As corporate computing infrastructures become more complex, it's important for information technology teams to keep tabs on how their tech stack is performing. Datadog (DDOG +3.58%) was founded to make this easier by helping its customers observe and monitor all facets of their network and every application users need. The stock has more than doubled since the company went public in September 2019, but shares have pulled back with the tech sell-off in the market. Even with shares off double digits from their recent high, Fool contributor Brian Withers explains why this cloud specialist is worth a look on a Fool Live episode that was recorded on May 13.
Brian Withers: I'm going to talk about Datadog. I really like this company. It's set up for the future in the cloud. If you don't know what Datadog does, it has a set of what it calls observability tools, which allow information technology teams to observe or look into their applications, their network, their logs. If you're not familiar with software, it creates a bunch of logs, which are just dumps of huge amounts of data. What Datadog does is pull all the stuff together in a semblance where you can look at it all on one pane of glass.
What happens over time is networks are getting more complicated and applications. Companies may have stuff that they host on-premise in their own data center that has been around for a while, some Oracle. I remember when I was in corporate, we had an Oracle instance to run our manufacturing business, and that was hosted on site. But then there's all these cloud platforms that are hosted somewhere else, on Azure, AWS, whatnot. More and more companies are getting into this hybrid environment, where it's almost users can be anywhere and the software can be anywhere. It's really important for companies that depend on their websites being available for customers, which is just about everybody nowadays.
Datadog is really helpful in pulling things together. In fact, they shared one customer this past quarter who took eight different observability tools they were using, and they centralized, consolidated down to just Datadog.
Some of the numbers are just really impressive if you look at the most recent quarter, 51% top-line revenue change. I really like how they're having customers land and then expand. They have a bunch of different products. Customers spending $100,000 or more make up a majority of their annual recurring revenue, about 75% and it's growing at a healthy 50% a year. They have about 1,400 customers that are spending more than $100,000 a year.
Their remaining performance obligations, the sum of all the contracts together, and how long they are, and the monthly fees, and whatnot, that's grown 81% year over year. To me, what that says is, since that's growing faster than revenue, customers are signing up for bigger contracts and potentially longer contracts. That really bodes well for the future of this company.
I talked about the products being a land-and-expand model. At the end of the first quarter, 75% of all their customers were using more than one product, which is up from 63% last year, and those using four or more doubled to 25%.
This company has got an addressable market of about $35 billion that it shared in its filing to go public. But this monitoring and observability stuff is really just getting started.
To me, I'm still really super positive about this company. The only thing that's changed for me is the stock price. If you haven't taken a look at this one, maybe it's time you did.
