Citi Global TMT Conf. 2025: DDOG CFO on AI-Driven Growth, Product Expansion & GTM in Cloud Observability/Security

Key Takeaways

TL;DR: DDOG highlighted strong top-line growth, expanding product adjacencies, and rising AI-native workloads. AI-native customers are a fast-growing but still small rev. segment (10–11% of rev.) w/ elevated NRR, though mgmt remains cautious on potential consumption optimization/insourcing risks. Security (esp. SIEM, cloud sec.) and newer product lines (product analytics, data monitoring, agentic svc mgmt tools) are set to accelerate within the $500M–$600M ARR wedge. Mgmt expects continued durable growth as trad. enterprise cloud migrations modernize, w/ little threat from commoditization of SW dev. GTM and int’l expansion remain key for margin capture and wallet share gains.

1. Growth Drivers & Biz Mix

• Top-line growth accel. in Q2 2025, driven by AI investments and sustained demand across segments.
• AI-native cohort NRR “above avg.”, but still only 10–11% of rev.
• Consumption-based model: “we’re not paid unless there are workloads.” AI-native growth = significant workload increase.
• Majority of rev. from existing customers, mirroring mature SaaS dynamics.
• SMB env. “stable to reasonably healthy”, aided by improved funding/growth for smaller techs.
• Int’l GTM expansion is a key investment focus.

2. AI-Related Adoption & Risks

• AI-native cos. behave like historical cloud-native: strong usage growth, “committing and then growing past commitments,” but open to “optimization/rationalization.”
  • “We’re only paid if workloads increase.”
• Mgmt notes risk of optimization, churn, insourcing, but “full in-sourcing is rare,” even for large techs.
• On risk mgmt: “Guidance heavily discounted for rapid growth rates.”
  • DDOG works w/ customers to monitor surges/optimize spend (“We even go on site sometimes.”), supporting LT relationships.

3. Product Portfolio & ARR Breakdown

• Key ARR:
  • Infra monitoring: $1.25B–$1.5B ARR (“stalwart franchise”)
  • Logs & APM: each at $750M ARR
  • Security: recently crossed $100M ARR, “very good growth”
  • Total ARR: ~$3.3B (analyst est.), $2.75B core + logs/APM, implying $500M–$600M ARR for newer adjacencies
• Product milestones:
  • Cloud SIEM: “star performer to come”—leveraging log biz, pricing flexibility vs. legacy SIEMs (Splunk, Cribl)
  • Agentic svc mgmt (Bits AI, private preview) & product analytics (Eppo acq.) as emerging opps.
  • Product analytics, data monitoring, integrations (RUM, synthetics): rapid-growth within $100M+ ARR “graduates”
• Infra monitoring growth: No saturation; growth “indexed against basic workloads,” expected to expand w/ cloud migrations.