So just kind of wanted to get a better understanding of what are some of the more resource-intensive products that you're anticipating scaling that could keep the lid on gross margins in the next couple of quarters.

Ali: appreciate that and david you all kind of roll out more what i would call resource intensive or comput intensive s like x log logs work facaces i'm wondering if you can sh a little bit al ed on how some of the group margin characteristics defer by product telliller i'm just looking at kind of the sequential compression ross margins so just kind of want to get a better understanding of what are some of the more you know resource intensive cts and your anticipating scale and that could keep a l on marginins and next couple of quarters thank you we have the numbers first and then on engineer of it but essentially what we said

David Obstler: Yeah, we have, I'll just go through the numbers first, and then Ali will talk about the engineering side of it. But essentially, what we said consistently is that gross margins have operated in a range, they've operated towards the top of the range, but there will be variability quarter to quarter as we launch functionality, often having to do with rolling out functionality and then optimizing it. And so the movements, the slight movements that we've seen quarter to quarter have been the result of that. And then I turn it over to Ali for more on that sort of engineering.

Speaker Change: consistently is that

Speaker Change: Gross margins have operated in a range, have operated towards the top of the range, but there will be variability quarter to quarter as we launch functionality, often having to do with.

Speaker Change: the growing up functionality and then optimizing it and so the movements a slight movements that we ve seen quarter to quarter have been the result of that in then turn rally from more more on that sort engineering yeah there is reallyly nothing to read to the small movements in the those moging some the product ix

David Obstler: Yeah, there's definitely nothing to read into the small movements in the gross margins from a product mix perspective. A lot of what happens is, you know, we build new features, maybe some of those new features will have, you know, more computing impact and more storage impact or something else. Maybe also they won't be fantastically optimized on day one, you know, from a code efficiency perspective. Or maybe sometimes we'll focus more on building more things as opposed to optimizing them. Because these are the same people, and same resources on our end that work on both.

Speaker Change: Perspective

Speaker Change: A lot of what happens is, you know, we build new features, maybe some of those new features.

Speaker Change: we have more computing back and more suraging pars something else

Speaker Change: butbe also they won't be fntheastically optimizede on their one you from a

Olivier Pomel: And so you should expect to see some ebbs and flows in that number, as we keep shooting new features, and then we keep optimizing. In general, we feel good about the gross margins; we're not constrained, you know, in terms of what we can build by the margin profile we have. And also, should we need them, we have many levers to improve these margins as well. So we, you know, wouldn't read too much into the small changes. I would expect some of those small changes in the future. And on our end, we feel good about that. Thank you so much. Thank you, and one moment for our next question. And our next question is going to come from the line.

Speaker Change: Co-Efficiency Perspective, or maybe sometime we'll focus more on building more things as opposed to optimizing them.

Speaker Change: Because it are the same people, same resources, on our end that welcome both. And so what you should expect to see is some ebbs and flows on that number as we keep shooting new features and we keep optimizing.

Unknown Attendee: Thank you so much.

Operator: Thank you, and one moment for our next question.

Operator: Thank you, and one moment for our next question. And our next question is going to come from the line of Matt Heberg with RBC. Your line is open. Please go ahead. Great, thanks, guys. Ollie, in your prepared remarks, you talked a lot about security and noted data security as a new

Olivier Pomel: Yeah, so it's interesting because, in many ways, we've been doing data security for a while now, you know, so we, on top of our logging product, we started building sensitive data scanning, which was, which is very successful with customers, and we extended that to cover data that flows inside APM tracing that flows between the front end and the back end, you know, in real world monitoring. And we basically had our customers, you know, ask for more. Basically, they wanted to not just see data in transit but also see where data was exposed at rest.

Speaker Change: And we basically hardware customers ask for more basically they wanted to not just data in transit, but also see where that I was exposed that back and so that's where we extend it to the rest of that security. So you can see customers coming to that from two different sides, Illinois, and one is customers adopting all security suite and.

Olivier Pomel: And so that's what we extended to the rest of data security. So you can see customers coming to that from two different sides on our end. One is customers adopting our security suite, and data security is little by little becoming part of, you know, CNAP and, you know, certain infrastructure security in general. But we also see customers coming to it from the log and APM side, basically, where they start from the applications, and they want to track where the data is. So it serves both sides, basically, and it plays to the... The strategy we have of integrating both observability and security into one platform. I got it and found it super helpful.

