10K - DDOG - Annual Report - 100 Pages

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549
________________________________________
FORM 10-K
________________________________________
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 001-39051
________________________________________
Datadog, Inc.
(Exact Name of Registrant as Specified in its Charter)
________________________________________
Delaware 27-2825503
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
620 8th Avenue, 45th Floor
New York, NY 10018
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (866) 329-4466
________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
The Nasdaq Stock Market LLC
Class A common stock, par value $0.00001 per share DDOG
(Nasdaq Global Select Market)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error
to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the closing price of the registrant’s shares of Class A common stock
as reported by The Nasdaq Global Select Market on June 30, 2023 was approximately $29.3 billion.
As of February 15, 2024, there were 305,929,910 shares of the registrant’s Class A common stock and 25,944,197 shares of the registrant’s Class B common stock, each with a par value of
$0.00001 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 2024 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated
herein. Such Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2023.
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©2024, AlphaSense, Inc. All Rights Reserved. AlphaSense is a service mark of AlphaSense, Inc. All other trademarks mentioned belong to their respective owners.
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DATADOG, INC.
2023 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Page
PART I.
Item 1. Business 5
Item 1A. Risk Factors 13
Item 1B. Unresolved Staff Comments 39
Item 1C. Cybersecurity 39
Item 2. Properties 41
Item 3. Legal Proceedings 41
Item 4. Mine Safety Disclosures 41
PART II.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 42
Item 6. [Reserved] 43
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 43
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 54
Item 8. Financial Statements and Supplementary Data 56
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 88
Item 9A. Controls and Procedures 88
Item 9B. Other Information 89
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 90
PART III.
Item 10. Directors, Executive Officers and Corporate Governance 91
Item 11. Executive Compensation 91
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 91
Item 13. Certain Relationships and Related Transactions, and Director Independence 91
Item 14. Principal Accounting Fees and Services 91
PART IV.
Item 15. Exhibits, Financial Statement Schedules 92
Item 16. Form 10-K Summary 94
Signatures 95
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RISK FACTORS SUMMARY
Our operations and financial results and an investment in our Class A common stock are subject to various risks and uncertainties, the most significant of which
are summarized below. You should consider carefully the summary below and the risks and uncertainties described in the “Risk Factors” section of this Annual Report on
Form 10-K, as well as the other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. The risks
and uncertainties described below and in “Risk Factors” are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently
believe are not material, may also become important factors that adversely affect our business. If any of such risks or others not specified below or in “Risk Factors”
materialize, our business, financial condition and results of operations could be materially and adversely affected. In that case, the trading price of our Class A common
stock could decline.
• Unfavorable conditions in our industry or the global economy, or reductions in information technology spending, could limit our ability to grow our
business and negatively affect our results of operations.
• Our recent rapid growth may not be indicative of our future growth. Our rapid growth also makes it difficult to evaluate our future prospects and may
increase the risk that we will not be successful.
• We have a history of operating losses and may not achieve or sustain profitability in the future.
• We have a limited operating history, which makes it difficult to forecast our future results of operations.
• We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.
• Our business depends on our existing customers purchasing additional subscriptions and products from us and renewing their subscriptions. If our
customers do not renew or expand their subscriptions with us, our future operating results would be harmed.
• If we are unable to attract new customers, our business, financial condition and results of operations will be adversely affected.
• Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader
market acceptance of our products.
• If we or our third-party service providers experience, or are unable to protect against cyber-attacks, ransomware, security incidents, or security
breaches, or if unauthorized parties otherwise obtain access to our customers’ data, our data, or our platform and information technology systems, then
our solution may be perceived as not being secure, our reputation may be harmed, demand for our platform and products may be reduced, and we may
incur significant liabilities or additional expenses.
• Interruptions or performance problems associated with our products and platform capabilities may adversely affect our business, financial condition and
results of operations.
• We may not be able to successfully manage our growth, and if we are not able to grow efficiently, our business, financial condition and results of
operations could be harmed.
• If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, or to changing customer
needs, requirements or preferences, our platform and products may become less competitive.
• The markets in which we participate are competitive, and if we do not compete effectively, our business, financial condition and results of operations
could be harmed.
• The dual class structure of our common stock has the effect of concentrating voting control with holders of our Class B common stock, including our
executive officers, directors and their affiliates, which will limit the ability of holders of our Class A common stock to influence the outcome of important
transactions.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All
statements other than statements of historical facts contained in this Annual Report on Form 10-K including statements regarding our future results of operations or
financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify
forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,”
“potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements
include, but are not limited to, statements concerning the following:
• our expectations regarding our revenue, expenses and other operating results;
• our ability to acquire new customers and successfully retain existing customers;
• our ability to increase usage of our platform and upsell and cross sell additional products;
• our ability to achieve or sustain our profitability;
• future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;
• the costs and success of our sales and marketing efforts, and our ability to promote our brand;
• our reliance on key personnel and our ability to identify, recruit and retain skilled personnel;
• our ability to effectively manage our growth, including any international expansion;
• our ability to protect our intellectual property rights and any costs associated therewith;
• our ability to compete effectively with existing competitors and new market entrants;
• the growth rates of the markets in which we compete; and
• the potential impact of general market, political, economic, and business conditions in our industry, or reductions in information technology spending, on
our business, results of operations and financial condition.
You should not rely on forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is
subject to risks, uncertainties and other factors described in under the header “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Moreover, we operate in
a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and
uncertainties that could have an impact on the forward-looking statements contained herein. The results, events and circumstances reflected in the forward-looking
statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date on which the statements are made, and we
undertake no obligation to update them to reflect events or circumstances after the date of this Annual Report on Form 10-K or to reflect new information or the occurrence
of unanticipated events, except as required by law.
Unless the context otherwise indicates, references in this report to the terms “Datadog”, “the Company,” “we,” “our” and “us” refer to Datadog, Inc. and its
subsidiaries.
“Datadog” and other trade names and trademarks of ours appearing in this report are our property. This report contains trade names and trademarks of other
companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names or trademarks to imply an endorsement
or sponsorship of us by such companies, or any relationship with any of these companies.
We may announce material business and financial information to our investors using our investor relations website (www.investors.datadoghq.com). We
therefore encourage investors and others interested in Datadog to review the information that we make available on our website, in addition to following our filings with the
Securities and Exchange Commission, or the SEC, webcasts, press releases and conference calls.
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MARKET, INDUSTRY AND OTHER DATA
The statistical data, estimates and forecasts referenced throughout this Annual Report on Form 10-K are based on independent industry publications or other
publicly available information, as well as information based on our internal sources. While we believe the industry and market data included in this Annual Report on Form
10-K are reliable and are based on reasonable assumptions, these data involve many assumptions and limitations, and you are cautioned not to give undue weight to these
estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and other publicly available information.
None of the industry publications referred to in this Annual Report on Form 10-K were prepared on our or on our affiliates’ behalf or at our expense. The industry in which
we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” and “Special Note
Regarding Forward-Looking Statements,” that could cause results to differ materially from those expressed in these publications and other publicly available information.
The Gartner content referenced herein (the “Gartner Content”) represents research opinion or viewpoints published, as part of a syndicated subscription
service, by Gartner, Inc. (“Gartner”), and are not representations of fact. The Gartner Content speaks as of its original publication date in December 2023 (and not as of the
date of this Annual Report on Form 10-K) and the opinions expressed in the Gartner Content are subject to change without notice.
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PART I
Item 1. Business
Overview
Datadog is the observability and security platform for cloud applications.
Our SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, user experience monitoring,
cloud security, and many other capabilities to provide unified, real-time observability and security for our customers’ entire technology stack. Datadog is used by
organizations of all sizes and across a wide range of industries to enable digital transformation and cloud migration, drive collaboration among development, operations,
security and business teams, accelerate time to market for applications, reduce time to problem resolution, secure applications and infrastructure, understand user
behavior, and track key business metrics.
Software applications are transforming how organizations engage with customers and operate their businesses. Companies across all industries are re-
platforming their businesses to cloud native or hybrid on-premise and cloud infrastructures to enable this digital transformation. Historically, engineering teams have been
siloed, making the development of next generation applications in dynamic cloud environments challenging. We started Datadog to break this model and facilitate
collaboration among development and operations teams, enabling the adoption of DevOps practices. Since then we have continuously pushed to unify separate tools into
an integrated monitoring and analytics platform, readily available to everyone who cares about applications and their impact on business. And while we continue to broaden
our capabilities in observability, we have continued to expand our platform into use cases beyond observability. Starting in 2020, we began to develop products in cloud
security, and in 2021, we expanded into developer-focused products.
From our founding goal of breaking down silos between Dev and Ops, we set out in 2010 to build a real-time data integration platform to turn chaos of having
uncorrelated data from disparate sources into digestible and actionable insights. Since launching our first use case with Infrastructure Monitoring in 2012, we have
expanded our platform rapidly, and today, we offer end-to-end monitoring and analytics, powered by a common data model that is extensible for use cases across
observability, security, and software delivery. In 2023, we launched Application Vulnerability Management to detect vulnerabilities in open-source libraries in production,
Data Streams Monitoring to track and improve the performance of event-driven applications, and Workflow Automation to easily automate actions based on observability
insights.
Our proprietary platform combines the power of metrics, traces, logs, user sessions, security signals, and other data from a single agent and over 700
integrations to provide a unified view of infrastructure, application performance and the real-time events impacting performance. Datadog is designed to be cloud agnostic
and easy to deploy, with hundreds of out-of-the-box integrations, a built-in understanding of modern technology stacks and extensive customizations. Customers can
deploy our platform across their entire infrastructure, making it ubiquitous and a daily part of the lives of developers, operations engineers, security professionals, and
business leaders.
We believe that our platform currently addresses a significant portion of the IT Operations Management market. According to Gartner, the IT Operations
Management market represents a $81 billion opportunity in 2027. We believe a large portion of this spend is for legacy on-premise and private cloud environments but
does not fully include the opportunity in modern multi-cloud and hybrid cloud environments. Our platform is designed to address both legacy and modern environments.
We employ a land-and-expand business model centered around offering products that are easy to adopt and have a very short time to value. Our customers
can expand their footprint with us on a self-service basis. Our customers often significantly increase their usage of the products they initially buy from us and expand their
usage to other products we offer on our platform. We grow with our customers as they expand their workloads in the public and private cloud.
Our Solution and Key Strengths
Datadog was founded on the premise that the old model of siloed developers and IT operations engineers is broken, and that legacy tools used for monitoring
static on-premise architectures do not work in modern cloud or hybrid environments. Datadog’s cloud-native platform enables development and operations teams to
collaborate, quickly build and improve applications, and drive business performance. Empowered by our out-of-the box functionality and simple, self-service installation,
our customers are able to rapidly deploy our platform to provide application- and infrastructure-wide visibility, often within minutes.
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• Built for dynamic cloud and hybrid infrastructures. Our innovative platform was born in the cloud and was built to work with ephemeral cloud
technologies such as microservices, containers and serverless computing. Our data model was built to work at cloud scale with highly dynamic data
sets and processes more than 10 trillion events a day.
• Simple but not simplistic. Our platform is easy-to-use with out-of-the-box integrations, customizable drag-and-drop dashboards, real-time
visualization and prioritized alerting. The platform is deployed in a self-service installation process within minutes, allowing new users to quickly derive
value without any specialized training or heavy implementation or customization. It is highly extensible across a wide array of use cases to a broad set of
developers, operations engineers, security professionals, product managers, product designers, platform engineers, customer support staff, and
business users. As a result, our platform is integral to business operations and used every day, and our users find increasing value in the solution over
time.
• Integrated data platform. We were the first to combine the “three pillars of observability” - metrics, traces, and logs - with the introduction of our log
management solution in 2018. Today, our platform combines infrastructure monitoring, application performance monitoring, log management, user
experience monitoring, security monitoring, incident management, continuous integration and continuous delivery, or CI/CD, pipeline and test monitoring
in one integrated data platform. This approach increases efficiency by reducing both the expense and friction of attempting to glean insights from
disparate systems. We are able to provide a unified view across the IT stack, including infrastructure and application performance, as well as the real-
time events impacting performance. Each of our products is integrated and taken together, they provide the ability to view metrics, traces, logs,
sessions, security signals, and other data side-by-side and to perform correlation analysis.
• Built for collaboration. Our platform was built to break down the silos between developers and operations teams in order to help organizations adopt
DevOps practices and improve overall business performance. We provide development and operations teams with a common set of tools to develop a
joint understanding of application performance and shared insights into the infrastructure supporting the applications. Additionally, our customizable and
interactive dashboards can be shared with business teams to provide them with real-time actionable insights. Over time, as the use cases for our
platform have expanded, the types of users that we can serve and help to collaborate have expanded as well, to include security professionals, product
managers, product designers, platform engineers, customer support staff, and business users.
• Cloud agnostic. Our platform is designed to be deployable across all environments, including public cloud, private cloud, on-premise, multi-cloud, and
hybrid environments, allowing organizations to diversify their infrastructure and reduce single vendor dependence.
• Ubiquitous. Datadog is frequently deployed across a customer’s entire infrastructure, making it ubiquitous. Compared to legacy systems that are often
used only by a few users in an organization’s IT operations team, Datadog is a daily part of the lives of developers, operations engineers and business
leaders.
• Integrates with our customers’ complex environments. We enable development and operations teams to harness the full spectrum of SaaS and
open source tools. We have over 700 out-of-the-box integrations with technologies to provide significant value to our customers without the need for
professional services. Our integrations provide for comprehensive data point aggregation and consistent, up-to-date, high-quality customer experiences
across heterogeneous IT environments as they are fully maintained by Datadog.
• Powered by robust machine-learning and artificial intelligence. Our platform ingests massive amounts of data into our unified data warehouse.
We develop actionable insights using our advanced analytics capabilities. Our platform's Watchdog capabilities feature artificial intelligence and
machine learning that can cross-correlate metrics, traces, logs, sessions, security signals, and other data to identify outliers and notify users of potential
anomalies; discover and help resolve issues quickly with automated root cause analysis; augment the troubleshooting workflow with contextual insights;
and minimize impact on customers.
• Scalable. Our SaaS platform is highly scalable and is delivered through the cloud. Our platform is massively scalable, currently monitoring more than
tens of trillion events a day and millions of servers and containers at any point in time. We offer secure, easily accessible data retention at full granularity
for extensive periods of time, which can provide customers with a complete view of their historical data.
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Key Benefits to Our Customers
Organizations of all sizes, in all industries, both private and public, purchase our products for a variety of use cases. As of December 31, 2023, we had
approximately 27,300 customers in over 150 countries. Our platform provides the following key benefits to our customers:
• Accelerate digital transformation. We enable customers to take full advantage of the cloud to develop and maintain mission-critical applications with
agility and with confidence in the face of increasing business and time pressure and complexity of underlying infrastructure. As a result, our platform
helps accelerate innovation cycles, deliver exceptional digital experiences and optimize business performance.
• Reduce time to problem detection and resolution. Using infrastructure, APM, log data, and data from integrations in our unified platform, our
customers are able to quickly isolate the root cause of application issues in one place where they otherwise would be required to spend hours trying to
investigate using multiple tools. The reduction in mean time to detection and mean time to resolution helps our customers avoid lost revenues and
enhance customer experience.
• Improve agility of development, operations, security and business teams. We eliminate the historical silos of development and operations teams
and provide a platform that enables efficient and agile development through the adoption of DevOps and DevSecOps. Our platform enables
development, operations and security teams to collaborate closely with a shared understanding of data and analytics. This helps them develop a joint
understanding of application performance and shared insights into the infrastructure supporting the applications.
• Enable operational efficiency. Our solution is easy to install, which eliminates the need for heavy implementation costs and professional services. We
have hundreds of integrations with key technologies, from which our customers can derive significant value, avoiding internal development costs and
professional services required to create those integrations. Our customer-centric pricing model is tailored to customers’ desired usage needs. Our
platform empowers customers to better understand the operational needs of their applications and IT environments, enabling greater efficiency in
resource allocation and spend on cloud infrastructure.
Our Growth Strategies
We intend to pursue the following growth strategies:
• Expand our customer base by acquiring new customers. Our market penetration is low. We believe there is a substantial opportunity to continue to
grow our customer base. We intend to drive new customer additions by expanding our sales and marketing efforts in the markets we serve.
• Expand within our existing customer base through broader deployments, new use cases and new product adoption. Our base of
approximately 27,300 customers as of December 31, 2023 represents a significant opportunity for further sales expansion. We plan to continue to
increase sales within our existing customer base through increased usage of our platform and the cross selling of additional products.
• Expand our technology leadership through continued investment and new products. We intend to invest in expanding the functionality of our
current platform and adding capabilities that address new market opportunities. We have a history of continued innovation. For example, in 2017 we
launched APM, in 2018 we launched Log Management, in 2019 we launched Digital Experience Monitoring and Network Performance Monitoring, in
2020 we launched Cloud SIEM, Continuous Profiler and Incident Management, in 2021 we launched Cloud Security Posture Management, Cloud
Workload Security, Database Monitoring, and Sensitive Data Scanner, in 2022 we launched Application Security Management, Cloud Security
Management, Audit Trail, Observability Pipelines, Cloud Cost Management, and Universal Service Monitoring, and in 2023 we launched Application
Vulnerability Management, Data Streams Monitoring, and Workflow Automation.
• Expand our customer base internationally. We believe there is a significant opportunity to continue to expand usage of our platform outside of the
United States, as international markets have increased the shift of their IT spend to the cloud.
Our Platform
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Our proprietary platform provides real-time insights into software applications and IT infrastructure performance to enable better user experiences, faster
problem detection and resolution and smarter, more impactful business decisions. Our platform is modular and includes infrastructure monitoring, application performance
monitoring, log management, user experience monitoring, network performance monitoring, cloud and application security, developer-focused observability, and incident
management, as well as a range of shared features such as sophisticated dashboards, advanced analytics, collaboration tools, workflow automation, and alerting
capabilities. Many of our products are fully capable stand-alone so clients can choose to use different capabilities incrementally or deploy many at once. When deployed
together, our products automatically enable cross-correlation, which in turn allows customers to gain greater levels of visibility across their infrastructure and applications to
more rapidly troubleshoot problems.
Our platform is supported by more than 700 integrations to seamlessly aggregate metrics and events across all of the systems and services that power digital
businesses. Our easy-to-use platform is deployed through a self-service installation process. Users can derive value from our platform within minutes without any
specialized training or heavy implementation or customization. Customers can easily expand their usage of our platform on a self-serve basis, adding hosts or volumes of
data monitored. Our platform is massively scalable currently monitoring more than tens of trillion events a day and millions of servers and containers.
The key elements that can be leveraged across our platform:
• Single Pane of Glass. Our ability to provide a unified source of data enables users to access information from a single platform and easily explore
multiple data sources. Through a single dashboard and with a common data framework, users are able to access and explore all of the relevant
performance data. Users are able to more quickly assess and resolve their issues without having to toggle between multiple products.
• Robust, Deep Data Set. Our client-side collection technology relies on installation of a single agent for metrics, traces, logs, and other data, allowing
for a simple, seamless deployment experience for the customers. We ingest massive amounts of complex data and normalize it. The volume of data
associated with combining infrastructure, APM and log management provides for a dramatically more robust data set than any of the individual data
sources would provide on their own.
• SaaS Platform. Our cloud based multi-tenant SaaS platform allows for real-time ingestion, and analysis of massive amounts of data, without our
customers needing to worry about the provisioning, sizing and capacity of their monitoring platform.
• One Data Model. Every piece of data that is ingested by our platform is consistently tagged with metadata regardless of its type. This allows for
different kinds of performance data, such as a log event and an application trace, to be queried together, correlated, alerted on, and visualized in a
common user interface.
• Cross-Correlation. All of our solutions are integrated and work cohesively to provide a deep level of context and insight into what is occurring in a
customer’s IT environment and power faster troubleshooting.
• Out-Of-The-Box, Actionable Insights. From the moment of installation, our platform provides actionable insights through customizable dashboards,
predictive analytics, automated correlations, visualizations and alerting.
• High Accuracy Machine-Learning Capabilities and Predictive Capabilities Powered by the Network Effect. Our multi-tenant cloud platform
analyzes massive data sets ingested across our customers and their IT environments. It uses machine learning to predict and identify sources of
performance or availability issues that customers share due to dependencies on common service providers or third-party services.
• 700+ Fully Supported Integrations. We offer more than 700 out-of-the-box integrations including public cloud, private cloud, on-premise hardware,
databases and third-party software.
• Automated Alerts. We offer sophisticated real time alerting capabilities in the platform that detects issues, alerts users, and integrates with their
service management systems.
Our platform consists of products that can be used individually or as a unified solution, and includes a Marketplace where customers can access products built
by our partners on top of the Datadog platform. Our products include:
• Infrastructure Monitoring. Our Infrastructure Monitoring platform provides real-time monitoring of IT infrastructure across public cloud, private cloud
and hybrid environments, as well as in containers and serverless architectures, ensuring performance, and availability of applications. All infrastructure
data is located in one repository with automatic correlation, regardless of environment size or rate of change, to provide a fulsome view of everything that
is occurring across the IT ecosystem.
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• Application Performance Monitoring (APM). APM provides full visibility into the health and functioning of applications regardless of the deployment
environment. Code-level distributed tracing across microservices, hosts, containers and serverless computing functions allows our customers to gain
deep insights into application and code performance.
• Log Management. Log Management for applications, systems and cloud platforms ingests data, creates indexes and enables querying of logs with
visualizations and alerting to provide immediate insight into any performance issues. Logging Without Limits® decouples the cost of log ingestion from
processing, allowing customers to cost effectively collect a massive volume of logs and selectively process those they need to monitor.
• Digital Experience Monitoring. Digital Experience Monitoring brings visibility up the stack to monitor the digital experience of the user and consists of
Synthetics, Real User Monitoring (RUM), and Session Replay. Synthetics provides user-experience monitoring of applications and API endpoints via
simulated AI-powered user requests to proactively track application performance and ensure uptime. RUM provides analysis and visualization of the
performance of web browser and mobile applications as experienced by all actual users. Session Replay captures and visually replays users' web
browser and mobile application experiences to help identify errors, application usage patterns, and design issues.
• Continuous Profiler. Continuous Profiler measures code level performance in any environment through an always-on, and low overhead solution. This
allows customers to quickly identify and optimize the slowest and most resource-consuming parts in application code in order to improve mean time to
resolution, reduce application latency, and lower cloud costs.
• Database Monitoring. Database Monitoring allows customers to view query metrics and explain plans from all of their databases in a single place. With
Database Monitoring, they can quickly pinpoint costly and slow queries and drill into precise execution details to address bottlenecks. Additionally,
query, host, and application metric correlation makes it easy to identify and understand the impact of resource constraints on database performance.
