Datadog has increased its revenue predictions for 2024 as demand for AI observability "continues to rise".
It earned $690 million in Q3 2024 - a 26% year-over-year uplift that is "above the high end of our guidance range", according to Olivier Pomel, Co-Founder, Chief Executive Officer, and Director.
The cloud observability big dog ended the quarter with 29,200 customers, up from about 26,800 a year ago. Of these, 3,490 have an annual recurring revenue (ARR) of $100,000 or more - up from 3,130 a year ago and now accounting for 88% of ARR.
Datadog increased its full-year revenue to roughly $2.66 billion, a small but not insignificant hike from previous figures of somewhere between $2.62 billion and $2.63 billion (with analysts' expectations coming in at the higher end of that range).
"Datadog executed well in the third quarter, with 26% year-over-year revenue growth. We continued to broaden our platform to help our customers observe, secure, and act on their mission-critical cloud applications," Pomel said.
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The company got a final pat on the back by being named a leader in the 2024 Gartner Magic Quadrant for Observability Platforms for the fourth year in a row. It was also placed in the 2024 Gartner Magic Quadrant for Digital Experience Monitoring.
In an earnings call, the Datadog CEO said customers were continuing to "experiment" with AI technologies.
"And as they do, they want to get visibility into their AI use," Pomel continued. "At the end of Q3, about 3,000 customers used one or more Datadog AI integrations to send us data about their AI, machine learning, and LLM usage."
As these experiments begin evolving into production AI applications, Datadog is also seeing "initial signs of traction" for its LLM observability products, combining this tech with application performance monitoring (APM) to "get fully integrated end-to-end visibility across all their applications and tech stacks."
On the earnings call, Pomel shared tantalising details of new customers - but did not reveal exact details.
"We signed a six-figure annualized land with a major U.S. Federal Agency," he revealed. "This agency is beginning to move some of its workloads to the cloud and is expanding the services it offers to every single U.S. citizen through cloud applications. They have chosen Datadog to observe and secure their cloud environment and deliver a faster, better experience to end users."
The deal includes eight products on Datadog GovCloud, including Cloud SIEM and cloud security management.
Datadog also landed a "seven-figure" deal with a "leading e-commerce company" in India and the same size contract with "a large American financial services company".
"This customer has a very seasonal business and experiences dozens of major incidents during the annual peak season with an average downtime per incident of about five hours," the CEO explained. "And they estimate millions of dollars of lost revenue for each hour of downtime. By replacing its cloud provider's monitoring tool with Datadog and in particular, using our Real User Monitoring product, this customer targets substantial reductions in downtime."
Finally, it announced another seven-figure deal with a " a major airline in Europe" which has adopted Datadog for its customer-facing websites as it moves "hundreds of applications" from on-prem to AWS.
"They want to derisk their cloud migration," the CEO continued. "They estimate that each incident can cost tens of millions of dollars in lost revenue and customer impact."