Speaker Change: There are securities little by little becoming part of <unk>.

Speaker Change: Seen.

Speaker Change: <unk> not been fantastic trial.

Speaker Change: Security in general.

Speaker Change: But we also see customers coming to it from the the logging APM side, basically where they start from the applications.

Speaker Change: And they want to track weighted that AE.

Speaker Change: So it serves both besides basically and it plays to the.

Unknown Executive: The strategy we have of integrating both observability and security into one platform has been super helpful. And then, you know, as we get into the third Q and kind of the US Fed spending quarter, what are your thoughts on how federal spending just in general might play out in Q3 relative to kind of your? Well, we're building up the capacity for it, you know, so we have build-up to do on several sides.

Speaker Change:

Speaker Change: The strategy, we have of integrating both the ability and security into one platform.

Olivier Pomel: And then, you know, as we get into 3Q and kind of the US Fed spending quarter, what are your thoughts on how federal spending just in general might play out in Q3 relative to kind of your? Well, we're building up the capacity for it, you know, so we have build-up to do on several sides. I mean, we have the go-to market capacity to build. We are also still pursuing more government certifications and government-specific deployments to open up some more of the market there. But that's definitely an area of investment for us.

Speaker Change: Got it Super helpful. And then as we get into <unk> and kind of the U S fed spending quarter what are your thoughts on.

Speaker Change: How federal spending just in general might play out in Q3 relative to kind of your assumptions.

Unknown Executive: I mean, we have the go-to-market capacity to build. We also are still pursuing more government certifications and government-specific deployments to open up some more of the market there. But that's definitely an area of investment for us.

Speaker Change: While we're building up the capacity for it so we.

Speaker Change: We have built up to do on several times I mean, we have the go to market capacity to build we also are still pursuing more.

Speaker Change: Government certifications and government specific deployment to open up some more of a market there.

Speaker Change: It's definitely an area of investment for us.

Speaker Change: Got it thanks, a lot guys well done.

Operator: Thank you, and one moment for our next question.

Operator: Thank you, and one moment for our next question. And our next question comes from the line of Jacob Roberge with William Blair. Your line is open. Please go ahead.

Speaker Change: Thank you and one moment for our next question.

Speaker Change: And our next question comes from the line of Jacob <unk> with William Blair. Your line is open. Please go ahead.

Speaker Change: Thanks for taking the questions I just wanted to follow up on the enterprise strength that you saw in the quarter are you starting to see enterprises reengage with their cloud migration efforts, which is helping drive that growth or is it is the strength more related to just general platform usage and expansion.

Jacob Roberge: They never stopped their enterprise migration. I think maybe, you know, some of the usage was not growing as quickly. For some time, maybe some short-term optimization efforts were ongoing. But you know, the direction was always the same, like the end. Also, they never, they never stopped growing with us in the cloud, you know, so we, we definitely saw that throughout the past couple of years. Some of the strengths we see today, you know, have to do with the fact that, in part, the emergence of AI has reaffirmed for them the need to go to the cloud, sooner rather than later, so they can build the right kind of applications; they have the right kind of data available to build these applications.

Speaker Change: They never stop their enterprise migration.

Speaker Change: I think maybe some of the use that was not growing as quickly.

Speaker Change: For some time, so if you sum of some short term optimization efforts, while ongoing but you know the.

Speaker Change: The direction was always the same date.

Unknown Executive: Also, they never, they never stopped growing with us in the cloud, you know, so we, we definitely saw that throughout the past couple of years. Some of the strengths we see today have to do with the fact that, in part, to serve their customers,

Speaker Change: Also they never say never stopped growing with us in the cloud so yeah. We.

Speaker Change: We definitely saw that throughout the year.

Speaker Change: The past couple of years.

Speaker Change: Some of the strength, we see today has to do with the fact that it to serve there.

Speaker Change: In fact.

Jacob Roberge: But also, you know, we have more to offer, like we have; we can do more, consider it more of what they were using before, and that gives us more avenues to grow these customers in the short term.

Speaker Change: The images of AI has reaffirmed for them to need.

Speaker Change: To go to the cloud sooner rather than later so they can.

Speaker Change: Bill the raccoons applications, they have the right kind of data available to business applications.