• Data Streams Monitoring. Data Streams Monitoring (DSM) enables customers to easily track and improve the performance of event-driven
applications. DSM automatically maps dependencies among services and queues to help measure end-to-end latencies, locate faulty queues or
services and their owners, and remediate backed-up messages.
• Universal Service Monitoring. Universal Service Monitoring automatically detects all microservices across an organization's environment and
provides instant visibility into their health and dependencies—all without any code changes.
• Network Monitoring. Network Performance Monitoring enables the analysis and visualization of the flow of network traffic in on-premise, cloud-based
or hybrid environments, helping customers determine when the network is the root cause of an issue. Network Device Monitoring seamlessly
consolidates monitoring and troubleshooting of network hardware, such as routers, firewalls, switches, load balancers, and other network devices.
• Incident Management. Incident Management allows users to declare incidents, investigate root cause and dependencies, collaborate around a shared
view of the incident, follow to resolution, and auto-generate post-mortem documentations, all within the Datadog platform.
• Workflow Automation. Workflow Automation enables customers to easily automate and orchestrate processes across their tech stacks, with hundreds
of out-of-the-box actions and dozens of customizable blueprints. Workflow Automation enables automated actions based on observability insights for
faster incident remediation, proactive prevention, and improved security.
• Observability Pipelines. Observability Pipelines enables IT and security teams to cost-effectively collect, transform, and route logs, metrics, and
traces from any source to any destination at scale.
• Cloud Cost Management. Cloud Cost Management provides granular visibility into costs across cloud resources, automatically surfacing changes in
cloud costs and visualizing cost data alongside metrics, traces, logs, and other data, and making it easy to find and fix cost inefficiencies.
• Cloud Security Management. Cloud Security Management delivers vulnerability management, automated compliance checks, continuous posture
management, real-time threat detection, identity risk assessments, and a comprehensive resource inventory across the entire cloud infrastructure, all in
a unified platform for seamless collaboration and faster remediation. With a unified platform and real-time observability context,
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DevOps and security teams can quickly remediate issues and continuously improve their organization's security posture.
• Application Security Management. Application Security Management (ASM) delivers continuous, real-time visibility into attacks that target
customers' web applications, serverless applications, and APIs. ASM is automatically integrated with APM distributed traces and code-level context,
empowering Dev, Ops, and security teams to build and run secure applications in production. Application Vulnerability Management continuously
monitors customers' production environments for both code-level and open-source vulnerabilities.
• Cloud SIEM. Cloud SIEM (Security Information and Event Management) allows customers to detect threats in real time and investigate security signals
across metrics, traces, logs, and other data. It provides the engineering organization, including Dev, Ops, and security teams, visibility into common data
sources, in order to better operationalize IT security.
• Sensitive Data Scanner. Sensitive Data Scanner helps businesses meet compliance goals by discovering, classifying, and redacting sensitive data, in
real-time and at scale. Datadog scans for patterns of sensitive data upon ingestion and then hashes or redacts it, following built-in or user-defined rules
to support compliance with GDPR, HIPAA, CCPA, and more.
• CI Visibility. CI, or Continuous Integration, Visibility provides deep insight into the health and performance of customers' CI environment. Pipeline
Visibility allows platform engineers to detect and find the root cause of slow or failing pipelines, builds, and jobs across all their CI providers in a single
place. Test Visibility auto-instruments every test service to help developers detect and resolve slow, failing, and flaky tests.
Sales and Marketing

Our sales team is segmented into four revenue-generating areas: an enterprise sales team that sells to large businesses; a high velocity inside sales team that
is focused on acquiring new customers; a customer success team that handles new customer on-boarding and expansions in existing customers; and a partner team that
works with resellers, system integrators, referral partners and managed service providers. Each of these teams is further split regionally for geographic coverage across
the Americas, Asia-Pacific, or APAC, and Europe, the Middle East and Africa, or EMEA, regions. The sales teams work with marketing to actively pursue leads generated
from marketing programs and help take prospective customers through an evaluation and purchase process.
We focus our multi-touch marketing efforts on the strength of our product innovation, the value we provide, and our domain expertise. We target the
development and IT operations community through our marketing activities, using diverse tactics to connect with prospective customers, such as content marketing, email
marketing, events, digital advertising, social media, public relations, partner marketing and community initiatives. We offer prospective customers free trials to help them
understand the power of our platform. We also host and present at regional, national, global and virtual events to engage both customers and prospects, deliver product
training, share best practices and foster community.
As of December 31, 2023, we had approximately 2,400 employees in our sales and marketing organization, including sales development, field sales, sales
engineering, technical solutions, business development, sales operations, sales strategy, customer success and marketing personnel. We intend to continue to invest in
our sales and marketing capabilities to capitalize on our market opportunity.
Research and Development
Our research and development organization is responsible for the design, development, testing and delivery of new technologies, features and integrations of
our platform, as well as the continued improvement and iteration of our existing products. It is also responsible for operating and scaling our platform including the
underlying cloud infrastructure. Our research and development investments seek to drive core technology innovation and bring new products to market. Research and
development employees are located primarily in our New York and Paris offices, as well as remotely distributed.
Our research and development team consists of our software engineering, product management, development and site reliability engineering teams. As of
December 31, 2023, we had approximately 2,400 employees in our research and development organization. We intend to continue to invest in our research and
development capabilities to extend our platform and products.
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Our Competition
The worldwide monitoring and analytics market is and has been highly competitive for decades and is rapidly evolving. We compete on the basis of a number
of factors, including:
• ability to provide unified, real-time observability of IT environments;
• ability to operate in dynamic and elastic environments;
• extensibility across the enterprise, including development, operations and business users;
• propensity to enable collaboration between development, operations and business users;
• ability to monitor any combination of public clouds, private clouds, on-premise and multi-cloud hybrids;
• ability to provide advanced analytics and machine learning;
• ease of deployment, implementation and use;
• breadth of offering and key technology integrations;
• performance, security, scalability and reliability;
• quality of service and customer satisfaction;
• total cost of ownership; and
• brand recognition and reputation.
Our unified platform combines functionality from numerous traditional product categories, and hence we compete in each of these categories with different
vendors:
• with respect to on-premise infrastructure monitoring, we compete with diversified technology companies and systems management vendors including
IBM, Microsoft Corporation, and SolarWinds Corporation.
• with respect to APM, we compete with Cisco Systems, Inc., New Relic, Inc. and Dynatrace Software Inc.
• with respect to Log Management, we compete with Splunk Inc. and Elastic N.V.
• with respect to Cloud monitoring, we compete with native solutions from cloud providers such as Amazon Web Services, or AWS, Microsoft Azure, and
Google Cloud Platform, or GCP.
Additionally, we compete with home-grown and open-source technologies across the categories described above. We believe that we compete favorably with
respect to the factors listed above. However, many of our competitors have greater financial, technical and other resources, greater brand recognition, larger sales forces
and marketing budgets, broader distribution networks, more diverse product and services offerings and larger and more mature intellectual property portfolios. They may
be able to leverage these resources to gain business in a manner that discourages customers from purchasing our offerings. Furthermore, we expect that our industry will
continue to attract new companies, including smaller emerging companies, which could introduce new offerings. We may also expand into new markets and encounter
additional competitors in such markets.
Human Capital Management
Headcount
As of December 31, 2023, we had approximately 5,200 employees operating across 33 countries. Approximately 39% of our full-time employees as of that
date were located outside of the United States, 36% of whom were located in France. In countries in which we operate, such as France, we are subject to, and comply
with, local labor law requirements, which may automatically make our employees subject to industry-wide collective bargaining agreements. We have not experienced any
work stoppages and we consider our relations with our employees to be good.
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Culture and Engagement
We strive to create a culture that promotes a healthy work-life balance, career growth, low drama, and a friendly office environment. As part of our commitment
to our employees, we periodically assess our culture by conducting global engagement surveys to gain a better understanding of what is important to our employees. The
areas in which we have been rated most favorable include employee pride and belief in Datadog's mission and purpose and alignment on how their work supports
Datadog's goals and priorities.
Training and Development
Datadog promotes professional growth by offering individual- and team-specific training on an ongoing basis, as well as a wide range of learning programs
delivered by our global Talent Development team. We also provide robust manager training that shares effective tools and frameworks around recruiting, managing, and
developing team members.
We continually invest in our employees’ career growth and provide employees with a wide range of development opportunities, including face-to-face, virtual,
social, and self-directed learning and mentoring.
Compensation and Benefits
We offer industry competitive wages and benefits and are committed to maintaining a workplace environment that promotes employee productivity and
satisfaction. We believe our employees should have the support they need to maintain a strong work/life balance, grow personally and professionally, and save for their
future. While the philosophy around our benefits is the same worldwide, specific benefits vary regionally due to local regulations and preferences.
Diversity and Inclusion
At Datadog, diversity means making a conscious effort to reflect the many experiences and identities of the world outside, while treating each other with
fairness and without bias. Inclusion is the choice we make every day to foster an environment where people of all backgrounds not only belong but excel, so that together,
as a company, we can succeed.
We are committed to creating inclusive work spaces for employees with diverse backgrounds and experiences. Our diversity and inclusion programming
includes a focus on training workshops and resources that increase education, promote moments of celebration, support belonging, and help our employees feel welcome
and respected.
Intellectual Property
Intellectual property rights are important to the success of our business. We rely on a combination of patent, copyright, trademark and trade secret laws in the
United States and other jurisdictions, as well as license agreements, confidentiality procedures, non-disclosure agreements with third parties, and other contractual
protections, to protect our intellectual property, including our proprietary technology, software, know-how and brand. We use open source software in our services. Our API
libraries and agent used by customers to send data to our proprietary platform are licensed by us on an open source basis.
As of December 31, 2023, we own thirty-seven patents globally, five patent applications pending for examination in the United States, three pending PCT
applications, and six pending foreign patent applications. The pending U.S. patent applications, if issued, would be scheduled to expire between 2039 and 2043. Despite
our pending patent applications, there can be no assurance that our patent applications will result in issued patents. As of December 31, 2023, we own seven registered
trademarks in the United States and one hundred sixteen registered trademarks in various non-U.S. jurisdictions. However, as we have expanded internationally, we have
been unable to register or obtain the exclusive right to use the Datadog trademark in certain jurisdictions, and as we continue to expand may face similar issues in other
jurisdictions.
Although we rely on intellectual property rights, including patents, copyrights, trademarks and trade secrets, as well as contractual protections to establish and
protect our proprietary rights, we believe that factors such as the technological and creative skills of our personnel, creation of new services, features and functionality, and
frequent enhancements to our proprietary platform are more essential to establishing and maintaining our technology leadership position.
We control access to and use of our proprietary technology and other confidential information through the use of internal and external controls, including
contractual protections with employees, contractors, customers and partners. We require our employees, consultants and other third parties to enter into confidentiality and
proprietary rights agreements and we
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control and monitor access to our software, internal documentation, proprietary technology and other confidential information. Our policy is to require all employees and
independent contractors to sign agreements assigning to us any inventions, trade secrets, works of authorship, developments, processes and other intellectual property
generated by them on our behalf and under which they agree to protect our confidential information. In addition, we generally enter into confidentiality agreements with our
customers and partners. See the section titled “Risk Factors” for a more comprehensive description of risks related to our intellectual property.
Corporate Information
We were incorporated in Delaware in June 2010. Our principal executive offices are located at 620 8th Avenue, 45th Floor, New York, New York 10018, and
our telephone number is (866) 329-4466. Our website address is www.datadog.com. Information contained on, or that can be accessed through, our website is not
incorporated by reference into this Annual Report on Form 10-K, and you should not consider information on our website to be part of this Annual Report on Form 10-K.
Available Information
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a)
and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are filed with the SEC. Such reports and other information filed by us with the SEC
are available free of charge on our website at www.investors.datadoghq.com when such reports are available on the SEC’s website. The SEC maintains an internet site
that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The information
contained on the websites referenced in this Annual Report on Form 10-K is not incorporated by reference into this filing. Further, our references to website URLs are
intended to be inactive textual references only.
Item 1A. Risk Factors
Our operations and financial results are subject to various risks and uncertainties including those described below. You should consider carefully the risks
and uncertainties described below, in addition to other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and
related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently
believe are not material, may also become important factors that adversely affect our business. If any of the following risks or others not specified below materialize, our
business, financial condition and results of operations could be materially and adversely affected. In that case, the trading price of our Class A common stock could
decline.
Risks Associated with our Growth
Unfavorable conditions in our industry or the global economy, or reductions in information technology spending, could limit our ability to grow our
business and negatively affect our results of operations.
Our results of operations may vary based on the impact of unfavorable changes in our industry or the global economy on us or our customers and potential
customers. Unfavorable conditions in the economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth in
the United States or abroad, financial and credit market fluctuations, inflation, rising interest rates, international trade relations, political turmoil, natural catastrophes,
outbreaks of contagious diseases, such as the COVID-19 pandemic, warfare and terrorist attacks on the United States, Europe, the Asia Pacific region or elsewhere, such
as the conflict in the Middle East, could cause a decrease in business investments, including spending on information technology, disrupt the timing and cadence of key
industry events, and negatively affect the growth of our business and our results of operations. For example, the COVID-19 pandemic adversely affected workforces,
economies and financial markets globally, leading to a reduction in the ability of, or the inability of, customers, partners, suppliers, vendors or other parties to meet their
contractual obligations, and for a period of time, a reduction in customer spending on technology, and such conditions may reoccur in the future. The war in Ukraine and
the related political and economic responses imposed on Russia such as sanctions, may also exacerbate these issues and trends especially in Europe. More recently, in
response to persistently high inflation, the U.S. Federal Reserve has increased interest rates, which may reduce economic growth and cause companies to decrease
spending on information technology. These types of unfavorable conditions could disrupt the timing of and attendance at key industry events, which we rely upon in part to
generate sales of our products. If those events are disrupted, our marketing investments, sales pipeline and ability to generate new customers and sales of our products
could be negatively and adversely affected. Our competitors, many of which are larger and have greater financial resources than we do, may respond to challenging market
conditions by lowering prices in an attempt to attract our
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customers and may be less dependent on key industry events to generate sales for their products. The increased pace of consolidation in certain industries may result in
reduced overall spending on our products and solutions. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or
how any such event may impact our business.
Our recent rapid growth may not be indicative of our future growth. Our rapid growth also makes it difficult to evaluate our future prospects and may
increase the risk that we will not be successful.
Our revenue was $2,128.4 million, $1,675.1 million and $1,028.8 million for the years ended December 31, 2023, 2022 and 2021, respectively. You should not
rely on the revenue growth of any prior quarterly or annual period as an indication of our future performance. Even if our revenue continues to increase, we expect that our
revenue growth rate will decline in the future as a result of a variety of factors, including the maturation of our business. Overall growth of our revenue depends on a number
of factors, including our ability to:
• price our products effectively so that we are able to attract new customers and expand sales to our existing customers;
• expand the functionality and use cases for the products we offer on our platform;
• maintain and expand the rates at which customers purchase and renew subscriptions to our platform;
• provide our customers with support that meets their needs;
• continue to introduce our products to new markets outside of the United States;
• successfully identify and acquire or invest in businesses, products or technologies that we believe could complement or expand our platform; and
• increase awareness of our brand on a global basis and successfully compete with other companies.
We may not successfully accomplish any of these objectives, and as a result, it is difficult for us to forecast our future results of operations. If the assumptions
that we use to plan our business are incorrect or change in reaction to changes in our market, or if we are unable to maintain consistent revenue or revenue growth, our
stock price could be volatile, and it may be difficult to achieve and maintain profitability. You should not rely on our revenue for any prior quarterly or annual periods as any
indication of our future revenue or revenue growth.
In addition, we expect to continue to expend substantial financial and other resources on:
• our technology infrastructure, including systems architecture, scalability, availability, performance and security;
• our sales and marketing organization to engage our existing and prospective customers, increase brand awareness and drive adoption of our products;
• product development, including investments in our product development team and the development of new products and new functionality for our
platform as well as investments in further optimizing our existing products and infrastructure;
• acquisitions or strategic investments;
• international expansion; and
• general administration.
These investments may not result in increased revenue growth in our business. If we are unable to maintain or increase our revenue at a rate sufficient to offset
the expected increase in our costs, our business, financial position, and results of operations will be harmed, and we may not be able to achieve or maintain profitability
over the long term. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and other unknown factors that may result in losses
in future periods. If our revenue growth does not meet our expectations in future periods, our business, financial position and results of operations may be harmed, and we
may not achieve or maintain profitability in the future.
We have a history of operating losses and may not achieve or sustain profitability in the future.
We have experienced net losses in several recent fiscal years and as of December 31, 2023, we had an accumulated deficit of $153.7 million. While we have
experienced significant revenue growth in recent periods and periods of
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profitability, we are not certain whether or when we will obtain a high enough volume of sales to sustain or increase our growth or maintain profitability in the future. We also
expect our costs and expenses to increase in future periods, which could negatively affect our future results of operations if our revenue does not increase. In particular, we
intend to continue to expend significant funds to further develop our platform, including by introducing new products and functionality, and to expand our inside and field
sales teams and customer success team to drive new customer adoption, expand use cases and integrations, and support international expansion. We will also face
increased compliance costs associated with growth and the expansion of our customer base. Our efforts to grow our business may be costlier than we expect, or the rate of
our growth in revenue may be slower than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses. We may incur
significant losses in the future for a number of reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications or delays, and other
unknown events. If we are unable to sustain profitability, the value of our business and Class A common stock may significantly decrease.
We have a limited operating history at our current scale, which makes it difficult to forecast our future results of operations.
As a result of our limited operating history at our current scale and the introduction of several new products in recent years, our ability to accurately forecast
our future results of operations is limited and subject to a number of uncertainties, including our ability to plan for and model future growth. Our historical revenue growth
should not be considered indicative of our future performance. Further, in future periods, our revenue growth could slow or our revenue could decline for a number of
reasons, including slowing demand for our products, increasing competition, changes to technology, a decrease in the growth of our overall market, or our failure, for any
reason, to continue to take advantage of growth opportunities. We have also encountered, and will continue to encounter, risks and uncertainties frequently experienced by
growing companies in rapidly changing industries, such as the risks and uncertainties described herein. If our assumptions regarding these risks and uncertainties and our
future revenue growth are incorrect or change, or if we do not address these risks successfully, our operating and financial results could differ materially from our
expectations, and our business could suffer.
We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.
We have funded our operations since inception primarily through equity and debt financings and sales of our products. We cannot be certain when or if our
operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business. We intend to continue to make investments to support our
business, which may require us to engage in equity or debt financings to secure additional funds. Additional financing may not be available on terms favorable to us, if at all.
If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results, and
financial condition. If we incur additional debt, the debt holders would have rights senior to holders of common stock to make claims on our assets, and the terms of any
debt could restrict our operations, including our ability to pay dividends on our common stock. Because our decision to issue securities in the future will depend on
numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity
securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our common stock and diluting their interests.
Strategic and Operational Risks
Our business depends on our existing customers purchasing additional subscriptions and products from us and renewing their subscriptions. If our
customers do not renew or expand their subscriptions with us, our future operating results would be harmed.
Our future success depends in part on our ability to sell additional subscriptions and products to our existing customers, and our customers renewing their
subscriptions when the contract term expires. The terms of our subscription agreements are primarily monthly or annual, with some quarterly, semiannual and multi-year.
Our customers have no obligation to renew their subscriptions for our products after the expiration of their subscription period. In order for us to maintain or improve our
results of operations, it is important that our customers renew or expand their subscriptions with us. Whether our customers renew or expand their subscriptions with us
may be impacted by a number of factors, including business strength or weakness of our customers, customer usage, customer satisfaction with our products and platform
capabilities and customer support, our prices, the capabilities and prices of competing products, mergers and acquisitions affecting our customer base, consolidation of
affiliates’ multiple paid business accounts into a single paid business account, or reductions in our customers’ spending on IT solutions or their spending levels generally.
These factors may be exacerbated by unfavorable conditions in the economy, see “Risks Associated with our Growth—Unfavorable conditions in our industry or the global
economy, or reductions in information technology spending, could limit our ability to grow our business and negatively affect our results of operations” above. These factors
may also be exacerbated if, consistent with our growth strategy, our customer base continues
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to grow to encompass larger enterprises, which may also require more sophisticated and costly sales efforts. If our customers do not purchase additional subscriptions and
products from us or our customers fail to renew their subscriptions, our revenue may decline and our business, financial condition and results of operations may be harmed.
If we are unable to attract new customers, our business, financial condition and results of operations will be adversely affected.
To increase our revenue, we must continue to attract new customers. Our success will depend to a substantial extent on the widespread adoption of our
platform and products as an alternative to existing solutions. Many enterprises have invested substantial personnel and financial resources to integrate traditional on-
premise architectures into their businesses and, therefore, may be reluctant or unwilling to migrate to cloud computing. Further, the adoption of SaaS business software
may be slower in industries with heightened data security interests or business practices requiring highly-customizable application software. In addition, as our market
matures, our products evolve, and competitors introduce lower cost or differentiated products that are perceived to compete with our platform and products, our ability to
sell subscriptions for our products could be impaired. Similarly, our subscription sales could be adversely affected if customers or users within these organizations perceive
that features incorporated into competitive products reduce the need for our products or if they prefer to purchase other products that are bundled with solutions offered by
other companies that operate in adjacent markets and compete with our products. As a result of these and other factors, we may be unable to attract new customers,
which may have an adverse effect on our business, financial condition and results of operations.
Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader
market acceptance of our products.
Our ability to increase our customer base and achieve broader market acceptance of our products and platform capabilities will depend to a significant extent
on our ability to expand our sales and marketing organization. We plan to continue expanding our direct sales force, both domestically and internationally. We also plan to
dedicate significant resources to sales and marketing programs. All of these efforts will require us to invest significant financial and other resources, including in channels in
which we have limited or no experience to date. Our business and results of operations will be harmed if our sales and marketing efforts do not generate significant
increases in revenue or increases in revenue that are smaller than anticipated. We may not achieve anticipated revenue growth from expanding our sales force if we are
unable to hire, develop, integrate and retain talented and effective sales personnel, if our new and existing sales personnel, on the whole, are unable to achieve desired
productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective.
If we or our third-party service providers experience, or are unable to protect against cyber-attacks, ransomware, security incidents, or security breaches,
or if unauthorized parties otherwise obtain access to or otherwise compromise our customers’ data, our data, or our platform and information technology
systems, then our solution may be perceived as not being secure, our reputation may be harmed, demand for our platform and products may be reduced,
and we may incur significant liabilities or additional expenses.
We collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of and share personal information, confidential
information and other information necessary to provide our services, to operate our business, for legal and marketing purposes, and for other business-related purposes.
Our platform and products involve the storage and transmission of data, including personal information, and security breaches or unauthorized access to our
platform and products, or those of our third-party service providers, could result in the unauthorized, unlawful, or accidental acquisition, modification, destruction, loss,
alteration, encryption, disclosure of, or access to sensitive information including our customers' data. Consequently, we may be subject to significant litigation, indemnity
obligations, fines, penalties, disputes, investigations and other liabilities. We have previously and may in the future become the target of cyber-attacks by third parties
seeking to gain unauthorized access to and exfiltrate our or our customers’ data, including confidential and personal information, from certain of our infrastructure
resources, or to disrupt our ability to provide our services. In addition, many of our employees are working remotely, which may pose additional data security risks
(including, for example, an increase in phishing and malicious emails we began experiencing during 2020). The reliability and continuous availability of our platform is
critical to our success. However, complex software such as ours can contain errors, defects, security vulnerabilities or software bugs that, despite testing by us, are difficult
to detect and correct, particularly when such vulnerabilities are first introduced or when new versions or enhancements of our platform are released. Real or perceived
errors, defects, security vulnerabilities or software bugs in our products could result in reputational harm, reduce the demand for our products and expose us to breach of
contract claims, regulatory fines and related liabilities.
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We may use third-party service providers and sub-processors to help us deliver services to our customers. These vendors, such as cloud infrastructure
providers, may store or process personal and confidential information for us or our customers. We use third-party technology, systems and services in a variety of contexts,
including, without limitation, encryption and authentication technology, employee email, content delivery to customers, back-office support, credit card processing and other
functions. While we have taken steps to protect the confidential and personal information that we have access to, our security measures or those of our third-party service
providers that store or otherwise process certain of our and our customers’ data on our behalf could be breached or we could suffer a loss of our or our customers’ data.
Our ability to monitor our third-party service providers’ data security is limited. Cyber-attacks, computer malware, viruses, employee mistakes or malfeasance, social
engineering (including spear phishing), malicious code, denial-of-service attacks, credential harvesting and general hacking have become more prevalent in our industry,
particularly against cloud services. Ransomware attacks, including those from organized criminal threat actors, nation-states and nation-state supported actors, are
becoming increasingly prevalent and can lead to significant interruptions, delays, or outages in our operations, loss of data (including customer data), loss of income,
significant extra expenses to restore data or systems, reputational loss and the diversion of funds. To alleviate the financial, operational and reputational impact of a
ransomware attack it may be preferable to make extortion payments, but we may be unwilling or unable to do so (including, for example, if applicable laws or regulations
prohibit such payments). Similarly, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our
supply chain have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our platform, systems and
networks or the systems and networks of third parties that support us and our services. Despite the security controls we have in place, such attacks are very difficult to
avoid.
There can be no assurance that any security measures that we or our third-party service providers have implemented will be effective against current or future
security threats. While we have developed systems and processes designed to protect the integrity, confidentiality, and security of our and our customers’ data, our
security measures or those of our third-party service providers could fail and result in unauthorized access to or disclosure, modification, misuse, loss or destruction of such
data.
Third parties may also conduct attacks designed to temporarily deny customers access to our cloud services. Any security breach or other security incident, or
the perception that one has occurred, could result in a loss of customer confidence in the security of our platform and damage to our brand, reduce the demand for our
products, disrupt normal business operations, require us to spend material resources to investigate or correct the breach and to prevent future security breaches and
incidents, expose us to legal liabilities, including litigation, regulatory enforcement, and indemnity obligations, and adversely affect our business, financial condition and
results of operations. These risks are likely to increase as we continue to grow and process, store, and transmit increasingly large amounts of data.
In addition, we do not directly control content that our customers store in our products. If our customers use our products for the collection, transmission or
storage of personal information and our security measures are or are believed to have been breached as a result of third-party action, employee error, malfeasance or
otherwise, our reputation could be damaged, our business may suffer, and we could incur significant liability. In addition, our remediation efforts may not be successful.
We also process, store and transmit our own data as part of our business and operations. This data may include personal, confidential or proprietary
information. We may expend significant resources, fundamentally change our business activities and practices, or modify our operations or information technology in an
effort to protect against security incidents and to mitigate, detect, and remediate actual and potential vulnerabilities.
We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of
third parties upon which we rely). We may not, however, detect and remediate all such vulnerabilities on a timely basis. Among other things, our applications, systems,
networks, software, other computer assets and physical facilities could be breached or could otherwise malfunction or fail, or the personal or confidential information that
we store could be otherwise compromised due to employee error or malfeasance, if, for example, third parties fraudulently induce our employees or our members to
disclose information or user names and/or passwords, or otherwise compromise the security of our networks, systems and/or physical facilities. Additionally, from time to
time employees or service providers may inadvertently misconfigure resources or misdirect certain communications, leading to security vulnerabilities or incidents that we
must then expend effort and incur expenses to correct.
We may have contractual and other legal obligations to notify relevant stakeholders of security incidents. For instance, most jurisdictions have enacted laws,
such as the U.S. Health Insurance Portability and Accountability Act of 1996, or HIPAA, requiring companies to notify individuals, regulatory authorities, and others of
security breaches involving certain types of data. Such mandatory contractual and legal disclosures are costly, could lead to negative publicity, may cause our
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customers to lose confidence in the effectiveness of our security measures and require us to expend significant capital and other resources to respond to and/or alleviate
problems caused by the actual or perceived security breach, and any failure to provide appropriate notice may violate the terms of our customer contracts. Applicable laws,
our contracts, our representations, or industry standards may require us to use industry-standard or reasonable measures to safeguard sensitive personal information or
confidential information. A security breach could lead to claims by our customers, or other relevant stakeholders, that we have failed to comply with such legal or
contractual obligations. As a result, we could be subject to legal action or our customers could end their relationships with us. Further, there can be no assurance that any
limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages.
The costs to respond to a security breach and/or mitigate any security vulnerabilities that may be identified could be significant, our efforts to address these
problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service, negative publicity, and other harm to our
business and our competitive position. We could be required to fundamentally change our business activities and practices in response to a security breach or related
regulatory actions or litigation, which could have an adverse effect on our business.
Additionally, we cannot be certain that our insurance coverage will be adequate for fines, judgments, settlements, penalties, costs, attorney fees and other
impacts that arise out of privacy or security incidents or breaches. If the impacts of a privacy or security incident or breach, or the successful assertion of one or more large
claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large
deductible or co-insurance requirements), it could have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage, cyber
coverage and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim. The
successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including
premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our reputation, business, financial condition and results of
operations. Our risks are likely to increase as we continue to expand, grow our customer base, and process, store, and transmit increasingly large amounts of proprietary
and sensitive data.
Interruptions or performance problems associated with our products and platform capabilities may adversely affect our business, financial condition and
Our continued growth depends in part on the ability of our existing and potential customers to access our products and platform capabilities at any time and
within an acceptable amount of time. We have experienced, and may in the future experience, disruptions, outages, and other performance problems due to a variety of
factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of users
accessing our products and platform capabilities simultaneously, denial of service attacks, or other security-related incidents. For example, in March 2023, our platform
experienced widespread outages across multiple products and regions, which was substantially resolved in approximately a day.
It may become increasingly difficult to maintain and improve our performance, especially during peak usage times and as our products and platform
capabilities become more complex and our user traffic increases. If our products and platform capabilities are unavailable or if our users are unable to access our products
and platform capabilities within a reasonable amount of time or at all, we may experience a loss of customers, lost or delayed market acceptance of our platform and
products, delays in payment to us by customers, injury to our reputation and brand, legal claims against us, and the diversion of our resources. In addition, to the extent that
we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate
actual and anticipated changes in technology, our business, financial condition and results of operations may be adversely affected.
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We may not be able to successfully manage our growth, and if we are not able to grow efficiently, our business, financial condition and results of
operations could be harmed.
As usage of our platform capabilities grow, we will need to devote additional resources to improving and maintaining our infrastructure and integrating with
third-party applications. In addition, we will need to appropriately scale our internal business systems and our services organization, including customer support and
professional services, to serve our growing customer base. Any failure of or delay in these efforts could result in impaired system performance and reduced customer
satisfaction, resulting in decreased sales to new customers, lower dollar-based net retention rates or, the issuance of service credits or requested refunds, which would
hurt our revenue growth and our reputation. Further, any failure in optimizing our spend on third-party cloud services as we scale could negatively impact our gross
margins. Even if we are successful in our expansion efforts, they will be expensive and complex, and require the dedication of significant management time and attention.
We could also face inefficiencies or service disruptions as a result of our efforts to scale our internal infrastructure. We cannot be sure that the expansion of and
improvements to our internal infrastructure will be effectively implemented on a timely basis, if at all, and such failures could harm our business, financial condition and
We rely upon third-party providers of cloud-based infrastructure to host our products. Any disruption in the operations of these third-party providers,
limitations on capacity or interference with our use could adversely affect our business, financial condition and results of operations.
We outsource substantially all of the infrastructure relating to our cloud solution to third-party hosting services. Customers of our cloud-based products need to
be able to access our platform at any time, without interruption or degradation of performance, and we provide them with service-level commitments with respect to uptime.
Our cloud-based products depend on protecting the virtual cloud infrastructure hosted by third-party hosting services by maintaining its configuration, architecture, features
and interconnection specifications, as well as the information stored in these virtual data centers, which is transmitted by third-party internet service providers. Any
limitation on the capacity of our third-party hosting services could impede our ability to onboard new customers or expand the usage of our existing customers, which could
adversely affect our business, financial condition and results of operations. In addition, any incident affecting our third-party hosting services’ infrastructure that may be
caused by cyber-attacks, natural disasters, fire, flood, severe storm, earthquake, power loss, telecommunications failures, outbreaks of contagious diseases, terrorist or
other attacks, and other similar events beyond our control could negatively affect our cloud-based products. A prolonged service disruption affecting our cloud-based
solution for any of the foregoing reasons would negatively impact our ability to serve our customers and could damage our reputation with current and potential customers,
expose us to liability, cause us to lose customers or otherwise harm our business. We may also incur significant costs for using alternative equipment or taking other
actions in preparation for, or in reaction to, events that damage the third-party hosting services we use.
In the event that our service agreements with our third-party hosting services are terminated, or there is a lapse of service, elimination of services or features
that we utilize, interruption of internet service provider connectivity or damage to such facilities, we could experience interruptions in access to our platform as well as
significant delays and additional expense in arranging or creating new facilities and services and/or re-architecting our cloud solution for deployment on a different cloud
infrastructure service provider, which could adversely affect our business, financial condition and results of operations.
We offer free trials and a free tier of our platform to drive developer awareness of our products, and encourage usage and adoption. If these marketing
strategies fail to lead to customers purchasing paid subscriptions, our ability to grow our revenue will be adversely affected.
To encourage awareness, usage, familiarity and adoption of our platform and products, we offer free trials and a free tier of our platform. These strategies may
not be successful in leading customers to purchase our products, as users of our free tier may not lead to them or others within their organization purchasing and deploying
our platform. To the extent that users do not become, or we are unable to successfully attract paying customers, we will not realize the intended benefits of these marketing
strategies and our ability to grow our revenue will be adversely affected.
We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or
investors with respect to our results of operations, our stock price could decline.
Our results of operations have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our
control. As a result, our past results may not be indicative of our future performance. In addition to the other risks described herein, factors that may affect our results of
operations include the following:
• fluctuations in demand for or pricing of our platform and products;
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• fluctuations in usage of our platform and products;
• our ability to attract new customers;
• our ability to retain our existing customers;
• customer expansion rates and the pricing and quantity of subscriptions renewed;
• the pricing of subscriptions from customers in our cloud-provider marketplaces;
• timing and amount of our investments to expand the capacity of our third-party cloud infrastructure providers;
• seasonality driven by industry conferences;
• the investment in new products and features relative to investments in our existing infrastructure and products;
• the timing of our customer purchases;
• fluctuations or delays in purchasing decisions in anticipation of new products or enhancements by us or our competitors;
• changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions;
• our ability to control costs, including our operating expenses;
• the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including
commissions;
• the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and other non-cash charges;
• the amount and timing of costs associated with recruiting, training and integrating new employees and retaining and motivating existing employees;
• the effects of acquisitions and their integration;
• general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our
customers participate, including those impacted by the COVID-19 pandemic, war in Ukraine and conflict in the Middle East;
• the effect of other economic factors, including inflation, pricing and currency fluctuations;
• the impact of new accounting pronouncements;
• changes in regulatory or legal environments that may cause us to incur, among other elements, expenses associated with compliance;
• changes in the competitive dynamics of our market, including consolidation among competitors or customers; and
• significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our products and platform capabilities.
The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and
credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, higher interest rates and
uncertainty about economic stability. For example, the COVID-19 pandemic resulted in widespread unemployment, economic slowdown and extreme volatility in the capital
markets. The ongoing military conflict between Russia and Ukraine has also created extreme volatility in the global capital markets and is expected to have further global
economic consequences. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets
deteriorate, or do not improve, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner
or on favorable terms, more costly or more dilutive. Increased inflation rates can adversely affect us by increasing our costs, including personnel costs.
Any of these and other factors, or the cumulative effect of some of these factors, may cause our results of operations to vary significantly. If our quarterly
results of operations fall below the expectations of investors and securities
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analysts who follow our stock, the price of our Class A common stock could decline substantially, and we could face costly lawsuits, including securities class action suits.
Seasonality may cause fluctuations in our sales and results of operations.
Historically, we have experienced seasonality in new customer bookings, as we typically enter into a higher percentage of subscription agreements with new
customers and renewals with existing customers in the fourth quarter of the year. We believe that this results from the procurement, budgeting, and deployment cycles of
many of our customers, particularly our enterprise customers. We expect that this seasonality will continue to affect our bookings and our results of operations in the future,
and might become more pronounced as we continue to target larger enterprise customers.
Downturns or upturns in our sales may not be immediately reflected in our financial position and results of operations.
Because we recognize a large portion of our revenue ratably over the term of the subscription agreement, any decreases in new subscriptions or renewals in
any one period may not be immediately reflected as a decrease in revenue for that period, but could negatively affect our revenue in future quarters. This also makes it
difficult for us to rapidly increase our revenue through the sale of additional subscriptions in any period, as revenue is recognized over the term of the subscription
agreement. In addition, fluctuations in monthly subscriptions based on usage could affect our revenue on a period-over-period basis. If our quarterly results of operations
fall below the expectations of investors and securities analysts who follow our stock, the price of our Class A common stock would decline substantially, and we could face
costly lawsuits, including securities class actions.
We target enterprise customers, and sales to these customers involve risks that may not be present or that are present to a lesser extent with sales to
smaller entities.
We have a field sales team that targets enterprise customers. Sales to large customers involve risks that may not be present or that are present to a lesser
extent with sales to smaller entities, such as longer sales cycles, more complex customer requirements, substantial upfront sales costs, and less predictability in
completing some of our sales. For example, enterprise customers may require considerable time to evaluate and test our solutions and those of our competitors prior to
making a purchase decision and placing an order. A number of factors influence the length and variability of our sales cycle, including the need to educate potential
customers about the uses and benefits of our solutions, the discretionary nature of purchasing and budget cycles, and the competitive nature of evaluation and purchasing
approval processes. As a result, the length of our sales cycle, from identification of the opportunity to deal closure, may vary significantly from customer to customer, with
sales to large enterprises typically taking longer to complete. Moreover, large enterprise customers often begin to deploy our products on a limited basis, but nevertheless
demand configuration, integration services and pricing negotiations, which increase our upfront investment in the sales effort with no guarantee that these customers will
deploy our products widely enough across their organization to justify our substantial upfront investment.
If we fail to retain and motivate members of our management team or other key employees, or fail to attract additional qualified personnel to support our
operations, our business and future growth prospects would be harmed.
Our success and future growth depend largely upon the continued services of our executive officers, particularly Olivier Pomel, our co-founder and Chief
Executive Officer, Alexis Lê-Quôc, our co-founder and Chief Technology Officer, and David Obstler, our Chief Financial Officer, as well as our other key employees in the
areas of research and development and sales and marketing functions. From time to time, there may be changes in our executive management team or other key
employees resulting from the hiring or departure of these personnel. Our executive officers and other key employees are employed on an at-will basis, which means that
these personnel could terminate their employment with us at any time. The loss of one or more of our executive officers, or the failure by our executive team to effectively
work with our employees and lead our company, could harm our business. We also are dependent on the continued service of our existing software engineers because of
the complexity of our products and platform capabilities.
In addition, to execute our growth plan, we must attract and retain highly qualified personnel. Competition for these personnel is intense, especially for
engineers experienced in designing and developing SaaS applications and experienced sales professionals. If we are unable to attract such personnel in cities where we
are located, we may need to hire in other locations which may add to the complexity and costs of our business operations. We have experienced, and we expect to
continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced
personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these
employees or we have breached their legal obligations, resulting in a diversion of our time and resources. In addition, prospective and existing employees often consider
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the value of the equity awards they receive in connection with their employment. If the value or perceived value of our equity awards declines, experiences significant
volatility, or increases such that prospective employees believe there is limited upside to the value of our equity awards, it may adversely affect our ability to recruit and
retain key employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects would be harmed.
If we fail to maintain and enhance our brand, our ability to expand our customer base will be impaired and our business, financial condition and results of
operations may suffer.
We believe that maintaining and enhancing the Datadog brand is important to support the marketing and sale of our existing and future products to new
customers and expand sales of our platform and products to existing customers. We also believe that the importance of brand recognition will increase as competition in
our market increases. Successfully maintaining and enhancing our brand will depend largely on the effectiveness of our marketing efforts, our ability to provide reliable
products that continue to meet the needs of our customers at competitive prices, our ability to maintain our customers’ trust, our ability to continue to develop new
functionality and use cases, and our ability to successfully differentiate our products and platform capabilities from competitive products. Our brand promotion activities
may not generate customer awareness or yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brand.
If we fail to successfully promote and maintain our brand, our business, financial condition and results of operations may suffer.
If we cannot maintain our company culture as we grow, our success and our business and competitive position may be harmed.
We believe our culture has been a key contributor to our success to date and that the critical nature of the platform that we provide promotes a sense of
greater purpose and fulfillment in our employees. Any failure to preserve our culture could negatively affect our ability to retain and recruit personnel, which is critical to our
growth, and to effectively focus on and pursue our corporate objectives. As we continue to grow and expand globally, we may find it difficult to maintain these important
aspects of our culture particularly given remote or hybrid work arrangements, which increased as a result of the COVID-19 pandemic. If we fail to maintain our company
culture, our business and competitive position may be harmed.
If we fail to offer high-quality support, our reputation could suffer.
Our customers rely on our customer support personnel to resolve issues and realize the full benefits that our platform provides. High-quality support is also
important for the renewal and expansion of our subscriptions with existing customers. The importance of our support function will increase as we expand our business and
pursue new customers. If we do not help our customers quickly resolve issues and provide effective ongoing support, our ability to maintain and expand our subscriptions
to existing and new customers could suffer, and our reputation with existing or potential customers could suffer.
Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify, pose integration challenges, divert the attention of
management, disrupt our business, dilute stockholder value, and adversely affect our business, financial condition and results of operations.
We have in the past and may in the future seek to acquire or invest in businesses, joint ventures, products and platform capabilities, or technologies that we
believe could complement or expand our services and platform capabilities, enhance our technical capabilities, or otherwise offer growth opportunities. Any such
acquisition or investment may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable opportunities,
whether or not the transactions are completed, and may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating
or integrating the businesses, technologies, products and platform capabilities, personnel internal controls or operations of any acquired companies, particularly if the key
personnel of an acquired company choose not to work for us, their software is not easily adapted to work with our platform, or we have difficulty retaining the customers of
any acquired business due to changes in ownership, management or otherwise. These transactions may also disrupt our business, divert our resources, and require
significant management attention that would otherwise be available for development of our existing business. Any such transactions that we are able to complete may not
result in any synergies or other benefits we had expected to achieve, which could result in impairment charges that could be substantial. In addition, we may not be able to
find and identify desirable acquisition targets or business opportunities or be successful in entering into an agreement with any particular strategic partner. These
transactions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our results of operations. In addition, if the
resulting business from such a transaction fails to meet our expectations, our business, financial condition and results of operations may be adversely affected or we may
be exposed to unknown risks or liabilities.
Industry and Competitive Risks
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If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, or to changing customer
needs, requirements or preferences, our platform and products may become less competitive.
Our ability to attract new users and customers and increase revenue from existing customers depends in large part on our ability to enhance and improve our
existing products, increase adoption and usage of our products, and introduce new products and capabilities. The market in which we compete is relatively new and
subject to rapid technological change, evolving industry standards, and changing regulations, as well as changing customer needs, requirements and preferences. The
success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. For example, some of our products use
artificial intelligence, or AI, and machine learning, and we are making investments in expanding our artificial intelligence capabilities, which will require significant
investment in infrastructure and personnel. However, AI technologies are complex and rapidly evolving in a changing competitive market and market acceptance of AI
technologies remains uncertain, see “Industry and Competitive Risks—We use artificial intelligence in our products and services which may result in operational
challenges, legal liability, reputational harm, competitive risks and regulatory concerns that could adversely affect our business and results of operations.” below. If we were
unable to enhance our products and platform capabilities to keep pace with rapid technological and regulatory change, or if new technologies emerge that are able to
deliver competitive products at lower prices, more efficiently, more conveniently, or more securely than our products, our business, financial condition and results of
operations could be adversely affected.
The success of our platform depends, in part, on its ability to be deployed in a self-service installation process. We currently offer more than 700 out-of-the-box
integrations to assist customers in deploying Datadog, and we need to continuously modify and enhance our products to adapt to changes and innovation in existing and
new technologies to maintain and grow our integrations. We expect that the number of integrations we will need to support will continue to expand as developers adopt new
software platforms, and we will have to develop new versions of our products to work with those new platforms. This development effort may require significant
engineering, sales and marketing resources, all of which would adversely affect our business. Any failure of our products to operate effectively with future infrastructure
platforms and technologies could reduce the demand for our products. If we are unable to respond to these changes in a cost-effective manner, our products may become
less marketable and less competitive or obsolete, and our business, financial condition and results of operations could be adversely affected.
The markets in which we participate are competitive, and if we do not compete effectively, our business, financial condition and results of operations
could be harmed.
