So Datadog remains one of the most iconic Cloud and SaaS leaders of this generation. Growth is still epic at almost $2.5 Billion — it’s still growing 27% a year (!). But like Snowflake, it’s a bit less of a mind-bending rocketship that it used to be, and has focused on efficiency as well.
Today its non-GAAP operating margins are 27%, and it’s generating almost $800m of free cash flow a year!
From the hyper-growth of the past, to very efficient growth at $2.5 Billion. It’s a sign of the times.
5 Interesting Learnings:
#1. $100k+ Customers Still Growing +15% a Year
A good sign for the future.
#2. Just a Cash Generating Machine Now. 28%+ Free Cash Flow Margin.
Datadog is sitting on $2.8 Billion in cash, and generated $212m in operating cash flow just last quarter.
#3. 5,200 Employees at Last Quarter, so About $410,000 in Revenue Per Employee
Again, the key to getting efficient in SaaS and Cloud at scale is getting to $300k in revenue per employee to get profitable, and then $400k to sustain it.
#4. Almost Every Customer Uses 2 or More Products.
The key to Datadog continuing to scale was becoming a true DevOps suite for its customers.
#5. NRR Down From Peak Highs, But Still Strong — And Key To Sustained Growth
Datadog customers sometimes gripe about it being expensive, but they love it. So they keep buying more from them. NRR remains at ~115%, and importantly GRR at mid-high 90%+.
And a few other interesting learnings:
#6. Targeting 2.5% or So Dilution Per Year from Equity Grants
This is a metric we didn’t used to talk about that much. But as SaaS and Cloud companies are focused on earnings now as well as growth, it’s come much more into focus. The dilution targets for scale-ups and public SaaS companies.
#7. From Break-Even at $200M in ARR to Wildly Profitable at $2B+ ARR
A nice illustration of how Datadog has gotten more and more efficient over time. At $200m in revenue, it had a smidge of positive cash flow from operations. At $2B+ in revenues, it’s extremely profitable, with almost 30% free cash flow margins.
And a great deep dive with Datadog’s CEO during their early scale phase here:
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Jason Lemkin, Khareem Sudlow