Speaker Change: But also we have more to offer like we have we can do more and consolidate more of what they were using.

Speaker Change: Before and that gives us more avenues to grow these customers in the short term yes.

Unknown Executive: I think we said, you know, over the quarters that one enterprise is very early in their journey, and there's a lot of white space for that. We said a couple of quarters ago that enterprises had started to resume more normal activity of deploying modern cloud applications. And as Ali mentioned, there are opportunities also for consolidation on the platform that we've talked about many times. I'll point you to the numbers we shared, I think, two quarters ago in terms of our enterprise penetration and the average size of our contracts.

Olivier Pomel: I think we said, you know, over the quarters that one enterprise is very early in their journey, and there's a lot of white space for that. We said a couple of quarters ago that enterprises had started to resume more normal activity of deploying modern cloud applications. And as Ali mentioned, there are opportunities also for consolidation on the platform that we've talked about many times. I'll point you to the numbers we shared, I think, two quarters ago in terms of our enterprise penetration and the average size of our.

Speaker Change: I think we said you know.

Speaker Change: Over the quarters that one enterprise is very early in their journey and there is a lot of white space to that we'd set a couple of quarter go though that enterprises have started to resume more normal activity of deploying of modern cloud applications and as Ali mentioned Theres opportunities also of consolidation and the platform subpar.

Unknown Executive: I'll point you to the numbers we shared I think two quarters ago in terms of our enterprise penetration and the average size of our contracts with enterprises, which are still fairly small, like there's a lot of runway there, and the growth of those accounts is not predicated on the growth of the enterprises themselves. They're still early in their transformation.

Speaker Change: Form that we've talked about many times I'll point you to the numbers, we shared I think two quarters ago in terms of our enterprise penetration in the average size of our.

Olivier Pomel: Contracts with enterprises that are still fairly small, like there's a lot of runway there, and the growth of those accounts is not predicated on the growth of the enterprises themselves. They're still early in their transformation. Okay, very helpful.

Ali: Contracts with enterprises, which are still fairly small, but theres a lot of runway there and the growth of those accounts is not predicated on the growth of the enterprises themselves, they're still early there in there.

Speaker Change: Transformation.

Speaker Change: Okay very helpful. And then you've talked a decent amount about the demand you're seeing from native customers, but how are you thinking about driving growth with your own AI solutions. That's a L. M observer ability and when do you think those start to layer more meaningfully into the model. Thanks.

David Obstler: Yeah, I mean, right now, the first array of direct application of Bits.ai is incident management and incident resolution. So that is tied more to the SKUs we're selling there, you know, in terms of incident management. And Bits.ai is not the only ingredient of that product. So part of it is what we have already because of the mechanics of incident management. Part of it is also the new Encore product we announced.

Unknown Executive: Yeah, I mean, right now, the first array of direct application of Bits.ai is incident management and incident resolution. So that is tied more to the SKUs we're selling there, you know, in terms of incident management. And Bits.ai is not the only ingredient of that product. So part of it is what we have already in terms of the mechanics of incident management. Part of it is also the new Encore product we announced.

Speaker Change: Yeah, I mean right now the the first.

Speaker Change: Array of direct application.

Speaker Change: Of beats AI is an incident management and incident resolution. So that is tied more to the skus. We're selling there in terms of a incident management and but <unk> is not the only.

Speaker Change: Ingredient.

Speaker Change: That of that products. So part of it is the what we had already cause liver to make any sort of incident management.

Speaker Change: A part of it is also the new encore product we announced.

David Obstler: And part of it's going to be the smarts in this, and we're integrating all that to have a fantastic end-to-end experience for our customers that almost makes them want to have incidents. No, actually, they still don't want to have incidents. But yeah, the point here is it should really help them.

Unknown Executive: And part of it's going to be the smarts and bits, and we're integrating all that to have a fantastic end-to-end experience for our customers that almost makes them want to have incidents. No, actually, they still don't want to have incidents. But yeah, the point here is it should really help them.

Speaker Change: And part of it is going to be this months can be and we're integrating all of that to have a fantastic end to end experience for our customers that.

Speaker Change: Almost makes them want to having seen that actually does seem a long time to see that but yeah. They.

Speaker Change: The point here is it should really help them.