Our unified platform combines functionality from numerous traditional product categories, and hence we compete in each of these categories with home-grown
and open-source technologies, as well as a number of different vendors. With respect to on-premise infrastructure monitoring, we compete with diversified technology
companies and systems management vendors including IBM, Microsoft Corporation, and SolarWinds Corporation. With respect to APM, we compete with companies
including Cisco Systems, Inc., New Relic, Inc. and Dynatrace Software Inc. With respect to log management, we compete with companies including Splunk Inc. and Elastic
N.V. With respect to cloud monitoring, we compete with native solutions from cloud providers such as AWS, GCP and Microsoft Azure. In addition, we may increasingly
choose to allow these third-party hosting providers to offer our solutions directly through their customer marketplaces. An increasing number of sales through cloud provider
marketplaces could reduce both the number of customers with whom we have direct commercial relationships as well as our profit margins on sales made through such
marketplaces.
With the introduction of new technologies and market entrants, we expect that the competitive environment will remain intense going forward. Some of our
actual and potential competitors have been acquired by other larger enterprises and have made or may make acquisitions or may enter into partnerships or other strategic
relationships that may provide more comprehensive offerings than they individually had offered or achieve greater economies of scale than us. In addition, new entrants not
currently considered to be competitors may enter the market through acquisitions, partnerships or strategic relationships. As we look to market and sell our products and
platform capabilities to potential customers with existing internal solutions, we must convince their internal stakeholders that our products and platform capabilities are
superior to their current solutions.
We compete on the basis of a number of factors, including:
• ability to provide unified, real-time observability of IT environments;
• ability to operate in dynamic and elastic environments;
• extensibility across the enterprise, including development, operations and business users;
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• propensity to enable collaboration between development, operations and business users;
• ability to monitor any combination of public clouds, private clouds, on-premise and multi-cloud hybrids;
• ability to provide advanced analytics and machine learning;
• ease of deployment, implementation and use;
• ability to operate across a broad range of geographies in compliance with local regulations;
• breadth of offering and key technology integrations;
• performance, security, scalability and reliability;
• quality of service and customer satisfaction;
• total cost of ownership; and
• brand recognition and reputation.
Our competitors vary in size and in the breadth and scope of the products offered. Many of our competitors and potential competitors have greater name
recognition, longer operating histories, more established customer relationships and installed customer bases, larger marketing budgets and greater resources than we do.
Further, other potential competitors not currently offering competitive solutions may expand their product or service offerings to compete with our products and platform
capabilities, or our current and potential competitors may establish cooperative relationships among themselves or with third parties that may further enhance their
resources and product offerings in our addressable market. Our competitors may be able to respond more quickly and effectively than we can to new or changing
opportunities, technologies, standards, and customer requirements. An existing competitor or new entrant could introduce new technology that reduces demand for our
products and platform capabilities. In addition to product and technology competition, we face pricing competition. Some of our competitors offer their solutions at a lower
price, which has resulted in, and may continue to result in, pricing pressures.
For all of these reasons, we may not be able to compete successfully against our current or future competitors, and this competition could result in the failure of
our platform to continue to achieve or maintain market acceptance, any of which would harm our business, results of operations, and financial condition.
The market for our solutions may develop more slowly or differently than we expect.
It is difficult to predict customer adoption rates and demand for our products, the entry of competitive products or the future growth rate and size of the cloud-
based software and SaaS business software markets. The expansion of these markets depends on a number of factors, including: the cost, performance, and perceived
value associated with cloud-based and SaaS business software as an alternative to legacy systems, as well as the ability of cloud-based software and SaaS providers to
address heightened data security and privacy concerns. If we have a security incident or other cloud-based software and SaaS providers experience security incidents,
loss of customer data, disruptions in delivery or other similar problems, which is an increasing focus of the public and investors in recent years, the market for these
applications as a whole, including our platform and products, may be negatively affected. If cloud-based and SaaS business software does not continue to achieve market
acceptance, or there is a reduction in demand caused by a lack of customer acceptance, technological challenges, weakening economic conditions, data security or
privacy concerns, governmental regulation, competing technologies and products, or decreases in information technology spending or otherwise, the market for our
platform and products might not continue to develop or might develop more slowly than we expect, which would adversely affect our business, financial condition and
We use artificial intelligence in our products and services which may result in operational challenges, legal liability, reputational harm, competitive risks
and regulatory concerns that could adversely affect our business and results of operations.
We incorporate AI, including generative AI, into our products. These technologies are complex and rapidly evolving and building them requires significant
investment in infrastructure and personnel with no assurance that we will realize the desired or anticipated benefits. Our competitors may more successfully incorporate AI
into their products and achieve higher market acceptance of their AI solutions, which could impair our ability to compete effectively and adversely affect our results of
operations.
We may also encounter new risks, challenges, and unintended consequences as a result of our use of AI. For example, the issue of intellectual property
ownership and license rights surrounding AI technologies has not been fully
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addressed by U.S. courts or federal or state laws and regulations, and the incorporation of AI technologies into our products and services could expose us to intellectual
property claims or mandatory compliance with open source software or other license terms. Our use of AI may also lead to novel cybersecurity or privacy risks which may
adversely affect our operations and reputation. Various governments have proposed policy and regulatory responses to oversee the use of AI, including the EU’s Artificial
Intelligence Act, which would apply beyond the European Union’s borders. Compliance with regulations as well as social and ethical standards relating to AI may require
significant research and development costs as well as management and employee attention. Any actual or perceived failure to comply with these laws, regulations or
ethical standards could include severe penalties, reputational harm, and slow adoption of AI in our products and services. In addition, our business may be disrupted if any
of the third-party AI services we use become unavailable due to extended outages or commercially unreasonable terms of service.
Legal and Regulatory Risks
We typically provide service-level commitments under our subscription agreements. If we fail to meet these contractual commitments, we could be
obligated to provide credits for future service or face subscription termination with refunds of prepaid amounts, which would lower our revenue and harm
our business, financial condition and results of operations.
Our subscription agreements typically contain service-level commitments. If we are unable to meet the stated service-level commitments, including failure to
meet the uptime and response time requirements under our customer subscription agreements, we may be contractually obligated to provide these customers with service
credits which could significantly affect our revenue in the periods in which the failure occurs and the credits are applied. We could also face subscription terminations and a
reduction in renewals, which could significantly affect both our current and future revenue. Any service-level failures could also damage our reputation, which could also
adversely affect our business, financial condition and results of operations.
Indemnity provisions in various agreements to which we are party potentially expose us to substantial liability for infringement, misappropriation or other
violation of intellectual property rights, data protection and other losses.
Our agreements with our customers and other third parties may include indemnification provisions under which we agree to indemnify or otherwise be liable to
them for losses suffered or incurred as a result of claims of infringement, misappropriation or other violation of intellectual property rights, data protection, damages caused
by us to property or persons, or other liabilities relating to or arising from our software, services, platform, our acts or omissions under such agreements or other contractual
obligations. Some of these indemnity agreements provide for uncapped liability and some indemnity provisions survive termination or expiration of the applicable
agreement. Large indemnity payments could harm our business, financial condition and results of operations. Although we attempt to contractually limit our liability with
respect to such indemnity obligations, we are not always successful and may still incur substantial liability related to them, and we may be required to cease use of certain
functions of our platform or products as a result of any such claims. Any dispute with a customer or other third party with respect to such obligations could have adverse
effects on our relationship with such customer or other third party and other existing or prospective customers, reduce demand for our products and services and adversely
affect our business, financial conditions and results of operations. In addition, although we carry general liability insurance, our insurance may not be adequate to indemnify
us for all liability that may be imposed or otherwise protect us from liabilities or damages with respect to claims alleging compromises of customer data, and any such
coverage may not continue to be available to us on acceptable terms or at all.
We and our third-party service providers are subject to stringent and changing laws, regulations, standards, and contractual obligations related to data
privacy and security. Actual or perceived failure by us or our third-party service providers to comply with such laws, regulations, standards, or contractual
obligations could harm our business.
We have legal, contractual and other applicable obligations regarding the protection and appropriate use of personal information, confidential information, and
other proprietary information that we, our third-party service providers or other partners process. We are subject to a variety of federal, state, local and foreign laws,
directives, regulations, and industry standards, relating to the collection, use, retention, security, disclosure, transfer and other processing of personal information. The
regulatory framework for and users' expectations around privacy and security issues worldwide is rapidly evolving and as a result, implementation standards and
enforcement practices are likely to remain uncertain for the foreseeable future resulting in possible significant operational costs for compliance and risk to our business. In
addition, new technologies we use in our products or in our business, like AI and machine learning, may also subject us to new or enhanced governmental or regulatory
scrutiny, litigation, ethical concerns, or other complications that could adversely affect our business, reputation, or financial results.
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Internationally, nearly every jurisdiction in which we operate has established its own data security and privacy legal framework with which we, our third-party
service providers, or our customers must comply. For example, the European Union's General Data Protection Regulation, or EU GDPR, contains numerous requirements
and changes from previously existing law, including more robust obligations on data processors and heavier documentation requirements for data protection compliance
programs by companies and data protection authorities. Under the EU GDPR, companies may face temporary or definitive bans on data processing and other corrective
actions, significant monetary fines, and private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations
authorized at law to represent their interests.
In addition, Europe and other jurisdictions have enacted data localization laws and cross-border personal data transfer laws. For example, the European
Economic Area (EEA) and the United Kingdom have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it
generally believes are inadequate. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and United Kingdom to the
United States in compliance with law, such as the EEA standard contractual clauses, the United Kingdom’s International Data Transfer Agreement/Addendum, and the
EU-U.S. Data Privacy Framework and the United Kingdom extension thereto (which allows for transfers for relevant U.S.-based organizations who self-certify compliance
and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully
transfer personal data to the United States.
Additionally, other countries outside of Europe have enacted or are considering enacting similar cross-border data transfer restrictions and laws requiring local
data residency, and strict limitations to the processing of personal information, which could increase the cost and complexity of delivering our services and operating our
business. For example, Brazil enacted the General Data Protection Law, New Zealand enacted the New Zealand Privacy Act, China enacted its Personal Information
Protection Law, and Canada introduced the Digital Charter Implementation Act.
If we are unable to implement a valid compliance mechanism for cross-border personal information transfers, we may face increased exposure to regulatory
actions, substantial fines and injunctions against processing or transferring personal information from Europe or elsewhere. Inability to import personal information from
other jurisdictions to the United States may significantly and negatively impact our business operations, including by lowering sales on our platform due to the difficulty of
establishing a lawful mechanism for personal information transfers out of Europe or other jurisdictions, or requiring us to increase our data processing capabilities in
Europe or elsewhere at significant expense. Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out of Europe
for allegedly violating the GDPR’s cross-border data transfer limitations.
Additionally, European legislative proposals and present laws and regulations apply to cookies and similar tracking technologies, electronic communications,
and marketing. In the EU and the United Kingdom, regulators are increasingly focusing on compliance with requirements related to the online behavioral advertising
ecosystem and requirements around consent. It is anticipated that the ePrivacy Regulation will replace the current national laws that implement the ePrivacy Directive that
governs electronic communications. Outside of Europe, other laws and regulations, including legislative proposals, individual behavior and industry practices are
increasingly resistant to the use of personal information to deliver targeted advertising, making certain online advertising activities more difficult and subject to additional
scrutiny. For example, the California Consumer Privacy Act, or CCPA, grants California residents the right to opt-out of a company’s sharing of personal information for
cross-context behavioral advertising purposes. Other comprehensive U.S. state privacy laws extend similar rights to residents. As a result of these developments, we may
be required to change the way we market our products, which would impair our ability to reach new or existing customers.
Complying with these and other applicable laws may cause us to incur substantial operational costs or require us to change our business practices. Despite
our efforts to bring practices into compliance with all applicable laws, we may not be successful in our efforts to achieve compliance either due to internal or external factors
such as resource allocation limitations or a lack of vendor cooperation. Non-compliance could result in proceedings against us by governmental entities, customers, data
subjects or others. We may also experience difficulty retaining or obtaining new European or multi-national customers due to the legal requirements, compliance cost,
potential risk exposure, and uncertainty for these entities, and we may experience significantly increased liability with respect to these customers pursuant to the terms set
forth in our engagements with them. While we utilize a data center in the EEA to maintain certain customer data (which may include personal information) originating from
the EEA, we may find it necessary to establish additional systems and processes to maintain such data in the EEA, which may involve substantial expense and distraction
from other aspects of our business.
Domestic laws in this area are also complex and developing rapidly, and we are, or may become, subject to numerous U.S. data privacy and security laws. In
the United States, laws governing data privacy and security include those promulgated under the authority of the Federal Trade Commission Act, the Electronic
Communications Privacy Act, the Computer Fraud and Abuse Act, the CCPA, HIPAA, and numerous other state and federal laws relating to privacy and data security.
Many state legislatures have adopted legislation that regulates how businesses operate online, including measures
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relating to privacy, data security and data breaches. Laws in all 50 states require businesses to provide notice to customers whose personal information has been
disclosed as a result of a data breach. The laws are not consistent, and compliance in the event of a widespread data breach is costly. States are also constantly amending
existing laws, requiring attention to frequently changing legal requirements.
The CCPA, which became effective on January 1, 2020, gives California residents (including consumers, employees, job applicants and business
representatives) expanded rights to access and delete their personal information, opt out of the sale of personal information, and receive detailed information about how
their personal information is used. The CCPA provides a private right of action and statutory damages for data breaches and may increase our compliance costs and
potential liability with respect to other personal information we collect about California residents. In addition, the amendments to the CCPA made by the California Privacy
Rights Act, or the CPRA, went into effect on January 1, 2023. The CPRA amends the CCPA to give California residents the ability to limit the use of their sensitive
information, provide additional penalties for CPRA violations concerning California residents under the age of 16, and establish a new California Privacy Protection Agency
to implement and enforce the law. These changes to the CCPA could impact our business activities depending on how they are interpreted. These laws exemplify the
vulnerability of our business to the evolving regulatory environment related to the protection of personal information. Other states have enacted or proposed comprehensive
privacy laws as well. For example, privacy laws in Colorado, Connecticut, Utah and Virginia have recently gone into effect and similar laws in other states, such as
Delaware, Indiana, Iowa, Montana, Oregon, Tennessee, and Texas have been enacted and are expected to go into effect over the next several years.
Because the interpretation and application of many privacy and data protection laws and regulations, along with contractually imposed industry standards are
uncertain, it is possible that they may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our
products and platform capabilities. If so, in addition to the possibility of fines, lawsuits, mass arbitration demands, regulatory investigations and imprisonment of company
officials, other claims and penalties, significant costs for remediation and damage to our reputation, we could be required to fundamentally change our business activities
and practices or modify our products and platform capabilities, any of which could have an adverse effect on our business. In particular, plaintiffs have become increasingly
more active in bringing privacy-related claims against companies, including class claims and mass arbitration demands. Some of these claims allow for the recovery of
statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of
violations. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data security laws, regulations, or
contractual obligations, could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business. Furthermore, the costs of
compliance with, and other burdens imposed by, the laws, regulations, and contractual obligations that are applicable to the businesses of our customers may limit the use
and adoption of, and reduce the overall demand for, our products. Privacy and data security concerns, whether valid or not valid, may inhibit market adoption of our
products, particularly in certain industries and foreign countries. If we are not able to adjust to these changing laws, regulations, and contractual obligations, our business
may be harmed.
We publicly post our policies and other documentation regarding our practices concerning the collection, processing, use, transfer, and disclosure of data.
Although we endeavor to comply with our published policies and documentation, we may at times fail to do so or be alleged to have failed to do so. The publication of our
policies and other documentation that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to
be deceptive, unfair, or misrepresentative of our actual practices. Any failure by us, our third-party service providers or other parties with whom we do business to comply
with our policies or other documentation could result in proceedings against us by governmental entities, private parties or others. We are or may also be subject to the
terms of our external and internal privacy and security policies, codes, representations, certifications, industry standards, publications and frameworks and contractual
obligations to third parties related to privacy, information security, including contractual obligations to indemnify and hold harmless third parties from the costs or
consequences of non-compliance with data protection laws or other obligations.
We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, and non-compliance with such laws can subject us to criminal or
civil liability and harm our business, financial condition and results of operations.
We are subject to the U.S. Foreign Corrupt Practices Act, or FCPA, U.S. domestic bribery laws, the UK Bribery Act, and other anti-corruption and anti-money
laundering laws in the countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted
broadly to generally prohibit companies, their employees and their third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper
payments or benefits to recipients in the public or private sector. As we increase our international sales and business and sales to the public sector, we may engage with
business partners and third-party intermediaries to market our products and
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to obtain necessary permits, licenses, and other regulatory approvals. In addition, we or our third-party intermediaries may have direct or indirect interactions with officials
and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party
intermediaries, our employees, representatives, contractors, partners and agents, even if we do not explicitly authorize such activities.
While we have policies and procedures to address compliance with such laws, we cannot assure you that all of our employees and agents will not take actions
in violation of our policies and applicable law, for which we may be ultimately held responsible. As we increase our international sales and business, our risks under these
laws may increase.
Detecting, investigating, and resolving actual or alleged violations of anti-corruption laws can require a significant diversion of time, resources, and attention
from senior management. In addition, noncompliance with anti-corruption, anti-bribery, or anti-money laundering laws could subject us to whistleblower complaints,
investigations, sanctions, settlements, prosecution, enforcement actions, fines, damages, other civil or criminal penalties or injunctions, suspension or debarment from
contracting with certain persons, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas or investigations are launched, or
governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal proceeding, our business, financial condition and results of operations
could be harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense
costs and other professional fees.
Sales to government entities and highly regulated organizations are subject to a number of challenges and risks.
We may sell to U.S. federal, state, and local, as well as foreign, governmental agency customers, as well as to customers in highly regulated industries such as
financial services, telecommunications and healthcare. Sales to such entities are subject to a number of challenges and risks. Selling to such entities can be highly
competitive, expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale. Government
contracting requirements may change which may restrict our ability to sell into the government sector until we are able to comply with the revised contracting requirements.
Government demand and payment for our products are affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely
affecting public sector demand for our products.
Further, governmental and highly regulated entities may demand contract terms that differ from our standard arrangements and are less favorable than terms
agreed with private sector customers. Such entities may have statutory, contractual, or other legal rights to terminate contracts with us or our partners for convenience or
for other reasons. Any such termination may adversely affect our ability to contract with other government customers as well as our reputation, business, financial condition
and results of operations.
We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we
violate the controls.
Our platform and products are subject to U.S. export controls, including the Export Administration Regulations, and we incorporate encryption technology into
certain of our products. These encryption products and the underlying technology may be exported outside of the United States only with the required export
authorizations, including by license, a license exception, or other appropriate government authorizations, including the filing of an encryption classification request or self-
classification report.
Furthermore, our activities are subject to U.S. economic sanctions laws and regulations administered by the Office of Foreign Assets Control that prohibit the
shipment of most products and services to embargoed jurisdictions or sanctioned parties without the required export authorizations. Obtaining the necessary export license
or other authorization for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities. Violations of U.S. sanctions or export control
regulations can result in significant fines or penalties and possible incarceration for responsible employees and managers.
If our channel partners fail to obtain appropriate import, export, or re-export licenses or permits, we may also be adversely affected through reputational harm,
as well as other negative consequences, including government investigations and penalties.
Also, various countries, in addition to the United States, regulate the import and export of certain encryption and other technology, including import and export
licensing requirements, and have enacted laws that could limit our ability to distribute our products or could limit our end-customers’ ability to implement our products in
those countries. Changes in our
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products or future changes in export and import regulations may create delays in the introduction of our platform in international markets, prevent our end-customers with
international operations from deploying our platform globally or, in some cases, prevent the export or import of our products to certain countries, governments, or persons
altogether. From time to time, various governmental agencies have proposed additional regulation of encryption technology. Any change in export or import regulations,
economic sanctions or related legislation, increased export and import controls, or change in the countries, governments, persons, or technologies targeted by such
regulations, could result in decreased use of our platform by, or in our decreased ability to export or sell our products to, existing or potential end-customers with
international operations. Any decreased use of our platform or limitation on our ability to export or sell our products would adversely affect our business, results of
operations, and growth prospects.
Any future litigation against us could be costly and time-consuming to defend.
We are and in the future may become subject to legal proceedings and claims that arise in the ordinary course of business, such as claims brought by our
customers in connection with commercial disputes or employment claims made by our current or former employees. Litigation might result in substantial costs and may
divert management’s attention and resources, which might seriously harm our business, financial condition and results of operations. Insurance might not cover such
claims, might not provide sufficient payments to cover all the costs to resolve one or more such claims, and might not continue to be available on terms acceptable to us. A
claim brought against us that is uninsured or underinsured could result in unanticipated costs, potentially harming our business, financial position and results of operations.
We are subject to risks related to our environmental, social, and governance practices and disclosures.
There is an increasing focus from regulators, certain investors and other stakeholders concerning environmental, social, and governance, or ESG, matters,
both in the United States and internationally. In response, we are in the process of evaluating and developing our ESG practices. Any of our current or future ESG practices
and initiatives, if any, could be difficult to achieve and costly to implement. Furthermore, if these practices are not perceived to be adequate, or if the initiatives and positions
we take (or choose not to take) on ESG issues are unpopular with some of our employees, customers or potential customers, our reputation could be harmed, which could
negatively impact our ability to attract or retain employees or customers.
Standards for tracking and reporting ESG matters continue to evolve. Our interpretation or application of frameworks and standards may change from time to
time or differ from those of others. This may result in a lack of consistent or meaningful comparative data from period to period or between us and other companies in the
same industry. In addition, our processes and controls may not comply with evolving standards for identifying, measuring and reporting ESG metrics, including ESG-
related disclosures that may be required by various regulators, and such standards may change over time, which could result in significant revisions to our ESG metrics.
The costs of changing any of our current practices to comply with any new legal and regulatory requirements in the United States and elsewhere may be substantial.
We could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our clients would have to pay for our
products and adversely affect our results of operations.
An increasing number of states have considered or adopted laws that attempt to impose tax collection obligations on out-of-state companies. Additionally, the
Supreme Court of the United States ruled in South Dakota v. Wayfair, Inc. et al, or Wayfair, that online sellers can be required to collect sales and use tax despite not
having a physical presence in the buyer’s state. In response to Wayfair, or otherwise, states or local governments may adopt, or begin to enforce, laws requiring us to
calculate, collect, and remit taxes on sales in their jurisdictions. A successful assertion by one or more states requiring us to collect taxes where we presently do not do so,
or to collect more taxes in a jurisdiction in which we currently do collect some taxes, could result in substantial tax liabilities, including taxes on past sales, as well as
penalties and interest. The imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional
administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors, and decrease our future sales, which could
have a material adverse effect on our business and results of operations.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
As of December 31, 2023, we had NOL carryforwards for federal and state income tax purposes of approximately $148.9 million and $206.4 million,
respectively, which may be available to offset taxable income in the future, and which expire in 2026 for state purposes if not utilized. Unused U.S. federal NOLs for taxable
years beginning before January 1, 2018, may be carried forward to offset future taxable income, if any, until such unused NOLs expire. Under current law, U.S. federal
NOLs incurred in taxable years after December 31, 2017, can be carried forward indefinitely, but the deductibility of such U.S.
