Datadog S-1 Comparison — Best in Show? 🏆
Datadog’s S-1 highlights four publicly traded standalone observability companies as competitors: Dynatrace, New Relic, Elastic, and Splunk. We analyzed the five companies’ income statements over the last two years (LTM and LTM-1) to see how they compare. Datadog’s revenue over the past twelve months is healthy and growing 82% YoY, faster than Elastic, which is closest in revenue and expanding 70% YoY. The IPO candidate’s gross margin is good at 74%, close to the median, but below New Relic’s impressive 84%. While Datadog’s R&D % is slightly above the median, its S&M % and G&A % are below. Overall Datadog’s net margin over the past year is the best of the cohort. Datadog’s financial metrics are good compared to its peers.
Datadog’s revenue is the smallest of its peers, but growth is healthy. Splunk is the largest vendor with +$2B in LTM revenue, almost 8X Datadog’s size.
Datadog’s gross margin worsened YoY from 78% to 74%, about the median of the cohort. New Relic’s gross margin is the highest of the group for the past two years. Elastic achieved the lowest gross margin of 71% over the past twelve months.
R&D spend as a percentage of revenue was highest amount the younger businesses, Datadog and Elastic. Dynatrace spent the least on R&D, most likely a function of it being a PE-backed company until its recent IPO.
While Datadog’s S&M spend as a percentage of revenue increased YoY, it is better than most of the other vendors. Its G&A % decreased YoY from 10% to 9% and is the lowest of the group.
Datadog achieved the highest net margin over the past twelve months at -9%. Elastic’s was the worst at -38%. It is important to note that Dynatrace’s other expense, net increased by $37M, or 124% YoY, primarily a result of interest expense on our Term Loans entered into in the second quarter of 2019.
Datadog’s financial metrics are healthy compared to its peers. Revenue growth remains strong with an OK gross margin. Datadog’s R&D % is slightly higher than its peers, but its spend on S&M and G&A as percentage of revenue is lower. The company achieved the best net income % of the cohort, which is impressive for a business of its age. Analyzing Datadog in the context of its peers suggests the upcoming IPO will be exciting.