Olivier Pomel: Thank you, and we'll move on to our next question. And our next question comes from the line of Koji Ikeda with B of A. Your line is open. Please go ahead.

Speaker Change: Thank you and we'll move onto our next question.

Speaker Change: And our next question comes from the line of Koji Ikeda with Bofa. Your line is open. Please go ahead.

Koji Ikeda: Thanks guys, thanks for taking the questions. Just one from me: I wanted to ask about the usage growth trends. You know, in the prepared remarks, you said a lot about friends leaving this quarter versus Q2 of last quarter and the first half of this year being better than the first half of last year. But the question here is, how did Q2 this year compare to Q1 this year? Thank you.

Koji Ikeda: Hey, great. Thanks, guys. Thanks for taking the questions just one for me.

Koji Ikeda: I wanted to ask on the usage growth trends in the prepared remarks, you said a lot about trends exiting this quarter versus Q2 of last quarter and the first half of this year being better than the first half of last year, but the question here is how did Q2 this year compared to Q1. This year. Thank you.

Unknown Executive: Yeah, we have so we have normal seasonality related to the number of days in the quarter and customer behavior as they launch new applications. So we saw we really look at it because of the seasonality over the quarter. So the usage growth exhibited the same patterns of improvement

David Obstler: Yeah, we have so we have normal seasonality related to the number of days in the quarter and customer behavior as they launch new applications. So we saw we really look at it because of the seasonality over the quarter. So the usage growth exhibited the same patterns of improvement over last year's similar period, looking at the days as it did in the first.

Speaker Change: Yes, we had so we have normal seasonality related to the number of days in the quarter and customer behavior and in.

Speaker Change: As they launch new applications.

Speaker Change: So we saw we really look at it because of this seasonality over quarter. So the usage growth.

Speaker Change: But at the same patterns of improvement.

Speaker Change: Over last year's similar period I'm.

Speaker Change: Looking at the days as it did in the first quarter.

Koji Ikeda: Got it, David. Actually, one quick follow-up that's on me here, then, you know, the follow-up would be, I know in the queue, you give a net new revenue growth split, I was wondering if we could get that mix now, or maybe at least some color in that mix. Last quarter was 70% coming from net. Higher or lower? No, no, no, no, no, no, no, It's going to be 75-25, 25 from new 75, which would be what we said all along is that, you know, as net retention recovers, and usage growth is higher than the previous comparable period. As you go back through our history, you will see that the amount of existing customers relative to new logos has generally increased, Great, thank you very much.

Speaker Change: Got it David I could one quick follow up if I may here then.

Speaker Change: The follow up would be I know in the Q you give a net new revenue growth split between existing and new I was wondering if we could get that mix now or maybe at least some color in that mix.

Speaker Change: Last quarter was 70% coming from net new from existing was it higher or lower this quarter from that 70%. It's going to be 70, 525, 25 from <unk> 75, which would be what we said all along is that as net retention recovers and usage growth is higher than the previous.

Unknown Executive: It's going to be 75-25, 25 from the new 75, which would be what we said all along that, you know, as net retention recovers, and usage growth is higher than the previous comparable period. As you go back through our history, you will see that the amount of existing customers relative to new logos has generally increased.

Speaker Change: Apparel period.

Speaker Change: As you go back through our history Youll see that the amount from existing customers relative to new logos has generally increased.

Speaker Change: Great. Thank you very much.

David Obstler: Thank you, and one moment for our next question. And our next question is going to come from the line of Yi-Fu Ling with Cantor Fitzgerald. Your line is open. Please go ahead.

Speaker Change: Thank you and one moment for our next question.

Leanne: And our next question is going to come from the line of lean.

Lean: Lean with Cantor Fitzgerald. Your line is open. Please go ahead.

Yi-Fu Ling: Thank you for taking my question and congrats on the quarter. In terms of like the new products that were launched at Dash, you know, a lot of stuff going on, LLM, AIOps, etc., like Olivia and David, like which one are you most bullish on near term and then long term?

Lean: Thank you for taking my question and congrats on the quarter.

Speaker Change: I also like the new products that we'll launch at dash.

Speaker Change: A lot of stuff going on.

Speaker Change: AI ops et cetera, like Olivier and David like which one are you most bullish near term and then longer term.