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federal NOLs is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to federal tax laws. A lack of future taxable income would
adversely affect our ability to utilize portions of these NOLs before they expire. In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the
Code, a corporation that undergoes an “ownership change” (as defined under Section 382 of the Code and applicable Treasury Regulations) is subject to limitations on its
ability to utilize its pre-change NOLs to offset post-change taxable income. We may experience a future ownership change under Section 382 of the Code that could affect
our ability to utilize the NOLs to offset our income. Furthermore, our ability to utilize NOLs of companies that we have acquired or may acquire in the future may be subject
to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons, our existing NOLs could expire or
otherwise be unavailable to reduce future income tax liabilities, including for state tax purposes. For these reasons, we may not be able to utilize a material portion of the
NOLs reflected on our balance sheets, even if we attain profitability, which could potentially result in increased future tax liability to us and could adversely affect our
operating results and financial condition.
Changes in our effective tax rate or tax liability may have an adverse effect on our results of operations.
Our effective tax rate or tax liability could change due to several factors, including:
• changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates;
• changes in tax laws, tax treaties, and regulations or the interpretation of them, including changes to IRC Section 174 under the U.S. Tax Cuts and Jobs
Act and the Inflation Reduction Act;
• any implementation of the Organization for Economic Co-operation and Development’s (OECD) international tax framework, including the Pillar II
minimum tax regime;
• changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and
feasibility of possible tax planning strategies, and the economic and political environments in which we do business;
• the outcome of current and future tax audits, examinations, or administrative appeals; and
• limitations or adverse findings regarding our ability to do business in some jurisdictions.
We will continue to monitor these developments and pending legislation, and evaluate any potential impact on our results of operations. Any of these
developments could adversely affect our results of operations.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
GAAP is subject to interpretation by the Financial Accounting Standards Board, the SEC and various bodies formed to promulgate and interpret applicable
accounting principles. A change in these principles or interpretations could have a significant effect on our reported results of operations and could affect the reporting of
transactions already completed before the announcement of a change.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in
our consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, as described in Note 2 in the Notes to Consolidated Financial Statements included in “Part II, Item 8. Financial Statements and
Supplementary Data” of this Annual Report on Form 10-K. The results of these estimates form the basis for making judgments about the carrying values of assets,
liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant estimates and judgments involve revenue
recognition, business combinations, and internal-use software development costs. Our results of operations may be adversely affected if our assumptions change or if
actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors,
resulting in a decline in the market price of our Class A common stock.
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Risks Related to Intellectual Property
Any failure to obtain, maintain, protect or enforce our intellectual property and proprietary rights could impair our ability to protect our proprietary
technology and our brand.
Our success depends to a significant degree on our ability to obtain, maintain, protect and enforce our intellectual property rights, including our proprietary
technology, know-how and our brand. We rely on a combination of trademarks, trade secrets, patents, copyrights, contractual restrictions, and other intellectual property
laws and confidentiality procedures to establish and protect our proprietary rights. However, the steps we take to obtain, maintain, protect and enforce our intellectual
property rights may be inadequate. We will not be able to protect our intellectual property rights if we are unable to enforce our rights or if we do not detect unauthorized
use of our intellectual property rights. If we fail to protect our intellectual property rights adequately, our competitors may gain access to our proprietary technology and
develop and commercialize substantially identical products, services or technologies, our business, financial condition, results of operations or prospects may be harmed.
In addition, defending our intellectual property rights might entail significant expense. Any patents, trademarks, or other intellectual property rights that we have or may
obtain may be challenged or circumvented by others or invalidated or held unenforceable through administrative processes, including re-examination, inter partes review,
interference and derivation proceedings and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings) or litigation. Despite our pending patent
applications, there can be no assurance that our patent applications will result in issued patents. Even if we continue to seek patent protection in the future, we may be
unable to obtain or maintain patent protection for our technology. In addition, any patents issued from pending or future patent applications or licensed to us in the future
may not provide us with competitive advantages, or may be successfully challenged by third parties. There may be issued patents of which we are not aware, held by third
parties that, if found to be valid and enforceable, could be alleged to be infringed by our current or future technologies or products. There also may be pending patent
applications of which we are not aware that may result in issued patents, which could be alleged to be infringed by our current or future technologies or products.
Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be
possible for unauthorized third parties to copy our products and platform capabilities and use information that we regard as proprietary to create products that compete
with ours. Patent, trademark, copyright, and trade secret protections may not be available to us in every country in which our products are available. For example, as we
have expanded internationally, we have been unable to register and obtain the exclusive right to use the Datadog trademark in certain jurisdictions, including certain
European countries outside of the EU, and as we continue to expand, we may face similar issues in other jurisdictions. The value of our intellectual property could diminish
if others assert rights in or ownership of our trademarks and other intellectual property rights, or trademarks that are similar to our trademarks. We may be unable to
successfully resolve these types of conflicts to our satisfaction. In some cases, litigation or other actions may be necessary to protect or enforce our trademarks and other
intellectual property rights. Furthermore, third parties may assert intellectual property claims against us, and we may be subject to liability, required to enter into costly
license agreements, or required to rebrand our products and/or prevented from selling some of our products if third parties successfully claim that we infringe,
misappropriate or otherwise violate their trademarks or other intellectual property rights. In addition, the laws of some foreign countries may not be as protective of
intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. As we expand our international
activities, our exposure to unauthorized copying and use of our products and platform capabilities and proprietary information will likely increase. Moreover, policing
unauthorized use of our technologies, trade secrets, and intellectual property may be difficult, expensive, and time-consuming, particularly in foreign countries where the
laws may not be as protective of intellectual property rights as those in the United States and where mechanisms for enforcement of intellectual property rights may be
weak. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon, misappropriating or otherwise violating our intellectual property
rights.
We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with other
third parties, including suppliers and other partners. However, we cannot guarantee that we have entered into such agreements with each party that has or may have had
access to our proprietary information, know-how and trade secrets. Moreover, no assurance can be given that these agreements will be effective in controlling access to,
distribution, use, misuse, misappropriation, reverse engineering or disclosure of our proprietary information, know-how and trade secrets. Further, these agreements may
not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our products and platform capabilities. These
agreements may be breached, and we may not have adequate remedies for any such breach.
In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect our intellectual property rights.
Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Litigation brought to protect and enforce our intellectual
property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Further,
our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits
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attacking the validity and enforceability of our intellectual property rights, and if such defenses, counterclaims or countersuits are successful, we could lose valuable
intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our
management’s attention and resources, could delay further sales or the implementation of our products and platform capabilities, impair the functionality of our products
and platform capabilities, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our products, or injure our reputation.
We may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing
business.
We have been and may continue to be subject to intellectual property disputes. Our success depends, in part, on our ability to develop and commercialize our
products and services without infringing, misappropriating or otherwise violating the intellectual property rights of third parties. However, we may not be aware that our
products or services are infringing, misappropriating or otherwise violating third-party intellectual property rights and such third parties may bring claims alleging such
infringement, misappropriation or violation. Lawsuits are time-consuming and expensive to resolve and they divert management’s time and attention. The software industry
is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets, and other intellectual and proprietary rights. Companies in the
software industry are often required to defend against litigation claims based on allegations of infringement, misappropriation or other violations of intellectual property
rights. Our technologies may not be able to withstand any third-party claims against their use. In addition, many companies have the capability to dedicate substantially
greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. We do not currently have a large patent portfolio,
which could prevent us from deterring patent infringement claims through our own patent portfolio, and our competitors and others may now and in the future have
significantly larger and more mature patent portfolios than we have. Any litigation may also involve patent holding companies or other adverse patent owners that have no
relevant product revenue, and therefore, our patent portfolio may provide little or no deterrence as we would not be able to assert them against such entities or individuals.
If a third party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or develop alternative
technology for any infringing aspect of our business, we would be forced to limit or stop sales of our products and platform capabilities or cease business activities related
to such intellectual property. Although we carry general liability insurance, our insurance may not cover potential claims of this type or may not be adequate to indemnify us
for all liability that may be imposed. We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our
business, financial condition or results of operations. Any intellectual property litigation to which we might become a party, or for which we have been or may continue to be
required to provide indemnification, may require us to do one or more of the following:
• cease selling or using products or services that incorporate the intellectual property rights that we allegedly infringe, misappropriate or violate;
• make substantial payments for legal fees, settlement payments or other costs or damages;
• obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or
• redesign the allegedly infringing products to avoid infringement, misappropriation or violation, which could be costly, time-consuming or impossible.
Even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the
resources of our management and harm our business and operating results. Moreover, there could be public announcements of the results of hearings, motions or other
interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of
our common stock. We expect that the occurrence of infringement claims is likely to grow as the market for our platform and products grows. Accordingly, our exposure to
damages resulting from infringement claims could increase and this could further exhaust our financial and management resources.
We use open source software in our products, which could negatively affect our ability to sell our services or subject us to litigation or other actions.
We use open source software in our products and we expect to continue to incorporate open source software in our services in the future. Few of the licenses
applicable to open source software have been interpreted by courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated
conditions or restrictions on our ability to commercialize our products. Moreover, we cannot ensure that we have not incorporated additional open source software in our
software in a manner that is inconsistent with the terms of the applicable license or our current policies and procedures. If we
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fail to comply with these licenses, we may be subject to certain requirements, including requirements that we offer our solutions that incorporate the open source software
for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software and that we
license such modifications or derivative works under the terms of applicable open source licenses. If an author or other third party that distributes such open source
software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending
against such allegations and could be subject to significant damages, enjoined from the sale of our products that contained the open source software and required to
comply with onerous conditions or restrictions on these products, which could disrupt the distribution and sale of these products. From time to time, there have been claims
challenging the ownership rights in open source software against companies that incorporate it into their products and the licensors of such open source software provide
no warranties or indemnities with respect to such claims. As a result, we and our customers could be subject to lawsuits by parties claiming ownership of what we believe
to be open source software. Litigation could be costly for us to defend, have a negative effect on our business, financial condition and results of operations, or require us to
devote additional research and development resources to change our products. In addition, although we employ open source software license screening measures, if we
were to combine our proprietary software products with open source software in a certain manner we could, under certain open source licenses, be required to release the
source code of our proprietary software products. Some open source projects have known vulnerabilities and architectural instabilities and are provided on an “as-is” basis
which, if not properly addressed, could negatively affect the performance of our product. If we inappropriately use or incorporate open source software subject to certain
types of open source licenses that challenge the proprietary nature of our products, we may be required to re-engineer such products, discontinue the sale of such
products or take other remedial actions.
Risks Associated with our International Operations
Our current operations are international in scope, and we plan further geographic expansion, creating a variety of operational challenges.
A component of our growth strategy involves the further expansion of our operations and customer base internationally. Revenue, as determined based on the
billing address of our customers, from regions outside of North America was 30% for the year ended December 31, 2023. Beyond North America, we now have sales
presence internationally, including in Amsterdam, Dublin, London, Paris, Seoul, Singapore, Sydney, and Tokyo. We are continuing to adapt to and develop strategies to
address international markets, but there is no guarantee that such efforts will have the desired effect. For example, we anticipate that we will need to establish relationships
with new partners in order to expand into certain countries, and if we fail to identify, establish and maintain such relationships, we may be unable to execute on our
expansion plans. As of December 31, 2023, approximately 39% of our full-time employees were located outside of the United States, 36% of whom were located in France.
We expect that our international activities will continue to grow for the foreseeable future as we continue to pursue opportunities in existing and new international markets,
which will require significant dedication of management attention and financial resources.
Our current and future international business and operations involve a variety of risks, including:
• slower than anticipated availability and adoption of cloud and hybrid IT infrastructures by international businesses;
• changes in a specific country’s or region’s political or economic conditions;
• the need to adapt and localize our products for specific countries;
• greater difficulty collecting accounts receivable and longer payment cycles;
• potential changes in trade relations, sanctions, regulations, or laws;
• unexpected changes in laws, regulatory requirements, or tax laws;
• more stringent regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information,
particularly in Europe and the United Kingdom;
• differing and potentially more onerous labor regulations, especially in Europe, where labor laws are generally more advantageous to employees as
compared to the United States, including deemed hourly wage and overtime regulations in these locations;
• challenges inherent in efficiently managing, and the increased costs associated with, an increased number of employees over large geographic
distances, including the need to implement appropriate systems, policies, benefits, and compliance programs that are specific to each jurisdiction;
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• potential changes in laws, regulations and costs affecting our U.K. operations and local employees due to Brexit;
• difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory
systems;
• increased travel, real estate, infrastructure, and legal compliance costs associated with international operations;
• currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if
we chose to do so in the future;
• limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;
• laws and business practices favoring local competitors or general market preferences for local vendors;
• limited or insufficient intellectual property protection or difficulties obtaining, maintaining, protecting or enforcing our intellectual property rights, including
our trademarks and patents;
• political instability, terrorist activities and military conflict, including the war in Ukraine and conflict in the Middle East;
• an outbreak of a contagious disease, which may cause us or our third-party providers and/or customers to temporarily suspend our or their respective
operations in the affected city or country;
• exposure to liabilities under anti-corruption and anti-money laundering laws, including the FCPA, U.S. bribery laws, the UK Bribery Act, and similar laws
and regulations in other jurisdictions; and
• adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
If we invest substantial time and resources to further expand our international operations and are unable to do so successfully and in a timely manner, our
business and results of operations will suffer.
We are exposed to fluctuations in currency exchange rates, which could negatively affect our results of operations.
Our sales contracts are denominated in U.S. dollars, and therefore, our revenue is not directly subject to foreign currency risk. However, a strengthening of the
U.S. dollar could increase the real cost of our products and platform capabilities to our customers outside of the United States, which could adversely affect our results of
operations. In addition, an increasing amount of our operating expenses are incurred outside the United States. These operating expenses are denominated in foreign
currencies and are subject to fluctuations due to changes in foreign currency exchange rates. If we are not able to successfully hedge against the risks associated with
currency fluctuations, our results of operations could be adversely affected.
Our international operations may subject us to potential adverse tax consequences.
We are expanding our international operations to better support our growth into international markets. Our corporate structure and associated transfer pricing
policies contemplate future growth in international markets, and consider the functions, risks, and assets of the various entities involved in intercompany transactions. The
amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of the various jurisdictions, including the United States, to our international
business activities, changes in tax rates, new or revised tax laws or interpretations of existing tax laws and policies, and our ability to operate our business in a manner
consistent with our corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies
for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to
specific jurisdictions. If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and
penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations. Our financial statements
could fail to reflect adequate reserves to cover such a contingency.
Risks Related to Ownership of Our Class A Common Stock
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Our stock price may be volatile, and the value of our Class A common stock may decline.
The market price of our Class A common stock may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of
which are beyond our control, including:
• actual or anticipated fluctuations in our financial condition or results of operations;
• variance in our financial performance from expectations of securities analysts;
• changes in the pricing of subscriptions to our products;
• changes in our projected operating and financial results;
• changes in laws or regulations applicable to our platform and products;
• announcements by us or our competitors of significant business developments, acquisitions, or new offerings;
• significant data breaches, disruptions to or other incidents involving our software;
• our involvement in litigation;
• future sales of our Class A common stock by us or our stockholders;
• changes in senior management or key personnel;
• the trading volume of our Class A common stock;
• changes in the anticipated future size and growth rate of our market; and
• general economic and market conditions.
Broad market and industry fluctuations, as well as general economic, political, regulatory, and market conditions may also negatively impact the market price
of our Class A common stock. Additional risks are described in “Risks Associated with our Growth—Unfavorable conditions in our industry or the global economy, or
reductions in information technology spending, could limit our ability to grow our business and negatively affect our results of operations”. In addition, technology stocks
have historically experienced high levels of volatility. In the past, companies that have experienced volatility in the market price of their securities have been subject to
securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial expenses and divert our management’s
attention.
The dual class structure of our common stock has the effect of concentrating voting control with holders of our Class B common stock, including our
executive officers, directors and their affiliates, which will limit the ability of holders of our Class A common stock to influence the outcome of important
transactions.
Our Class B common stock has ten votes per share and our Class A common stock has one vote per share. As of December 31, 2023, our outstanding shares
of Class B common stock represented approximately 46% of the voting power of our outstanding capital stock. As a result, the holders of our Class B common stock, which
includes certain of our directors, executive officers and their affiliates, exercise considerable influence over matters requiring stockholder approval, including the election of
directors and approval of significant corporate transactions, such as a merger or other sale of our company or our assets, even if their stock holdings represent less than
50% of the outstanding shares of our capital stock. This concentration of ownership limits the ability of other stockholders to influence corporate matters and may cause us
to make strategic decisions that could involve risks to holders of our Class A common stock or that may not be aligned with the interests of holders of our Class A common
stock. This control may adversely affect the market price of our Class A common stock.
Further, future transfers by holders of our Class B common stock will generally result in those shares converting into shares of our Class A common stock,
subject to limited exceptions, such as certain transfers effected for tax or estate planning purposes. The conversion of shares of our Class B common stock into shares of
our Class A common stock has had and will continue to have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who
retain their Class B shares.
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We cannot predict the impact our dual class structure may have on the market price of our Class A common stock.
We cannot predict whether our dual class structure, combined with the concentrated control of our stockholders who held our capital stock prior to the
completion of our initial public offering, or IPO, including our executive officers, employees and directors and their affiliates, will result in a lower or more volatile market
price of our Class A common stock or in adverse publicity or other adverse consequences. For example, certain index providers have in the past imposed restrictions on
including companies with multiple class share structures in certain of their indexes. Given the sustained flow of investment funds into passive strategies that seek to track
certain indexes, exclusion from stock indexes would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other
investors. As a result, the market price of our Class A common stock could be adversely affected.
Future sales of our Class A common stock in the public market could cause the market price of our Class A common stock to decline.
Sales of a substantial number of shares of our Class A common stock in the public market, or the perception that these sales might occur, could depress the
market price of our Class A common stock and could impair our ability to raise capital through the sale of additional equity securities. Many of our stockholders who held
our capital stock prior to the completion of our IPO have substantial unrecognized gains on the value of the equity they hold based upon the price at which shares were sold
in our IPO, and therefore they may take steps to sell their shares or otherwise secure the unrecognized gains on those shares. We are unable to predict the timing of or the
effect that such sales may have on the prevailing market price of our Class A common stock.
We have registered all of the shares of Class A common stock and Class B common stock issuable upon exercise of outstanding options or other equity
incentives we may grant in the future, for public resale under the Securities Act. The shares of Class A common stock and Class B common stock will become eligible for
sale in the public market to the extent such options are exercised, subject to compliance with applicable securities laws.
Further, as of December 31, 2023, holders of a substantial number of shares of our capital stock have rights, subject to certain conditions, to require us to file
registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
Our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans or otherwise will dilute all
other stockholders.
We expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to continue to grant equity awards to
employees, directors and consultants under our equity incentive plans. We may also raise capital through equity financings in the future. As part of our business strategy,
we have and may continue to acquire or make investments in companies, products or technologies and issue equity securities to pay for any such acquisition or
investment. Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of
our Class A common stock to decline. Furthermore, if we issue additional equity or convertible debt securities, the new equity securities could have rights senior to those of
our common stock. For example, if we elect to settle our conversion obligation under our 0.125% Convertible Senior Notes due 2025, or our 2025 Notes, in shares of our
Class A common stock or a combination of cash and shares of our Class A common stock, the issuance of such Class A common stock may dilute the ownership interests
of our stockholders and sales in the public market could adversely affect prevailing market prices.
If securities or industry analysts cease publishing research or publish unfavorable or inaccurate research about our business, or if we fail to meet or
significantly exceed our publicly announced financial guidance or the expectations of analysts or public investors, the market price and trading volume of
our Class A common stock could decline.
The market price and trading volume of our Class A common stock will be heavily influenced by the way analysts interpret our financial information and other
disclosures. We do not have control over these analysts. If securities or industry analysts cease coverage of us, downgrade our Class A common stock, or publish negative
reports about our business, our stock price would likely decline. In addition, the stock prices of many companies in the technology industry have declined significantly after
those companies have failed to meet, or significantly exceed, the financial guidance publicly announced by those companies or the expectations of analysts. If our financial
results fail to meet, or significantly exceed, our announced guidance or the expectations or analysts or public investors, analysts could downgrade or Class A common
stock or publish unfavorable research on us. As a result, demand for our Class A common stock could decrease, which might cause our stock price to decline and could
decrease the trading volume of our Class A common stock.
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We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our capital stock, and we do not intend to pay any cash dividends in the foreseeable future. Any
determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, holders of our Class A common stock may need to rely on sales
of their holdings of Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.
We incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States,
which may harm our business.
As a public company in the Unites States, we incur significant legal, accounting, insurance, and other expenses. The Sarbanes-Oxley Act, the Dodd-Frank
Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Global Select Market and other applicable securities rules and regulations impose
various requirements on public companies and these laws, requirements, rules and regulations are subject to varying interpretations and, as a result, their application in
practice may evolve over time as new guidance is provided by regulatory and governing bodies. Our management and other personnel devote a substantial amount of time
to compliance with these requirements. These rules and regulations contribute to increased legal and financial compliance costs and make some activities more time-
consuming and costly.
We are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these
internal controls may adversely affect investor confidence in our company and, as a result, the value of our Class A common stock.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our
internal control over financial reporting on an annual basis. This assessment must include disclosure of any material weaknesses identified by our management in our
internal control over financial reporting. In addition, our independent registered public accounting firm is required to attest to the effectiveness of our internal control over
financial reporting. Our compliance with Section 404 requires that we incur substantial expenses and expend significant management efforts. We have hired, and need to
continue to hire, additional accounting and financial staff with appropriate public company experience and technical accounting knowledge to comply with Section 404.
