Every week I’ll provide updates on the latest trends in cloud software companies. Follow along to stay up to date! Datadog Consumption This week we got another earnings report from a key consumption player: Datadog’s Q2. On the surface, it wasn’t good. They narrowly beat estimates for Q2, and then guided Q3 below consensus. On top of that, they took down their full year guide by 2% from where they guided after Q1. Another way to look at this is despiteh Q2 coming in above their guide, they took down their full year guide. This means the outlook for Q3 and Q4 is came down quite a bit. Does this mean optimization headwinds are getting stronger? Not quite… The earnings call gave us more detail, and painted a more positive picture than just the numbers may suggest. The weakness they called out was from larger cloud-native businesses. The good news is gross retention (ie churn) stayed constant. But these larger customers expanded at a slower clip, and this was the primary driver for reducing the full year guide.
The slower expansion from large cloud native customers is intresting but I think you're right that it's not all doom and gloom. The fact that gross retention stayed constant is actualy a pretty strong signal that customers aren't leaving, they're just being more thoughtful about their spnding. I wonder if this is more about macro concerns than actual product issues?
The slower expansion from large cloud native customers is intresting but I think you're right that it's not all doom and gloom. The fact that gross retention stayed constant is actualy a pretty strong signal that customers aren't leaving, they're just being more thoughtful about their spnding. I wonder if this is more about macro concerns than actual product issues?