Unknown Executive: uh well you know it's it's always hard to

Olivier Pomel: Uh, well, it's always hard to have a favorite child, you know, in all of the all of the amazing things that we're shipping. Look, I think in the short term, the ones that are going to have the most impact are the ones that relate to the products that already have scale. You know, so anything we do that facilitates the deployment of EPA at scale has a large impact.

Speaker Change: Well you know, it's always hard to.

Speaker Change: Two to have a favorite child in the in all of the all of the.

Speaker Change: Having things that we're shipping.

Speaker Change: Look I think the.

Speaker Change: Short term is that why there are going to have the most impact otherwise that that relates to the products that are out there already have scale. So anything we do.

Speaker Change: That.

Speaker Change: I see it as a deployment of EPA My scale has a large impact everything we do.

Speaker Change: That mix.

Speaker Change: That changes the economics of log opens up new market within the exiting our legacy loan.

Speaker Change: Our user base.

Speaker Change: Has a huge impact.

Speaker Change: What we're doing with open telemetry has a large impact because it's a big trend in the industry and.

Speaker Change: We're taking we're making bold move there so.

Olivier Pomel: Everything we do that makes, that changes the economics of logs, opens up new markets within the existing legacy logging user base has a huge impact. What we're doing with open telemetry has a big impact, you know, because it's a big trend in the industry and we're making bold moves there. You know, so longer term, look, we think there's a very large opportunity for us to do a lot of automation on behalf of our customers.

Speaker Change: Longer term.

Speaker Change: Look we think the there's a very logical for us to do a lot of automation on behalf of our customers.

Olivier Pomel: And you see that, whether that's on the observability side or on the security side, with all of the various ways in which we are taking action on the product, we are fixing things for customers, driving them to take the next step. We are organizing the tracking of the workflows they're running, you know, from end to end. So this is a longer bill, but I think in the long run, it makes a very, very large difference in terms of the value we can provide to our customers.

Speaker Change: And you.

Speaker Change: You see that whether that's on a on the authority side or on the security side with all the device wave in which we're taking action into the product. We are fixing things for customers, we're driving them to take a next step we are organized to India. The tracking of the workflows that they're running from end to end. So this is a longer view.

Speaker Change: But I think in the long way it makes it a very large difference in terms of value, we can pull back to our customers.

Yi-Fu Ling: Thanks for that, Olivier. And just a quick follow-up for David: NRR is, like, at the mid-110 level. What needs to happen in order for Datadog to go back to the above-120 level? I mean, it sounds like the trends are very, very healthy, month-to-month, quarter-over-quarter. So just some commentary around that, and that's it from me. Thank you.

Speaker Change: Excellent and just a quick follow up for David.

Speaker Change: Submit 110 level what needs to happen in order for David ought to go back to the above by 'twenty level I mean, it sounds like the trends are very very healthy.

David Gallo-Reeves: Two months quarter over quarter.

Speaker Change: So just some commentary around there and that's it for me. Thank you.

Unknown Executive: Yeah, I mean, we don't give that, you know, that forecast. I mean, the components are the use of existing.

David Obstler: Yeah, I mean, we don't give that, you know, that forecast. I mean, the components are the use of existing customers and the cross sell. And so, you know, as you mentioned, both of those have, you know, been stronger in the first half of this year than they were, you know, last year. And, you know, it, you know, we'll, we'll see what happens. But we don't give, you know, guidance or forecast on that retention. Thanks.

David Gallo-Reeves: Yes.

David Gallo-Reeves: I'll give that.

Speaker Change: Cast I mean, the components or the use of existing products and the cross sell.

Speaker Change: And so as you mentioned both of those have.

Speaker Change: <unk> been stronger in the first half of this year than they were last year.

Speaker Change: And you know it will.

Speaker Change: We will see what happens, but we don't give guidance or forecast on that retention.

Speaker Change: Thank you very much.

Operator: Thank you and one moment for our next question. And our next question comes from the line of Patrick Colville with.

Operator: Thank you, and one moment for our next question. And our next question comes from the line of Patrick Colville with Scotiabank. Your line is open. Please go ahead.

Speaker Change: Thank you and one moment for our next question.

Speaker Change: And our next question comes from the line of Patrick Colville with Scott Scott.

Speaker Change: Scotiabank. Your line is open. Please go ahead.