During the evaluation and testing process of our internal controls in future years, if we identify one or more material weaknesses in our internal control over
financial reporting, we will be unable to certify that our internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses
in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report
our financial condition or results of operations. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered
public accounting firm determines we have a material weakness in our internal control over financial reporting, we could lose investor confidence in the accuracy and
completeness of our financial reports, the market price of our Class A common stock could decline, and we could be subject to sanctions or investigations by the SEC or
other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control
systems required of public companies, could also restrict our future access to the capital markets.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our
stockholders to replace or remove our current management and limit the market price of our Class A common stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change
of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:
• authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and
preferences determined by our board of directors that may be senior to our Class A common stock;
• require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;
• specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief
executive officer;
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• establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons
for election to our board of directors;
• establish that our board of directors is divided into three classes, with each class serving three-year staggered terms;
• prohibit cumulative voting in the election of directors;
• provide that our directors may be removed for cause only upon the vote of at least 66 2/3% of our outstanding shares of voting stock;
• provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and
• require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of voting stock to amend our bylaws and
certain provisions of our certificate of incorporation.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for
stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated
in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on
which the stockholder became an “interested” stockholder. Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares
of our Class A common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that holders of our Class A common stock would
receive a premium for their shares of our Class A common stock in an acquisition.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware and the federal district courts of the
United States of America as the exclusive forums for substantially all disputes between us and our stockholders, which could restrict our stockholders’
ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following
types of actions or proceedings under Delaware statutory or common law: any derivative action or proceeding brought on our behalf; any action asserting a breach of a
fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation, or
our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. The provisions would not apply to suits
brought to enforce a duty or liability created by the Exchange Act. In addition, our amended and restated certificate of incorporation provides that the federal district courts
of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors,
officers, or other employees. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to
bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability
of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such
action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
Risks Related to Our Outstanding 2025 Notes
We may not have sufficient cash flow from our business to make payments on our significant debt when due, and we may incur additional indebtedness in
the future.
In June 2020, we issued the 2025 Notes in a private placement. We may be required to use a substantial portion of our cash flows from operations to pay
interest and principal on our indebtedness. Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the
2025 Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue
to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we
may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly
dilutive. Our ability to refinance
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our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these
activities on desirable terms, which could result in a default on our debt obligations.
In addition, we may incur substantial additional debt in the future, subject to the restrictions contained in our future debt agreements, some of which may be
secured debt. We are not restricted under the terms of the indenture governing the 2025 Notes, from incurring additional debt, securing existing or future debt,
recapitalizing our debt, repurchasing our stock, pledging our assets, making investments, paying dividends, guaranteeing debt or taking a number of other actions that are
not limited by the terms of the indenture governing the 2025 Notes that could have the effect of diminishing our ability to make payments on the 2025 Notes when due.
The conditional conversion feature of the 2025 Notes may adversely affect our financial condition and operating results.
In the event the conditional conversion feature of the 2025 Notes is triggered, as it was during the quarter ended March 31, 2022, holders of the 2025 Notes
are entitled to convert the notes at any time during specified periods at their option. If one or more holders elect to convert their 2025 Notes, unless we elect to satisfy our
conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to
settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert
their 2025 Notes when these conversion triggers are satisfied, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding
principal of the 2025 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
The capped call transactions may affect the value of the 2025 Notes and our Class A common stock.
In connection with the pricing of the 2025 Notes, we entered into capped call transactions with the option counterparties. The capped call transactions cover,
subject to customary adjustments, the number of shares of our common stock that initially underlie the 2025 Notes. The capped call transactions are expected generally to
partially offset the potential dilution to our Class A common stock as a result of conversion of the 2025 Notes. In connection with establishing their initial hedges of the
capped call transactions, the option counterparties or their respective affiliates entered into various derivative transactions with respect to our Class A common stock
concurrently with or shortly after the pricing of the 2025 Notes, including with certain investors in the 2025 Notes.
In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with
respect to our common stock and/or purchasing or selling our Class A common stock or other securities of ours in secondary market transactions following the pricing of
the 2025 Notes on June 2, 2020 and prior to the maturity of the 2025 Notes. They are likely to do so on each exercise date for the capped call transactions, which are
expected to occur during each 30 trading day period beginning on the 31st scheduled trading day prior to the maturity date of the 2025 Notes, or following any termination
of any portion of the capped call transactions in connection with any repurchase, redemption or early conversion of the 2025 Notes. This activity could also cause or
prevent an increase or decrease in the price of our Class A common stock or the 2025 Notes. The potential effect, if any, of these transactions on the price of our Class A
common stock or the 2025 Notes will depend in part on market conditions and cannot be ascertained at this time. Any of these activities could adversely affect the value of
our Class A common stock.
We are subject to counterparty risk with respect to the capped call transactions.
The counterparties to the capped call transactions are financial institutions, and we will be subject to the risk that one or more of the option counterparties may
default, fail to perform or exercise their termination rights under the capped call transactions. Our exposure to the credit risk of the option counterparties will not be secured
by any collateral. If a counterparty to the capped call transactions becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings
with a claim equal to our exposure at the time under such transaction. Our exposure will depend on many factors but, generally, our exposure will increase if the market
price or the volatility of our common stock increases. In addition, upon a default, failure to perform or a termination of the capped call transactions by a counterparty, we
may suffer more dilution than we currently anticipate with respect to our common stock.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
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Risk Management and Strategy
We utilize various processes and tools to assess, identify, and manage risks from cybersecurity threats. In the development of our products and features, our
security teams work with our engineering and product teams to identify, assess, and agree upon mitigation or remediation measures with respect to product development.
On an ongoing basis, we encourage an environment of openness in which our engineering and product teams, led by our security teams, proactively identify, manage and
discuss actual or perceived cybersecurity risks. These teams also use automated and manual processes to identify and track risks from cybersecurity threats. The
identified risks are triaged, prioritized for remediation, and reported by the security teams to various levels of our senior management, as appropriate. We also deploy
technical safeguards that are designed to protect our platform and systems from cybersecurity threats, including firewalls, intrusion prevention, and detection systems. We
have established an incident response plan that addresses our response to cybersecurity incidents, and we require periodic training for our employees on cybersecurity
threats. In addition, we maintain cybersecurity insurance, however, the costs related to cybersecurity threats or disruptions may not be fully insured.
In addition, we maintain third-party vendor management standards that are used to evaluate cybersecurity risks associated with our third-party service
providers, and we assess information technology and software vendors to determine their security posture and maturity. All vendors that process our data or access our
systems go through a security and privacy review before they are engaged that is targeted to the services to be provided and the systems and data involved. Based on the
information provided by the vendor and depending on the nature of the services provided, our vendor management process may involve security questionnaires and
contractual obligations such as audit rights and breach reporting.
We also periodically perform various types of security audits and assessments, including penetration tests, via internal and external parties. In addition, certain
Datadog products are subject to specific compliance requirements and standards, including, as applicable, ISO 27001, SOC 2, PCI, and FedRAMP (Low and Moderate),
and are tested and evaluated by third-party auditors against those applicable compliance requirements and standards. The identified risks from such audits and
assessments are triaged, prioritized, reported by our security teams to various levels of our senior management and tracked and remediated depending on the severity.
Our internal audit function conducts annual interviews across business groups to identify key areas of risk, including cybersecurity risk. This enterprise risk
assessment helps inform the internal audit plan, and both the assessment and progress against the internal audit plan are periodically presented to the Audit Committee.
Our Chief Information Security Officer also reports separately to our Audit Committee on cyber and information security risk on a quarterly basis.
We have previously and may in the future become the target of cyber-attacks by third parties seeking unauthorized access to our or our customers’ data or to
disrupt our ability to provide our services. As a result, we have expended and plan to continue to expend significant resources in an effort to protect against security
incidents and to mitigate, detect, and remediate actual and potential vulnerabilities. Notwithstanding the measures and processes we take to manage cybersecurity risk,
there is no guarantee that these measures and processes will be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on
us. For a description of the risks from cybersecurity threats that may materially affect the Company and how those risks may affect the Company, see our risk factors under
Part 1. Item 1A. Risk Factors in this Annual Report on Form 10-K, including without limitation “Strategic and Operational Risks—If we or our third-party service providers
experience, or are unable to protect against cyber-attacks, ransomware, security incidents, or security breaches, or if unauthorized parties otherwise obtain access to or
otherwise compromise our customers’ data, our data, or our platform and information technology systems, then our solution may be perceived as not being secure, our
reputation may be harmed, demand for our platform and products may be reduced, and we may incur significant liabilities or additional expenses.”
Governance
Our Board of Directors has delegated its oversight of risks associated with cybersecurity to its Audit Committee. Generally, each quarter, the Audit Committee
reviews and discusses with our Chief Information Security Officer material cybersecurity risks and our processes for assessing, identifying, and managing such risks, and
the Audit Committee will receive updates as necessary between each quarterly meeting. In the event of a material cybersecurity incident, the Audit Committee will be
notified, and the Board of Directors will also receive updates on cybersecurity risks and incidents, as appropriate.
Our Chief Information Security Officer and Chief Technology Officer are the members of our executive team who are principally responsible for overseeing our
cybersecurity risk management program. Our Chief Information Security Officer and Chief Technology Officer are informed about cybersecurity threats through their
involvement with the processes set forth above. For example, our Chief Information Security Officer receives regular reports on identified cybersecurity risks and
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progress toward remediation from our security teams and both our Chief Information Security Officer and Chief Technology Officer are notified of cybersecurity incidents
and the management of such incidents in accordance with the escalation procedures of our incident response plan.
We believe these members of our executive team have the appropriate expertise, background, and experience to manage risks arising from cybersecurity
threats. Alexis Lê-Quôc is one of the co-founders of our company and has served as our Chief Technology Officer and a member of our board of directors since June 2010.
Mr. Lê-Quôc has extensive knowledge and experience from building and leading the development of our technology and from his decades of experience in the technology
industry. Prior to co-founding Datadog, Mr. Lê-Quôc worked at Wireless Generation from March 2004 to December 2010, where he most recently served as Director of
Live Operations. Previously, Mr. Lê-Quôc held engineering positions at a number of technology and software companies, including IBM Research and France Télécom
S.A. Mr. Lê-Quôc received his M.S. in Computer Science from CentraleSupélec. Emilio Escobar has served as our Chief Information Security Officer since September
2020. With two decades of experience in information security and compliance, Mr. Escobar has worked at large enterprises, medium-sized companies, and governmental
organizations. Previously, Mr. Escobar served as the Vice President of Information Security for Hulu, where he played a pivotal role in setting up key security functions.
Prior to that, Mr. Escobar worked for PlayStation, where he built and ran the software security teams. Mr. Escobar holds a BS in Computer Science from the University of
Puerto Rico.
Item 2. Properties
Our current principal executive office is located in New York, New York and, as of December 31, 2023, it consists of approximately 238,000 square feet of
space under leases that expire in June 2033.
We lease other offices around the world for our employees, including in Boston, Denver, San Francisco, Paris, Dublin, Amsterdam, Sydney, Tokyo, and
Singapore.
We lease all of our facilities and do not own any real property. We intend to procure additional space in the future as we continue to add employees and
expand geographically. We believe our facilities are adequate and suitable for our current needs.
Item 3. Legal Proceedings
From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a
party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results,
cash flows or financial condition. Defending such proceedings is costly and can impose a significant burden on management and employees. The results of any current or
future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs,
diversion of management resources and other factors.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Holders of Record
Our Class A common stock is traded on The Nasdaq Global Select Market, or Nasdaq, under the symbol “DDOG”. Our Class B common stock is not listed or
traded on any exchange, but each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock, and is
automatically converted upon sale or transfer into one share of Class A common stock.
As of February 15, 2024, there were 305,929,910 holders of record of our Class A common stock and 25,944,197 holders of record of our Class B common
stock.
Dividend Policy
We have never declared or paid any dividends on our Class A common stock or Class B common stock. We currently intend to retain all available funds and
any future earnings for the operation and expansion of our business. Accordingly, we do not anticipate declaring or paying dividends in the foreseeable future. The payment
of any future dividends will be at the discretion of our Board of Directors and will depend on our results of operations, capital requirements, financial condition, prospects,
contractual arrangements, any limitations on payment of dividends present in any debt agreements, and other factors that our Board of Directors may deem relevant.
Recent Sales of Unregistered Equity Securities
During the year ended December 31, 2023, we issued 176,687 shares of Class A common stock as consideration in acquisitions. The issuance was deemed
exempt from registration under the Securities Act pursuant to the exemption provided by Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a
public offering.
Issuer Purchases of Equity Securities
None.
Stock Performance Graph
The graph below shows a comparison, from September 19, 2019 (the date our Class A common stock commenced trading on Nasdaq) through December 31,
2023, of the cumulative total return to stockholders of our Class A common stock relative to the Nasdaq-100 Index, or the Nasdaq 100, and the Nasdaq Computer Index,
or the Nasdaq Computer.
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The graph assumes that $100 was invested in each of our Class A common stock, the Nasdaq 100 and the Nasdaq Computer at their respective closing
prices on September 19, 2019 and assumes reinvestment of gross dividends. The stock price performance shown in the graph represents past performance and should
not be considered an indication of future stock price performance.
This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise
subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Datadog, Inc. under the Securities Act or the
Exchange Act.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial
statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion, particularly information with respect to our future results of
operations or financial condition, business strategy and plans and objectives of management for future operations, includes forward-looking statements that involve risks
and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K. You should review the
disclosure under the heading “Part I, Item 1A. Risk Factors” in this Annual Report on Form 10-K for a discussion of important factors that could cause our actual results to
differ materially from those anticipated in these forward-looking statements.
This section of our Annual Report on Form 10-K discusses our financial condition and results of operations for the fiscal years ended December 31, 2023 and
2022, and year-to-year comparisons between fiscal 2023 and fiscal 2022. A discussion of our financial condition and results of operations for the fiscal year ended
December 31, 2021 and year-to-year comparisons between fiscal 2022 and fiscal 2021 that are not included in this Annual Report on Form 10-K can be found in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2022, filed on February 24, 2023.
Overview
Datadog is the observability and security platform for cloud applications.
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Our SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, user experience monitoring,
cloud security, and many other capabilities to provide unified, real-time observability and security for our customers’ entire technology stack. Datadog is used by
organizations of all sizes and across a wide range of industries to enable digital transformation and cloud migration, drive collaboration among development, operations,
security and business teams, accelerate time to market for applications, reduce time to problem resolution, secure applications and infrastructure, understand user
behavior and track key business metrics.
We generate revenue from the sale of subscriptions to customers using our cloud-based platform. The terms of our subscription agreements are primarily
monthly or annual. Customers also have the option to purchase additional products, such as additional containers to monitor, custom metrics packages, anomaly detection
and app analytics. Professional services are generally not required for the implementation of our products and revenue from such services has been immaterial to date.
We employ a land-and-expand business model centered around offering products that are easy to adopt and have a very short time to value. Our customers
can expand their footprint with us on a self-service basis. Our customers often significantly increase their usage of the products they initially buy from us and expand their
usage to other products we offer on our platform. We grow with our customers as they expand their workloads in the public and private cloud.
As of December 31, 2023, we had $330.3 million in cash, cash equivalents and restricted cash and $2,252.6 million in marketable securities. We have grown
rapidly in recent periods, with revenues for the fiscal years ended December 31, 2023, 2022 and 2021 of $2,128.4 million, $1,675.1 million, and $1,028.8 million,
respectively, representing year-over-year growth of 27% from the fiscal year ended December 31, 2022 to the fiscal year ended December 31, 2023 and 63% from the
fiscal year ended December 31, 2021 to the fiscal year ended December 31, 2022. Substantially all of our revenue is from subscription software sales. We have continued
to make significant expenditures and investments, including in personnel-related costs, sales and marketing, infrastructure and operations, and have incurred net income
(losses) of $48.6 million, $(50.2) million and $(20.7) million for the fiscal years ended December 31, 2023, 2022 and 2021, respectively. Our operating cash flow was
$660.0 million, $418.4 million and $286.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. Our free cash flow was $597.5 million, $353.5
million and $250.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. See the section titled “—Liquidity and Capital Resources—Non-GAAP
Free Cash Flow” below.
Unfavorable conditions in the economy both in the United States and abroad may negatively affect the growth of our business and our results of operations.
For example, macroeconomic events including rising inflation, the U.S. Federal Reserve raising interest rates, the Russian invasion of Ukraine, the conflict in the Middle
East and the COVID-19 pandemic have led to economic uncertainty. Historically, during periods of economic uncertainty and downturns, businesses may slow spending
on information technology, which may impact our business and our customers’ businesses. In recent quarters, we have seen slower usage growth from existing customers,
which may be related to the uncertain macroeconomic environment.
Due to our subscription model, the effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. However, if
economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the
potential impacts of macroeconomic events on our business, financial condition, and operating results, see “Risk Factors” included in Part I, Item 1A of this report.
Factors Affecting Our Performance
Acquiring New Customers
We believe there is substantial opportunity to continue to grow our customer base. We intend to drive new customer acquisition by continuing to invest
significantly in sales and marketing to engage our prospective customers, increase brand awareness and drive adoption of our platform and products. We also plan to
continue to invest in building brand awareness within the development and operations communities. As of December 31, 2023, we had approximately 27,300 customers
spanning organizations of a broad range of sizes and industries, compared to approximately 23,200 as of December 31, 2022. Customers as of December 31, 2022
exclude customers from a then-recent acquisition, which did not contribute meaningful revenue during the fiscal year. Our ability to attract new customers will depend on a
number of factors, including the effectiveness and pricing of our products, offerings of our competitors, and the effectiveness of our marketing efforts.
We define the number of customers as the number of accounts with a unique account identifier for which we have an active subscription in the period
indicated. Users of our free trials or tier are not included in our customer count. A single organization with multiple divisions, segments or subsidiaries is generally counted
as a single customer. However, in some cases where they have separate billing terms, we may count separate divisions, segments or subsidiaries as multiple customers.
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Expanding Within Our Existing Customer Base
Our base of customers represents a significant opportunity for further sales expansion. As of December 31, 2023, we had approximately 3,190 customers with
annual run-rate revenue, or ARR, of $100,000 or more, representing 86% of our ARR, up from 2,780 as of December 31, 2022, representing 85% of our ARR. We monitor
our number of customers with ARR of $100,000 or more, and believe it is useful to investors, as an indicator of our ability to grow the number of customers that are
exceeding this ARR threshold. We define ARR as the annual run-rate revenue of subscription agreements from all customers at a point in time. We calculate ARR by taking
the monthly run-rate revenue, or MRR, and multiplying it by 12. MRR for each month is calculated by aggregating, for all customers during that month, monthly revenue
from committed contractual amounts, additional usage, usage from subscriptions for a committed contractual amount of usage that is delivered as used and monthly
subscriptions. ARR and MRR should be viewed independently of revenue, and do not represent our revenue under GAAP on a monthly or annualized basis, as they are
operating metrics that can be impacted by contract start and end dates and renewal rates. ARR and MRR are not intended to be replacements or forecasts of revenue.
A further indication of the propensity of our customer relationships to expand over time is our dollar-based net retention rate, which compares our ARR from
the same set of customers in one period, relative to the year-ago period. As of December 31, 2023, our trailing 12-month dollar-based net retention rate was mid-110%'s.
As of December 31, 2022, our trailing 12-month dollar-based net retention rate was mid-140%'s. The decline in our trailing 12-month dollar-based net retention rate was
primarily attributable to slower usage growth from existing customers, which may be related to the uncertain macroeconomic environment. We calculate dollar-based net
retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period-end, or the Prior Period ARR. We then
calculate the ARR from these same customers as of the current period-end, or the Current Period ARR. Current Period ARR includes any expansion and is net of
contraction or attrition over the last 12 months, but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior
Period ARR to arrive at the point-in-time dollar-based net retention rate. We then calculate the weighted average of the trailing 12-month point-in-time dollar-based net
retention rates, to arrive at the trailing 12-month dollar-based net retention rate. As the growth of our business has decelerated in recent quarters, our trailing 12-month
dollar-based net retention rate has declined.
We believe that our land-and-expand business model allows us to efficiently increase revenue from our existing customer base. Our customers often expand
the deployment of our platform across large teams and more broadly within the enterprise as they migrate more workloads to the cloud, find new use cases for our platform,
and generally realize the benefits of our platform. We intend to continue to invest in enhancing awareness of our brand and developing more products, features and
functionality, which we believe are important factors to achieve widespread adoption of our platform. Our ability to increase sales to existing customers will depend on a
number of factors, including our customers’ satisfaction with our solution, competition, pricing and overall changes in our customers’ spending levels.
Sustaining Innovation and Technology Leadership
Our success is dependent on our ability to sustain innovation and technology leadership in order to maintain our competitive advantage. We believe that we
have built a highly differentiated platform that will position us to further extend the adoption of our platform and products. Datadog is frequently deployed across a
customer’s entire infrastructure, making it ubiquitous. Datadog is a daily part of the lives of developers, operations engineers and business leaders. We employ a land-and-
expand business model centered around offering products that are easy to adopt and have a very short time to value. Our efficient go-to-market model enables us to
prioritize significant investment in innovation. We have demonstrated the success of our platform approach, through expansion beyond our initial infrastructure monitoring
solution to include over 19 products. As of December 31, 2023, approximately 83% of our customers were using more than one product, up from approximately 81% a year
earlier. Additionally, as of December 31, 2023, approximately 47% of our customers were using more than four products, up from approximately 42% a year earlier, and
approximately 22% of our customers were using more than six products, up from approximately 18% a year earlier. We believe these metrics indicate strong expansion of
product adoption across our platform.
We intend to continue to invest in building additional products, features and functionality that expand our capabilities and facilitate the extension of our platform
to new use cases. We also intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion.
Our future success is dependent on our ability to successfully develop, market and sell existing and new products to both new and existing customers.
Expanding Internationally
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We believe there is a significant opportunity to expand usage of our platform outside of North America. Revenue, as determined based on the billing address of
our customers, from regions outside of North America was approximately 30% and 28% of our total revenue for each of the years ended December 31, 2023 and 2022,
respectively. In addition, we have made and plan to continue to make significant investments to expand geographically, particularly in EMEA and APAC. Although these
investments may adversely affect our operating results in the near term, we believe that they will contribute to our long-term growth. Beyond North America, we now have
sales presence internationally, primarily in Amsterdam, Dublin, London, Paris, Seoul, Singapore, Sydney, and Tokyo.
Components of Results of Operations
Revenue
monthly, annual or multi-year, with the majority of our revenue coming from annual subscriptions. Our customers can enter into a subscription for a committed contractual
amount of usage that is apportioned ratably on a monthly basis over the term of the subscription period, a subscription for a committed contractual amount of usage that is
delivered as used, or a monthly subscription based on usage. To the extent that our customers’ usage exceeds the committed contracted amounts under their
subscriptions, either on a monthly basis in the case of a ratable subscription or once the entire commitment is used in the case of a delivered-as-used subscription, they are
charged for their incremental usage.