Patrick Colville: All right, terrific. Thank you so much for having me on.

Patrick Colville: Alright terrific. Thank you so much have me on.

Speaker Change:

Speaker Change: And David I mean, one of the things you talked about the past is kind of competitive dynamics and observe ability.

Olivier Pomel: Olivier and David, one of the things you talked about in the past is kind of competitive dynamics in observability. I mean, there have been a lot of corporate transactions in the space over the past year. So I guess how are you seeing competition versus your open source peers, kind of platform peers, peers that are now private versus a couple quarters ago?

Speaker Change: When there's been a lot of corporate transactions in the space over the past year.

Speaker Change: So I guess, how you seen competition versus your.

Speaker Change: Open source peers.

Unknown Executive: platform peers, peers that are now in private versus a couple of quarters ago.

Speaker Change: That pump is petering out.

Speaker Change: Private.

Speaker Change: This is a couple of quarters ago.

Olivier Pomel: So, in general, the commission is very, very much unchanged. You know, there's nothing super specific to say about that.

Unknown Executive: So, in general, the commission is very, very much unchanged. You know, there's nothing super specific to say about that. I think we have some of the big players that are disappearing to a certain extent as a result of the transactions you've mentioned, though we expect that to play out more in the mid term than in the very short term in the marketplace.

Speaker Change: So in general the the commission is very very much unchanged there's nothing.

Speaker Change: Specific to say about that I think.

Speaker Change: We have some of the scale players that are there are disappearing to a certain extent.

Speaker Change: As a result of the transactions you've mentioned.

Speaker Change: Though we.

Speaker Change: Expect that to play out more into mid term that in the very short term.

Olivier Pomel: I think we have some of the big players that are disappearing to a certain extent as a result of the transactions you've mentioned, though we expect that to play out more in the midterm than in the very short term in the marketplace. We do have scaled competition still in terms of public companies that are competing with us on observability, and there's no change in the posture there, and we like the way we're performing.

Speaker Change: Place.

Speaker Change: We do have scaled competition still in terms of public companies that are competing with US you know an observer ability and.

Speaker Change: And there's no change in the Bush are there and we like to work with performing.

Olivier Pomel: A number of the large deals we've mentioned were displacements or wins against these folks. We feel very good about that. And then, on the low end, there's been pretty much a rotating cast of subscale companies that are going after that market, and that's also unchanged. It's been the same throughout the life of the company, pretty much. So there's nothing to report there.

Speaker Change: The number of the large deals, we've mentioned where displacements of wins against.

Speaker Change: These folks we feel very good about that.

Speaker Change: And then on the low end desert.

Speaker Change: Pretty much all rotating gases.

Speaker Change: Subscale companies.

Speaker Change: That all goes.

Speaker Change: After that market.

Speaker Change: Were also unchanged it's been the same from the throughout the life of the company pretty much. So nothing nothing to report there I think largely when we build products.

Olivier Pomel: I think largely when we build products... we build them with customers, we don't build them with competition in mind, with the few exceptions being when we see large future opportunities in the market because of big changes and big transactions, like you mentioned earlier.

Speaker Change: We built it with customers, where you don't feel it as competition in mind.

Speaker Change: The two exceptions being when we see large future opportunities in the market because of the year of <unk>.

Speaker Change: Big changes in big transactions that you mentioned earlier.

David Obstler: Okay, very helpful. And I guess, David, I mean, looking at the 3Q review guidance, it looks like the kind of buoyant trends you saw this quarter will continue. And can you just put a fine pin, if possible, on the trends we saw through July and thus far in August? Yeah, no, too.

Speaker Change: Okay.

Speaker Change: Helpful.

David Gallo-Reeves: Yes, David.

Speaker Change: Looking at the three key revenue guidance.

David Gallo-Reeves: It looks like the club Orient trends you saw this quarter will continue can you just put a fine pen possible on the trends we saw.

Speaker Change: Through July.

Speaker Change: In August.

Unknown Executive: Yeah, no, but I think what we've seen since the quarters we mentioned is a continuation of better usage trends relative to the comparable period last year. So you know, more of the same. And in our guidance philosophy, it hasn't changed; we take those trends as much information as we have and apply discount and conservatism given that, you know, we don't control the consumption of our clients; we, you know, observe it. So it's a very similar methodology to what we've used in previous quarters and a continuation of the trends we've seen in the first half of the year.

David Obstler: Yeah, no, but I think what we've seen since the quarters we mentioned is a continuation of better usage trends relative to the comparable period last year. So you know, more of the same. And in our guidance philosophy, it hasn't changed; we take those trends as much information as we have and apply discount and conservatism given that, you know, we don't control the consumption of our clients; we, you know, observe it. So it's a very similar methodology to what we've used in previous quarters and a continuation of the trends we've seen in the first half of the year.

Speaker Change: Yes, I think so what we've seen since the quarter as we mentioned is a continuation of.

Speaker Change: Better usage trends relative to the comparable period last year, so more more of the same and in our guidance philosophy. It Hasnt change we take those trends as much information as we have an applied discount at <unk> given that we don't control.

Speaker Change: The consumption of our clients, we observe it so it's a very similar methodology to what we've used in previous quarters and a continuation of the trends we've seen in the first half of the year.

Speaker Change: Perfect. Thank you so much.

Operator: Thank you, and one moment for our next question.

Operator: Thank you and one moment for our next question. And our next question comes from the line of Taz Koujalgi with.

Speaker Change: Thank you and one moment for our next question.

Speaker Change: And our next question comes from the line of cash Cow Belge with.

Operator: Woodbush Securities. Your line is open. Please go ahead.

Speaker Change: Wedbush Securities. Your line is open. Please go ahead.

Operator: Hey guys, thanks for taking my question. I have a question for David on your sequential revenue growth this quarter. So I'm trying to reconcile the comments you made about the usage growth in this quarter being better than last year, but if you look at the revenue growth sequentially, that's slowed down. I think it's the lowest Q2 sequential growth for the longest time. And one more question was, if you look at the sequential growth for the last three, four quarters, it's been accelerating since the optimization trends, and that trend kind of...

Speaker Change: Hey, guys. Thanks for taking my question I have a question for David on your sequential revenue growth. This quarter. So I'm trying to reconcile the comments you made about the usage growth.

Speaker Change: In this quarter being better than last year, but that if you look at the.

Unknown Attendee: The revenue growth sequentially, that's slowed down. I think it's the lowest Q2 sequential growth in the longest time. And one more question was, if you look at the sequential growth for the last three, four quarters, it's been accelerating since the optimization trends ended. But that trend kind of...

Speaker Change: The revenue growth sequentially.

Speaker Change: Slowdown I think its the lowest Q2 sequential growth.

Speaker Change: And the longest time.

Speaker Change: And one more question was if you look at the.

Speaker Change: It's a question of growth for the last three four quarters, it's been accelerating since the optimization trends in that.

Speaker Change: That trend kind of.

Operator: I guess it buckled this quarter because the Q2 growth in Q2 was lower than what we had last year. Just like the commentary about usage growth being strong, but then the revenue growth sequentially was a little bit lighter than last year.

Speaker Change: Buckled this quarter because the.

Speaker Change: <unk> growth in Q2 was lower than what you had last year, just like reconcile the commentary about.

Speaker Change: Usage growth being strong, but then the revenue growth sequentially, it looks a little bit lighter than last year.

Unknown Executive: Yeah, a lot of that has to do with what we always say, which is that in the second half of December, clients are not at their desks, and new deployments have been frozen. So we generally find that the usage or revenue run rate growth then goes down or is the same. And then we find a recovery as people get back to their desks in Q1. And then we find, in Q2, a similar linearity pattern that we see in all Q2s, which is, you know, how people work. And so we didn't see anything out of the ordinary in terms of the time series from Q4 to Q1 to Q2.

David Obstler: Yeah, a lot of that has to do with what we always say, which is that in the second half of December, clients are not at their desks, and new deployments have been frozen. So we generally find that the usage or revenue run rate growth then goes down or is the same. And then we find a recovery as people get back to their desks in Q1. And then we find, in Q2, a similar linearity pattern that we see in all Q2s, which is, you know, how people work. And so we didn't see anything out of the ordinary in terms of the time series from Q4 to Q1 to Q2.

Speaker Change: Yeah, a lot of that has to do with what we've always said, which is that in the second half of December.

Speaker Change: Clients are not at their desks and new deployments have been frozen. So we generally find that the usage or revenue run rate growth then.