Usage is measured primarily by the number of hosts or by the volume of data indexed. A host is generally defined as a server, either in the cloud or on-
premise. Our infrastructure monitoring, APM and network performance monitoring products are priced per host, our logs product is priced primarily per log events indexed
and secondarily by events ingested. Customers also have the option to purchase additional products, such as additional container or serverless monitoring, custom metrics
packages, anomaly detection, synthetic monitoring and app analytics.
In the case of subscriptions for committed contractual amounts of usage, revenue is recognized ratably over the term of the subscription agreement, generally
beginning on the date that our platform is made available to a customer. As a result, much of our revenue is generated from subscriptions entered into during previous
periods. Consequently, any decreases in new subscriptions or renewals in any one period may not be immediately reflected as a decrease in revenue for that period, but
could negatively affect our revenue in future quarters. This also makes it difficult for us to rapidly increase our revenue through the sale of additional subscriptions in any
period, as revenue is recognized over the term of the subscription agreement. In the case of a subscription for a committed contractual amount of usage that is delivered as
used, a monthly subscription based on usage, or usage in excess of a ratable subscription, we recognize revenue as the product is used, which may lead to fluctuations in
our revenue and results of operations. In addition, historically, we have experienced seasonality in new customer bookings, as we typically enter into a higher percentage of
subscription agreements with new customers in the fourth quarter of the year.
Due to ease of implementation of our products, professional services generally are not required and revenue from such services has been immaterial to date.
Cost of Revenue
Cost of revenue primarily consists of expenses related to providing our products to customers, including payments to our third-party cloud infrastructure
providers for hosting our software, personnel-related expenses for operations and global support, including salaries, benefits, bonuses and stock-based compensation,
payment processing fees, information technology, depreciation and amortization related to the amortization of acquired intangibles and internal-use software and other
overhead costs such as allocated facilities.
We intend to continue to invest additional resources in our platform infrastructure and our customer support and success organizations to expand the
capability of our platform and ensure that our customers are realizing the full benefit of our platform and products. The level, timing and relative investment in our
infrastructure could affect our cost of revenue in the future.
Gross Profit and Gross Margin
Gross profit represents revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin may fluctuate from
period to period as our revenue fluctuates, and as a result of the timing and amount of investments to expand our products and geographical coverage.
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Operating Expenses
Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel costs are the most
significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation expense and sales commissions. Operating expenses
also include overhead costs for facilities and shared IT-related expenses, including depreciation expense.
Research and development expense consists primarily of personnel costs for our engineering, service and design teams. Additionally, research and
development expense includes contractor fees, depreciation and amortization and allocated overhead costs. Research and development costs are expensed as incurred.
We expect that our research and development expense will increase in absolute dollars as our business grows, particularly as we incur additional costs related to
continued investments in our platform.
Sales and Marketing
Sales and marketing expense consists primarily of personnel costs for our sales and marketing organization, costs of general marketing and promotional
activities, including the free tier and free introductory trials of our products, travel-related expenses, amortization of acquired customer relationships, and allocated
overhead costs. Sales commissions earned by our sales force are deferred and amortized on a straight-line basis over the expected period of benefit, which we have
determined to be four years. We expect that our sales and marketing expense will increase in absolute dollars as we expand our sales and marketing efforts.
General and Administrative
General and administrative expense consists primarily of personnel costs and contractor fees for finance, legal, human resources, information technology and
other administrative functions. In addition, general and administrative expense includes non-personnel costs, such as legal, accounting and other professional fees,
hardware and software costs, certain tax, license and insurance-related expenses and allocated overhead costs.
We have incurred, and expect to continue to incur, additional expenses as a result of operating as a public company, including costs to comply with the rules
and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations, and increased expenses for
insurance, investor relations and professional services. We expect that our general and administrative expense will increase in absolute dollars as our business grows.
Other Income (Loss), Net
Other income (loss), net consists of interest income, primarily due to income earned on money market funds included in cash and cash equivalents and on
marketable securities, partially offset by interest expense due on the 2025 Notes and amortization of premiums on our marketable securities.
Provision for Income Taxes
Provision for income taxes consists of U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We
recorded a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be
realized.
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Results of Operations
The following table sets forth our consolidated statements of operations data for the periods indicated:
Year Ended December 31,
2023 2022 2021
(in thousands)
Revenue $ 2,128,359 $ 1,675,100 $ 1,028,784
Cost of revenue (1)(2)(3) 409,908 346,743 234,245
Gross profit 1,718,451 1,328,357 794,539
Operating expenses:
Research and development (1)(3) 962,447 752,351 419,769
Sales and marketing (1)(2)(3) 609,276 495,288 299,497
General and administrative (1)(3) 180,192 139,413 94,429
Total operating expenses 1,751,915 1,387,052 813,695
Operating loss (33,464) (58,695) (19,156)
Other income:
Interest expense (4) (6,302) (16,535) (21,052)
Interest income and other income, net 100,001 37,160 21,786
Other income, net 93,699 20,625 734
Income (loss) before provision for income taxes 60,235 (38,070) (18,422)
Provision for income taxes 11,667 12,090 2,323
Net income (loss) $ 48,568 $ (50,160) $ (20,745)
____________________
(1) Includes stock-based compensation expense as follows:
2023 2022 2021
(in thousands)
Cost of revenue $ 17,578 $ 10,827 $ 4,565
Research and development 313,096 237,120 101,942
Sales and marketing 101,937 76,735 35,035
General and administrative 49,689 38,472 22,195
Total $ 482,300 $ 363,154 $ 163,737
____________________
(2) Includes amortization of acquired intangibles expense as follows:
2023 2022 2021
(in thousands)
Cost of revenue $ 8,041 $ 6,750 $ 3,792
Sales and marketing 825 825 600
Total $ 8,866 $ 7,575 $ 4,392
_____________________
(3) Includes employer payroll taxes on employee stock transactions as follows:
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2023 2022 2021
(in thousands)
Cost of revenue $ 364 $ 266 $ 345
General and administrative 4,811 830 1,248
Total $ 32,541 $ 14,246 $ 16,085
____________________
(4) Includes amortization of debt discount and issuance costs as follows:
2023 2022 2021
(in thousands)
Interest expense $ 3,388 $ 3,369 $ 3,349
The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue for the periods indicated:
2023 2022 2021
(as a percentage of total revenue(1))
Revenue 100 % 100 % 100 %
Cost of revenue 19 21 23
Gross profit 81 79 77
Operating expenses:
Research and development 45 45 41
Sales and marketing 29 30 29
General and administrative 8 8 9
Total operating expenses 82 83 79
Operating loss (2) (4) (2)
Other income:
Interest expense — (1) (2)
Interest income and other income, net 5 2 2
Other income, net 4 1 —
Income (loss) before provision for income taxes 3 (2) (2)
Provision for income taxes 1 1 0
Net income (loss) 2% (3)% (2)%
_____________________
(1) Certain items may not total due to rounding.
Comparison of the Years Ended December 31, 2023 and 2022

Revenue

2023 2022 Change % Change
Revenue $ 2,128,359 $ 1,675,100 $ 453,259 27 %
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Revenue increased by $453.3 million or 27%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. Approximately 65% of
the increase in revenue was attributable to growth from existing customers, and the remaining 35% was attributable to growth from new customers.
Cost of Revenue and Gross Margin

(dollars in thousands)
Cost of revenue $ 409,908 $ 346,743 $ 63,165 18 %
Gross margin 81 % 79 % 2%
Cost of revenue increased by $63.2 million, or 18%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. This increase
was primarily due to an increase of $36.8 million in third-party cloud infrastructure hosting and software costs, an increase of $16.2 million in personnel expenses as a
result of increased headcount, and an increase of $6.2 million in depreciation and amortization expense.
Our gross margin increased by 2% for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily as the result of revenue
growth exceeding the growth of third-party cloud infrastructure provider costs due to cost savings.

Research and development $ 962,447 $ 752,351 $ 210,096 28 %
Percentage of revenue 45 % 45 %
Research and development expense increased by $210.1 million, or 28%, for the year ended December 31, 2023 compared to the year ended December 31,
2022. This increase was primarily due to an increase of $194.5 million in personnel costs including allocated overhead costs for our engineering, product and design teams
as a result of increased headcount and an increase of $14.1 million in cloud infrastructure-related investments.
Sales and Marketing

Sales and marketing $ 609,276 $ 495,288 $ 113,988 23 %
Percentage of revenue 29 % 30 %
Sales and marketing expense increased by $114.0 million, or 23%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
This increase was primarily due to an increase of $107.5 million in personnel costs including allocated overhead costs for our sales and marketing organization as a result
of increased headcount and increased variable compensation for our sales personnel and an increase of $5.4 million in advertising, sales, marketing and promotional
activities.
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General and Administrative

General and administrative $ 180,192 $ 139,413 $ 40,779 29 %
Percentage of revenue 8% 8%
General and administrative expense increased by $40.8 million, or 29%, for the year ended December 31, 2023 compared to the year ended December 31,
2022. This increase was primarily due to an increase in personnel costs including allocated overhead costs as a result of increased headcount, legal expenses, and other
professional services.
Other Income, Net

Other income, net $ 93,699 $ 20,625 $ 73,074 354 %
Percentage of revenue 4% 1%
Other income, net increased by $73.1 million, or 354% for the year ended December 31, 2023 compared to the year ended December 31, 2022. This increase
was primarily driven by an increase of $68.5 million in interest income, mainly due to income earned from investments in marketable securities.
Liquidity and Capital Resources
Our largest source of operating cash is cash collection from sales of subscriptions to our customers. Our primary uses of cash from operating activities are for
personnel expenses, hosting expenses, facility expenses, and marketing expenses. We have generated positive cash flows from operations during the years ended
December 31, 2023, 2022, and 2021. When assessing sources of liquidity, we also include cash and cash equivalents of $330.3 million and marketable securities of $2.3
billion as of December 31, 2023. We believe that our existing cash and cash equivalents, marketable securities and cash flow from operations will be sufficient to support
our cash requirements for the next 12 months and beyond.
Our working capital requirements principally consist of workforce salaries, bonuses, commissions, and benefits and, to a lesser extent, cancellable and non-
cancelable licenses and services arrangements that are integral to our business operations, and operating lease obligations. Non-cancelable purchase commitments for
business operations and operating lease obligations total $485.0 million and $347.1 million, respectively, as of December 31, 2023, due primarily over the next five years.
Purchase commitments for business operations are primarily related to cloud hosting and other software-based services.
We have also issued long-term debt to finance our business. In June 2020, we issued $747.5 million aggregate principal amount of the 2025 Notes in a private
placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The total net proceeds from the sale of the 2025 Notes, after deducting the initial
purchasers’ discounts and debt issuance costs, were approximately $730.2 million. The principal and future interest payments related to our 2025 Notes are $749.0
million.
Cash Flows
The following table shows a summary of our cash flows for the periods presented:
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2023 2022
(in thousands)
Cash provided by operating activities $ 659,954 $ 418,407
Cash used in investing activities (731,365) (384,670)
Cash provided by financing activities 58,279 36,023
Operating Activities
Net cash provided by operating activities for the year ended December 31, 2023 increased $241.5 million compared to the year ended December 31, 2022,
primarily driven by an increase in non-cash charges of $104.6 million, an increase in deferred revenue of $62.3 million, and an increase in accounts payable of $59.1
million. The increase in non-cash charges related primarily to an increase of $119.1 million in stock-based compensation as we continued to increase headcount to support
the growth of the business. The increase in cash provided by operating activities was partially offset by a decrease in accrued expenses and other liabilities of $78.1 million.
Investing Activities
Net cash used in investing activities for the year ended December 31, 2023 increased by $346.7 million compared to the year ended December 31, 2022,
primarily driven by a increase in the investment in marketable securities of $1,144.3 million, partially offset by an increase in proceeds from maturities of marketable
securities of $726.8 million.
Financing Activities
Net cash provided by financing activities for the year ended December 31, 2023 increased by $22.3 million compared to the year ended December 31, 2022,
primarily due to an increase in proceeds from the issuance of Class A common stock under the ESPP of $11.3 million and an increase in proceeds from the exercise of
stock options of $10.9 million.
Non-GAAP Free Cash Flow
We report our financial results in accordance with U.S. GAAP. To supplement our consolidated financial statements, we provide investors with the amount of
free cash flow, which is a non-GAAP financial measure. Free cash flow represents net cash provided by operating activities, reduced by capital expenditures and
capitalized software development costs, if any. Free cash flow is a measure used by management to understand and evaluate our liquidity and to generate future operating
plans. The reduction of capital expenditures and amounts capitalized for software development facilitates comparisons of our liquidity on a period-to-period basis and
excludes items that we do not consider to be indicative of our liquidity. We believe that free cash flow is a measure of liquidity that provides useful information to our
management, board of directors, investors and others in understanding and evaluating the strength of our liquidity and future ability to generate cash that can be used for
strategic opportunities or investing in our business. Nevertheless, our use of free cash flow has limitations as an analytical tool, and you should not consider it in isolation or
as a substitute for analysis of our financial results as reported under GAAP. Further, our definition of free cash flow may differ from the definitions used by other companies
and therefore comparability may be limited. You should consider free cash flow alongside our other GAAP-based financial performance measures, such as net cash used
in operating activities, and our other GAAP financial results.
The following table presents a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable financial measure
calculated in accordance with GAAP, for each of the periods indicated:
2023 2022 2021
(in thousands)
Net cash provided by operating activities $ 659,954 $ 418,407 $ 286,545
Less: Purchases of property and equipment (27,586) (35,261) (9,956)
Less: Capitalized software development costs (34,820) (29,628) (26,069)
Free cash flow $ 597,548 $ 353,518 $ 250,520
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Critical Accounting Estimates
Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing
basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could
differ from these estimates.
The significant accounting policies and methods used in the preparation of our consolidated financial statements are discussed in Note 2, Basis of
Presentation and Summary of Significant Accounting Policies, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. We believe
that the accounting policies described below involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid
in fully understanding and evaluating our consolidated financial condition and results of operations.
Revenue Recognition
monthly or annual, with the majority of our revenue coming from annual subscriptions. Our customers can enter into a subscription for a committed contractual amount of
usage that is apportioned ratably on a monthly basis over the term of the subscription period, a subscription for a committed contractual amount of usage that is delivered
as used, or a monthly subscription based on usage. To the extent that our customers’ usage exceeds the committed contracted amounts under their subscriptions, either
on a monthly basis in the case of a ratable subscription or once the entire commitment is used in the case of a delivered-as-used subscription, they are charged for their
incremental usage.
We account for revenue contracts with customers through the following steps:
(1) identify the contract with a customer;
(2) identify the performance obligations in the contract;
(3) determine the transaction price;
(4) allocate the transaction price to the performance obligations in the contract; and
(5) recognize revenue when or as we satisfy a performance obligation.
Our subscriptions are generally non-cancellable. Once we have determined the transaction price, the total transaction price is allocated to each performance
obligation in the contract on a relative stand-alone selling price basis, or SSP. The determination of a relative stand-alone SSP for each distinct performance obligation
requires judgment. We determine SSP for performance obligations based on overall pricing objectives, which take into consideration market conditions and customer-
specific factors. This includes a review of internal discounting tables, the service(s) being sold, and customer demographics.
Revenue is recognized when control of these services is transferred to customers, in an amount that reflects the consideration we expect to be entitled to
receive in exchange for those services. We determine an output method to be the most appropriate measure of progress because it most faithfully represents when the
value of the services is simultaneously received and consumed by the customer, and control is transferred.
For committed contractual amounts of usage, revenue is recognized ratably over the term of the subscription agreement generally beginning on the date that
the platform is made available to a customer. For committed contractual amount of usage that is delivered as used, a monthly subscription based on usage, or usage in
excess of a ratable subscription, we recognize revenue as the services are rendered.
Internal-Use Software Development Costs
We capitalize certain costs related to the development of our platform and other software applications for internal-use. In accordance with authoritative
guidance, we begin to capitalize our costs to develop software when preliminary development efforts are successfully completed, management has authorized and
committed project funding, and it is probable that the project will be completed and the software will be used as intended. We stop capitalizing these costs when the
software is substantially complete and ready for its intended use, including the completion of all significant testing. These costs are amortized on a straight-line basis over
the estimated useful life of the related asset, generally estimated to be two years. We also capitalize costs related to specific upgrades and enhancements when it is
probable the expenditure will result in additional
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functionality and expense costs incurred for maintenance and minor upgrades and enhancements. Costs incurred prior to meeting these criteria together with costs
incurred for training and maintenance are expensed as incurred and recorded within research and development expenses in our consolidated statements of operations.
We exercise judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in
determining the estimated useful lives over which the costs are amortized. To the extent that we change the manner in which we develop and test new features and
functionalities related to our platform, assess the ongoing value of capitalized assets or determine the estimated useful lives over which the costs are amortized, the
amount of internal-use software development costs we capitalize and amortize could change in future periods.
Business Combinations
When we acquire a business, the purchase consideration is allocated to the tangible assets acquired, liabilities assumed, and intangible assets acquired
based on their estimated respective fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is
recorded as goodwill. Such valuations require us to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in
valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, and trade names from a market
participant perspective, useful lives and discount rates. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently
uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, we may record adjustments to the assets acquired
and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to other
income, net in the consolidated statement of operations.
Recently Adopted Accounting Pronouncements
See Note 2, in our Notes to Consolidated Financial Statements included in “Part II, Item 8. Financial Statements and Supplementary Data” of this Annual
Report on Form 10-K for a discussion of recent accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to
adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.
Interest Rate Risk
As of December 31, 2023, we had $295.4 million in cash equivalents, and $2.3 billion in marketable securities, which consisted of corporate debt securities,
commercial paper, certificates of deposit, U.S. government treasury securities, and U.S. government agency securities. Our cash and cash equivalents are held for working
capital purposes. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to a fluctuation in interest rates,
which may affect our interest income and the fair market value of our investments. As of December 31, 2023, a hypothetical 10% relative change in interest rates would not
have a material impact on our consolidated financial statements.
On June 2, 2020, we issued $747.5 million aggregate principal amount of the 2025 Notes. The fair value of the 2025 Notes is subject to interest rate risk,
market risk and other factors due to the conversion feature. The fair value of the 2025 Notes will generally increase as our Class A common stock price increases and will
generally decrease as our Class A common stock price declines. The interest and market value changes affect the fair value of the 2025 Notes but do not impact our
financial position, cash flows, or results of operations due to the fixed nature of the debt obligation. Additionally, we carry the 2025 Notes at face value less unamortized
discount and unamortized issuance costs on our balance sheet, and we present the fair value for required disclosure purposes only.
Foreign Currency Exchange Risk
Our reporting currency and the functional currency of our wholly owned foreign subsidiaries is the U.S. dollar. All of our sales are denominated in U.S. dollars,
and therefore our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which
our operations are located, which are primarily in the United States, France, Ireland, and the United Kingdom. Our consolidated results of operations and cash flows are,
therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates.
To date, we have not entered into any hedging arrangements
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with respect to foreign currency risk or other derivative financial instruments, although we may choose to do so in the future. A hypothetical 10% increase or decrease in the
relative value of the U.S. dollar to other currencies would not have a material effect on our operating results.
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Item 8. Financial Statements and Supplementary Data
DATADOG, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 57
Consolidated Balance Sheets as of December 31, 2023 and 2022 59
Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021 60
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023, 2022 and 2021 61
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2023, 2022 and 2021 62
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 63
Notes to Consolidated Financial Statements 64
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Datadog, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Datadog, Inc. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related
consolidated statements of operations, comprehensive income (loss), stockholders' equity (deficit), and cash flows for each of the three years in the period ended
December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control
over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 23, 2024, expressed an unqualified opinion on the Company's internal control over financial
reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based
on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be
communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which
it relates.
Revenue Recognition — Identification of Performance Obligations – (Refer to Note 2 of the Financial Statements)
Critical Audit Matter Description
As described in Note 2 to the consolidated financial statements, the Company generates revenue from the sale of subscription services contracts to customers using its
cloud-based platform. Subscription services contracts with certain of the Company’s customers may include non-standard terms and conditions and promises to transfer
multiple services.
Contracts with customers that contain non-standard terms and conditions and promises to transfer multiple services require significant judgment by management to identify
the distinct performance obligations in the arrangement. Distinct performance obligations will be accounted for as separate performance obligations, while non-distinct
services are combined with others to form a single performance obligation.
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Given the complexity of the Company’s subscription services contracts with certain customers, coupled with management’s judgments involved in identifying distinct
performance obligations and non-standard terms and conditions, auditing the Company’s subscription services contracts with certain customers required a high degree of
auditor judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s subscription contracts with certain customers included, among others:
◦ We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls over revenue recognition. This includes
management’s controls over the identification of performance obligations and non-standard terms and conditions in subscription contracts, as well as the allocation
of revenue to each performance obligation.
◦ We evaluated a sample of subscription contracts with customers to determine if all the promises referred to in the contract were properly identified by management
and accounted for as distinct performance obligations by performing the following:
• Obtained and read the subscription contract and independently assessed the terms of the contract to identify all promises and non-standard terms and
conditions.
• For each promise identified, we evaluated whether such promise represented a distinct “performance obligation”, as prescribed by Accounting Standards
Codification Topic 606, Revenue from Contracts with Customers.
• We evaluated the completeness and accuracy of the performance obligations by comparing those identified by us to those identified by management.
/s/ Deloitte & Touche LLP
New York, New York
February 23, 2024
We have served as the Company's auditor since 2016.