Speaker Change: US goes down or or or is the same and then we find a recovery as people get back to their deaths in Q1, and then we find in Q2.

Speaker Change: Similar linearity pattern that we see in all Q2s, which is how it sort of people work and so we didn't see anything out of the ordinary in terms of the time series of Q4 to Q1 to Q2.

Unknown Attendee: David, you mentioned that revenue is the best metric for your business; you shouldn't be looking at billings in RP or bookings, but I'm just wondering, any color you can provide on the first half of bookings growth this year; it's been flat year over year, with duration increasing, and that's, I think, the lowest bookings growth going up again in any first half of your year. Any more comments beyond what you already provided? Is the renewal base lighter in the first half? Should we expect an acceleration in the second half? Any more color on the bookings moment?

Operator: Got it. And then just one follow-up question. And David, you mentioned that revenue is the best method for your business. You shouldn't be looking at billings and RP or bookings. But I'm just wondering, any color you can provide on the first half of bookings growth this year? It's been flat year over year, with duration increasing. And that's, I think, the lowest bookings growth, again, in any first half of your year. Any more commentary beyond what you already provided? Is the renewal base lighter in the first half? Should we expect an acceleration in the second half? Any more color on the bookings moment? Now, if you look...

Speaker Change: Got it and then one just one follow up on David you mentioned that.

Speaker Change: The best metric like business, you can be looking at billings, an RP or bookings, but I'm just wondering.

Speaker Change: Any color you can provide on the first half of bookings growth. This year, it's been flat year over year valuation and that's I think the lowest bookings go up again in any first half of your year and any more commentary beyond what you already provided is the renewal base lighter in the first half.

Speaker Change: We would expect an acceleration in the second half any any more color on the bookings momentum.

David Obstler: No, if you look at the latest 12 months of all these trends, they all eventually converge around revenues. It has to do with, as we mentioned in every earnings call, when bills go out, whether the deals are multi-year or single-year, etc. So no, all of that essentially balances out back to the metrics that we direct you to, which are revenue and then ARR. So, there is nothing wrong with that.

Speaker Change: No. If you look at the latest 12 months of all of these trends.

Speaker Change: They all eventually converge around revenues it has to do with as we mentioned on every earnings call. When bills go out whether the deals are multiyear single year et cetera. So now all of that is is essentially balances out back to the metrics that we direct you to.

Speaker Change: Which is revenue and then.

Speaker Change: So no nothing in it.

Speaker Change: Thank you.

Operator: Thank you, and I would now like to hand the conference back over to Olivier Pomel for any further remarks.

Speaker Change: Thank you and I would now like to hand, the conference back over to Olivier for any further remarks.

Olivier Pomel: And just to close the call, I want to thank again everybody who was involved in Dash this year. So that means, obviously, the product engineering teams who shipped these amazing products, and there were lots of them. That means the go-to-market teams that relayed the message to our customers. That means the marketing and community teams that did such a fantastic job putting on a show. And, of course, that means the customers who showed up in large numbers with enthusiasm and who have been the life of the conference. So thank you, everyone, and we'll see you next quarter.

Unknown Executive: And just to close the call, I want to thank again everybody who was involved in Dash this year. So that means, obviously, the product engineering teams who shipped these amazing products, and there were lots of them. That means the go-to-market teams that relayed the message to our customers. That means the marketing and community teams that did such a fantastic job putting on a show. And, of course, that means the customers who showed up in large numbers with enthusiasm and who have been the life of the conference. So thank you, everyone, and we'll see you next quarter.

Olivier: Thank you and just to close the call I want to thank again, everybody who was involved in that she's here. So that means that usually the product and engineering teams, who shipped is amazing products and there were lots of them.

Speaker Change: I mean, the go to market teams.

Speaker Change: That has led to a message to our customers that means the marketing and community community teams.

Speaker Change: That dataset venetic job, putting up a show and of course that means the customers who showed up in large numbers with enthusiasm and who have been the life of a conference. So thank you everyone and we'll see you next quarter.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Olivier Pomel: So, of course, you know, we had all of the interactions you can imagine with our customers around it, you know, in terms of how they use our product to come back online, debug, and everything, even though fixing that case was very, very manual, you know; there was really no good way to automate it. But, again, we see that every single day. That's what we do.