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DATADOG, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
December 31, December 31,
2023 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 330,339 $ 338,985
Marketable securities 2,252,559 1,545,341
Accounts receivable, net of allowance for credit losses of $12,096 and $5,626 as of December 31, 2023 and 2022,
respectively 509,279 399,551
Deferred contract costs, current 44,938 33,054
Prepaid expenses and other current assets 41,022 27,303
Total current assets 3,178,137 2,344,234
Property and equipment, net 171,872 125,346
Operating lease assets 126,562 87,629
Goodwill 352,694 348,277
Intangible assets, net 9,617 16,365
Deferred contract costs, non-current 73,728 55,338
Restricted cash — 3,303
Other assets 23,462 24,360
TOTAL ASSETS $ 3,936,072 $ 3,004,852
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 87,712 $ 23,474
Accrued expenses and other current liabilities 127,631 171,158
Operating lease liabilities, current 21,974 22,092
Deferred revenue, current 765,735 543,024
Total current liabilities 1,003,052 759,748
Operating lease liabilities, non-current 138,128 76,582
Convertible senior notes, net 742,235 738,847
Deferred revenue, non-current 21,210 12,944
Other liabilities 6,093 6,226
Total liabilities 1,910,718 1,594,347
COMMITMENTS AND CONTINGENCIES (NOTE 9)
STOCKHOLDERS' EQUITY:
Class A common stock, $0.00001 par value per share; 2,000,000,000 shares authorized as of December 31, 2023 and
2022; 305,395,175 and 293,573,825 shares issued and outstanding as of December 31, 2023 and 2022, respectively 3 3
Class B common stock, $0.00001 par value per share; 310,000,000 shares authorized as of December 31, 2023 and
2022; 25,684,571 and 25,616,018 shares issued and outstanding as of December 31, 2023 and 2022, respectively — —
Additional paid-in capital 2,181,267 1,625,190
Accumulated other comprehensive loss (2,218) (12,422)
Accumulated deficit (153,698) (202,266)
Total stockholders’ equity 2,025,354 1,410,505
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,936,072 $ 3,004,852
See accompanying notes to consolidated financial statements.
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DATADOG, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
2023 2022 2021
Revenue $ 2,128,359 $ 1,675,100 $ 1,028,784
Cost of revenue 409,908 346,743 234,245
Gross profit 1,718,451 1,328,357 794,539
Operating expenses:
Total operating expenses 1,751,915 1,387,052 813,695
Operating loss (33,464) (58,695) (19,156)
Other income:
Interest expense (6,302) (16,535) (21,052)
Interest income and other income, net 100,001 37,160 21,786
Other income, net 93,699 20,625 734
Income (loss) before provision for income taxes 60,235 (38,070) (18,422)
Provision for income taxes 11,667 12,090 2,323
Net income (loss) $ 48,568 $ (50,160) $ (20,745)
Net income (loss) attributable to common stockholders $ 48,568 $ (50,160) $ (20,745)
Basic net income (loss) per share $ 0.15 $ (0.16) $ (0.07)
Diluted net income (loss) per share $ 0.14 $ (0.16) $ (0.07)
Weighted average shares used in calculating basic net income (loss) per share: 324,033 315,410 309,048
Weighted average shares used in calculating diluted net income (loss) per share: 350,292 315,410 309,048
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DATADOG, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
2023 2022 2021
Net income (loss) $ 48,568 $ (50,160) $ (20,745)
Other comprehensive income (loss):
Foreign currency translation adjustments 1,050 (1,322) (1,853)
Unrealized gain (loss) on available-for-sale marketable securities 9,154 (7,270) (4,264)
Other comprehensive income (loss) 10,204 (8,592) (6,117)
Comprehensive income (loss) $ 58,772 $ (58,752) $ (26,862)
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DATADOG, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share data)
Total
Class A and Class B
Additional Accumulated Other Stockholders'
Common Stock
Paid-in Comprehensive Accumulated Equity
Shares Amount Capital Income (Loss) Deficit (Deficit)
BALANCE—December 31, 2020 305,880,063 $ 3 $ 1,103,305 $ 2,287 $ (148,163) $ 957,432
Effect of adoption of ASU 2020-06 — — (173,070) — 16,802 (156,268)
BALANCE—January 1, 2021 305,880,063 3 930,235 2,287 (131,361) 801,164
Issuance of common stock upon exercise of stock options 5,109,688 — 14,941 — — 14,941
Vesting of early exercised stock options — — 566 — — 566
Vesting of restricted stock units 1,483,639 — — — — —
Issuance of restricted shares of common stock from acquisitions 600,176 — 57,720 — — 57,720
Issuance of common stock under the Employee Stock Purchase Plan 291,871 — 20,278 — — 20,278
Stock-based compensation — — 173,397 — — 173,397
Change in accumulated other comprehensive loss — — — (6,117) — (6,117)
Net loss — — — — (20,745) (20,745)
BALANCE—December 31, 2021 313,365,437 $ 3 $ 1,197,136 $ (3,830) $ (152,106) $ 1,041,203
Vesting of early exercised stock options — — 33 — — 33
Vesting of restricted stock units 2,492,535 — — — — —
Issuance of restricted shares of common stock from acquisitions 327,662 — 14,019 — — 14,019
Change in accumulated other comprehensive loss — — — (8,592) — (8,592)
Net loss — — — — (50,160) (50,160)
Vesting of restricted and performance stock units 4,794,318 — — — — —
Issuance (retirement) of restricted shares of common stock from acquisitions 122,224 — 1,886 — — 1,886
Change in accumulated other comprehensive income — — — 10,204 — 10,204
Net income — — — — 48,568 48,568
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DATADOG, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
2023 2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 48,568 $ (50,160) $ (20,745)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 44,465 34,629 22,938
(Accretion) amortization of (discounts) premiums on marketable securities (41,621) 4,726 16,236
Amortization of debt discount and issuance costs 3,388 3,369 3,349
Amortization of deferred contract costs 39,207 28,003 17,866
Stock-based compensation, net of amounts capitalized 482,300 363,154 163,737
Non-cash lease expense 26,382 21,416 17,201
Allowance for credit losses on accounts receivable 11,933 5,215 2,311
Loss on disposal of property and equipment 706 1,662 274
Changes in operating assets and liabilities:
Accounts receivable, net (121,661) (135,701) (107,112)
Deferred contract costs (69,481) (51,098) (42,775)
Prepaid expenses and other current assets (13,508) (6,565) (737)
Other assets 1,018 (5,179) (2,627)
Accounts payable 57,773 (1,286) 3,078
Accrued expenses and other liabilities (40,489) 37,578 37,270
Deferred revenue 230,974 168,644 176,281
Net cash provided by operating activities 659,954 418,407 286,545
CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of marketable securities (2,558,013) (1,413,717) (1,125,519)
Maturities of marketable securities 1,864,557 1,137,724 1,046,560
Proceeds from sale of marketable securities 36,995 2,090 67,749
Purchases of property and equipment (27,586) (35,261) (9,956)
Capitalized software development costs (34,820) (29,628) (26,069)
Cash paid for acquisition of businesses; net of cash acquired (12,498) (45,878) (226,505)
Net cash used in investing activities (731,365) (384,670) (273,740)
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from exercise of stock options 20,909 10,001 14,907
Proceeds from issuance of common stock under the employee stock purchase plan 37,370 26,025 20,278
Employee payroll taxes paid related to net share settlement under the employee stock purchase plan — — (245)
Repayments of convertible senior notes — (3) —
Net cash provided by financing activities 58,279 36,023 34,940
Effect of exchange rate changes on cash, cash equivalents and restricted cash 1,183 (1,935) (1,993)
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (11,949) 67,825 45,752
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 342,288 274,463 228,711
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period $ 330,339 $ 342,288 $ 274,463
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid for income taxes $ 16,505 $ 1,595 $ 1,486
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Accrued property and equipment purchases $ 7,046 $ 972 $ 1,746
Stock-based compensation included in capitalized software development costs $ 13,597 $ 14,853 $ 9,660
Vesting of early exercised options $ — $ 33 $ 566
Issuance of restricted shares of common stock for the acquisition of businesses $ 1,886 $ 14,019 $ 57,720
Acquisition holdback $ 750 $ 8,123 $ 5,555
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH WITHIN THE CONSOLIDATED BALANCE SHEETS TO THE AMOUNTS SHOW IN THE STATEMENTS OF CASH FLOWS ABOVE:
Cash and cash equivalents $ 330,339 $ 338,985 $ 270,973
Restricted cash — 3,303 3,490
Total cash, cash equivalents and restricted cash $ 330,339 $ 342,288 $ 274,463
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DATADOG, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business
Description of Business
Datadog, Inc. (“Datadog” or the “Company”) was incorporated in the State of Delaware on June 4, 2010. The Company is the observability and security
platform for cloud applications. The Company’s SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management,
user experience monitoring, cloud security, and many other capabilities to provide unified, real-time observability and security of its customers’ entire technology stack. The
Company is headquartered in New York City and has various other global office locations.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America (“GAAP”).
Principles of Consolidation
The consolidated financial statements include the accounts of Datadog, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances
have been eliminated in consolidation.
Segment Information
The Company has a single operating and reportable segment as well as one business activity, monitoring and providing analytics on companies’ information
technology (“IT”) infrastructure. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a
consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. There are no segment managers who are held
accountable for operations or results below the consolidated level.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. Such estimates include the fair value of marketable securities, the allowance for credit
losses, the fair value of acquired assets and assumed liabilities from business combinations, useful lives of property, equipment, software, and finite lived intangibles,
stock-based compensation, valuation of long-lived assets and their recoverability, including goodwill, the incremental borrowing rate for operating leases, estimated
expected period of benefit for deferred contract costs, fair value of the liability component of the convertible debt, realization of deferred tax assets and uncertain tax
positions, revenue recognition and the allocation of overhead costs between cost of revenue and operating expenses. The Company bases its estimates on historical
experience and also on assumptions that management considers reasonable. The Company assesses these estimates on a regular basis; however, actual results could
materially differ from these estimates.
Foreign Currency Translation
The reporting currency of the Company is the United States dollar (“USD”). The functional currency of the Company is USD, and the functional currency of the
Company’s subsidiaries is generally the local currency of the jurisdiction in which the foreign subsidiary is located. The assets and liabilities of the Company’s subsidiaries
are translated to USD at exchange rates in effect at the balance sheet date. All income statement accounts are translated at monthly average exchange rates. Resulting
foreign currency translation adjustments are recorded directly in accumulated other comprehensive loss as a separate component of stockholders’ equity.
Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are
included in other income, net in the accompanying consolidated statements of operations when realized and have not been material for any of the periods presented.
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Revenue Recognition
The Company generates revenue from the sale of subscriptions to customers using its cloud-based platform. The terms of the Company’s subscription
agreements are primarily monthly, annual or multi-year. The Company’s customers can enter into (1) a subscription agreement for a committed contractual amount of
usage that is apportioned ratably on a monthly basis over the term of the subscription period, (2) a subscription agreement for a committed contractual amount of usage
that is delivered as used, or (3) a monthly subscription based on usage. The Company typically bills customers on an annual or multi-year subscription in advance, with any
usage in excess of the committed contracted amount billed monthly in arrears. The Company typically bills customers on a monthly plan in arrears. Customers also have
the option to purchase additional services priced at rates at or above the stand-alone selling price.
The Company accounts for revenue contracts with customers through the following steps:
(1) identify the contract with a customer;
(2) identify the performance obligations in the contract;
(3) determine the transaction price;
(4) allocate the transaction price to the performance obligations in the contract; and
(5) recognize revenue when or as the Company satisfies a performance obligation.
The Company’s revenue arrangements may include infrastructure monitoring, application performance monitoring, log management, synthetics monitoring,
security monitoring, continuous profiling, serverless monitoring, network monitoring, real user monitoring and incident management as well as secondary services including
custom metrics in dashboard monitoring, docker container monitoring, and indexed spans. The Company has identified each service as a separate performance obligation.
The transaction price is based on the fixed price for the contracted level of service plus variable consideration for additional optional purchases. Billing periods
correspond to the periods over which services are performed and there are no discounts given on the purchase of future services.
The Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone
selling prices based on a range of actual prices charged to customers.
Revenue is recognized when control of these services is transferred to customers, in an amount that reflects the consideration the Company expects to be
entitled to receive in exchange for those services. The Company determined an output method, recognition over time, to be the most appropriate measure of progress
because it most faithfully represents when the value of the services is simultaneously received and consumed by the customer, and control is transferred.
For committed contractual amounts of usage, revenue is recognized ratably over the term of the subscription agreement generally beginning on the date that
the platform is made available to a customer. For committed contractual amount of usage that is delivered as used, a monthly subscription based on usage, or usage in
excess of a ratable subscription, the Company recognizes revenue as the product is used. Subscription revenue excludes sales and other indirect taxes.
The Company applied the practical expedient in Topic 606 and did not evaluate contracts of one year or less for the existence of a significant financing
component.
Deferred Revenue and Remaining Performance Obligations
Certain of the Company’s customers pay in advance of satisfaction of performance obligations and other customers with monthly contract terms are billed in
arrears on a monthly basis. The Company records contract liabilities to deferred revenue when customers are billed or when the Company receives customer payments in
advance of the performance obligations being satisfied on the Company’s contracts.
Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or
partially undelivered, as of the end of the reporting period. Remaining performance obligations include deferred revenue, multi-year contracts with future installment
payments and certain unfulfilled orders against accepted customer contracts at the end of any given period.
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Convertible Senior Notes
In accounting for the issuance of the Company’s convertible senior notes (the “2025 Notes”), the 2025 Notes were separated into liability and equity
components through December 31, 2020. The carrying amounts of the liability component was calculated by measuring the fair value of similar liabilities that do not have
associated convertible features. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability
component from the par value of the respective 2025 Notes. This difference represents the debt discount that is amortized to interest expense over the contractual terms of
the 2025 Notes using the effective interest rate method. The equity component was recorded in additional paid-in capital.
In accounting for the debt issuance costs related to the 2025 Notes, the Company allocated the total amount incurred to the liability and equity components of
the 2025 Notes in the same proportion as the allocation of the proceeds. Issuance costs attributable to the liability component are being amortized to interest expense over
the contractual terms of the 2025 Notes. The issuance costs attributable to the equity component were netted against the equity component in additional paid-in capital.
On January 1, 2021, the Company adopted ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU No.
2020-06”). As a result of the adoption, the debt conversion option of $177.2 million and debt issuance costs of $4.1 million previously attributable to the equity component
are no longer presented in equity. Similarly, the debt discount, that is equal to the carrying value of the embedded conversion feature upon issuance, is no longer amortized
into income as interest expense over the life of the instrument. This resulted in a $16.8 million decrease to the opening balance of accumulated deficit, a $173.1 million
decrease to the opening balance of additional paid-in capital and a $156.3 million increase to the opening balance of convertible senior notes, net on the consolidated
balance sheet.
Cost of Revenue
Cost of revenue consists primarily of costs related to providing subscription services to paying customers, including data center and networking expenses,
employee compensation (including stock-based compensation) and other employee-related expenses for customer experience and technical operations staff, payments to
outside service providers, payment processing fees, amortization of capitalized internally developed software costs and acquired developed technology, and allocated
overhead costs.
Research and Development Costs
Research and development costs are expensed as incurred. Research and development costs consist of employee compensation (including stock-based
compensation) and other employee-related expenses, materials and supplies, and allocated overhead costs such as rent and facilities costs.
Sales and Marketing Costs
Sales and marketing costs consist primarily of personnel costs for the Company’s sales and marketing organization, including stock-based compensation and
commissions, costs of general marketing and promotional activities, including the free tier and introductory trials of the Company’s products, travel-related expenses,
amortization of acquired customer relationships, and allocated overhead costs.
Advertising Costs
Advertising costs are expensed as incurred and were approximately $21.8 million, $25.5 million and $20.8 million for the years ended December 31, 2023,
2022 and 2021, respectively, and are included in sales and marketing expense in the accompanying consolidated statement of operations.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts
for financial reporting and the tax bases of assets and liabilities. The deferred assets and liabilities are recorded at the statutorily enacted tax rates anticipated to be in
effect when such temporary differences reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the
enactment date. A valuation allowance is established; when based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not
be realized.
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The Company engages in transactions in which the tax consequences may be subject to uncertainty. The Company accounts for uncertain tax positions based
on an evaluation as to whether it is more likely than not that a tax position will be sustained on audit, including resolution of any related appeals or litigation processes. This
evaluation is based on all available evidence and assumes that the appropriate tax authorities have full knowledge of all relevant information concerning the tax position.
The Company accounts for uncertain tax positions as non-current tax liabilities or through a reduction of a corresponding deferred tax asset. The tax benefit recognized is
based on the largest amount that is greater than 50% likely of being realized upon ultimate settlement. The Company includes potential interest expense and penalties
related to its uncertain tax positions in income tax expense.
Stock-Based Compensation
The Company recognizes and measures compensation expense for all stock-based payment awards granted to employees, directors, and nonemployees,
including stock options, restricted stock units (“RSUs”), performance-based awards (“PSUs”), and the employee stock purchase plan (the “ESPP”) based on the fair value
of the awards on the date of grant. The fair value of each stock option granted is estimated using the Black-Scholes option pricing model. The determination of the grant
date fair value using an option-pricing model is affected by the estimated fair value of the Company’s Class A common stock as well as assumptions regarding a number of
other complex and subjective variables. These variables include expected stock price volatility over the expected term of the award, actual and projected employee stock
option exercise behaviors, the risk-free interest rate for the expected term of the award and expected dividends. The fair value of RSUs and PSUs is determined by the
closing price on the date of grant of the Company’s Class A common stock, as reported on The Nasdaq Global Select Market. The Company estimates the fair value of the
rights to acquire stock under the ESPP using the Black-Scholes option pricing model. Stock-based compensation for stock options and RSUs is recognized on a straight-
line basis over the requisite service period and account for forfeitures as they occur. Stock-based compensation for PSUs is amortized under the accelerated attribution
method and may be adjusted over the vesting period based on interim estimates of performance against pre-set objectives. PSUs will vest upon achievement of specified
performance targets and subject to continuous service through the applicable vesting dates. The compensation cost is recognized over the requisite service period when it
is probable that the performance condition will be satisfied and the Company accounts for forfeitures as they occur.
The Company also has certain options that have performance-based vesting conditions; stock-based compensation expense for such awards is recognized on
a straight-line basis from the time the vesting condition is likely to be met through the time the vesting condition has been achieved.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash
equivalents consist of money market funds, corporate debt securities, and U.S. government treasury securities.
Marketable Securities
The Company’s marketable securities consist of corporate debt securities, commercial paper, certificates of deposit, U.S. government treasury securities, and
U.S. government agency securities. The Company determines the appropriate classification of its marketable securities at the time of purchase and reevaluates such
designation at each balance sheet date. The Company has classified and accounted for its marketable securities as available-for-sale securities as the Company may sell
these securities at any time for use in its current operations or for other purposes, even prior to maturity. As a result, the Company classifies its marketable securities within
current assets on the consolidated balance sheet.
Available-for-sale securities are recorded at fair value each reporting period. Premiums and discounts are amortized or accreted over the life of the related
available-for-sale security as an adjustment to yield using the effective interest method. Interest income is recognized when earned. Unrealized gains and losses on these
marketable securities are presented net of tax and reported as a separate component of accumulated other comprehensive loss until realized. Realized gains and losses
are determined based on the specific identification method and are reported in Interest income and other income, net in the consolidated statements of operations.
The Company periodically evaluates its marketable securities to assess whether an investment’s fair value is less than its amortized cost basis and if the
decline in the fair value is attributable to a credit loss. Declines in fair value judged to be related to credit loss are reported in Interest income and other income, net in the
consolidated statements of operations.
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Restricted Cash
Restricted cash primarily consists of collateralized letters of credit established in connection with lease agreements for the Company’s facilities. Restricted
cash is included in current assets for leases that expire within one year and is included in non-current assets for leases that expire in more than one year from the balance
sheet date.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk primarily consist of cash and cash equivalents, marketable securities and accounts
receivable. Cash deposits may, at times, exceed amounts insured by the Federal Deposit Insurance Corporation (“FDIC”) and the Securities Investor Protection
Corporation (“SIPC”). The Company has not experienced any losses on its deposits of cash and cash equivalents to date. For accounts receivable, the Company is
exposed to credit risk in the event of nonpayment by customers to the extent of the amounts recorded on the accompanying consolidated balance sheets.
Geographical Information - Long-Lived Assets
As of December 31, 2023, and 2022, 67% and 66% of the Company’s long-lived assets were located in the United States and 33% and 34% were located
outside of the United States, primarily in EMEA, respectively.
Fair Value of Financial Instruments
The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding
fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction
between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation
methodologies in measuring fair value as follows:
Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially
the full term of the asset or liability.
Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby
allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
The Company’s financial instruments consist of cash equivalents, marketable securities, accounts receivable, accounts payable and accrued expenses. Cash
equivalents are stated at amortized cost, which approximates fair value at the balance sheet dates, due to the short period of time to maturity. Marketable securities are
recorded at fair value. Accounts receivable, accounts payable, and accrued expenses are stated at their carrying value, which approximates fair value due to the short time
to the expected receipt or payment date.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable includes billed and unbilled receivables. Trade accounts receivable are recorded at invoiced amounts and do not bear interest. The
expectation of collectability is based on a review of credit profiles of customers, contractual terms and conditions, current economic trends, and historical payment
experience. The Company regularly reviews the adequacy of the allowance for credit losses by considering the age of each outstanding invoice and the collection history to
determine the appropriate amount of allowance for credit losses. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when
identified.
Unbilled accounts receivable represents revenue recognized on contracts for which billings have not yet been presented to customers because the amounts
were earned but not contractually billable as of the balance sheet date, substantially all of which is expected to be billed and collected within one year.
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Internal-Use Software Development Costs
The Company capitalizes qualifying internal-use software development costs related to its cloud platform. The costs consist of personnel costs (including
related benefits and stock-based compensation) that are incurred during the application development stage. Capitalization of costs begins when two criteria are met: (1)
the preliminary project stage is completed, and (2) it is probable that the software will be completed and used for its intended function. Capitalization ceases when the
software is substantially complete and ready for its intended use, including the completion of all significant testing. Costs related to preliminary project activities and post
implementation operating activities are expensed as incurred.
Capitalized costs are included in property and equipment. These costs are amortized over the estimated useful life of the software, which is two years, on a
straight-line basis, which represents the manner in which the expected benefit will be derived. The amortization of costs related to the platform applications is included in
cost of revenue and sales and marketing expense based on an allocation between paid customer accounts and free customer accounts not generating revenue.
Property and Equipment, Net
Property and equipment, net is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over
the estimated useful life of the related asset. Expenses that improve an asset or extend its remaining useful life are capitalized. Costs of maintenance or repairs that do not
extend the lives of the respective assets are charged to expenses as incurred.
Deferred Contract Costs
Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer. There are
no sales commissions earned on renewals. These costs are deferred and then amortized over a period of benefit which is determined to be 4 years. The Company
determined the period of benefit by taking into consideration the length of terms in its customer contracts, life of the technology and other factors. Amounts expected to be
recognized within one year of the balance sheet date are recorded as deferred contract costs, current; the remaining portion is recorded as deferred contract costs, non-
current, in the consolidated balance sheets. Deferred contract costs are periodically analyzed for impairment. Amortization expense is included in sales and marketing
expenses in the accompanying consolidated statements of operations.
Business Combinations
When the Company acquires a business, the purchase consideration is allocated to the tangible assets acquired, liabilities assumed, and intangible assets
acquired based on their estimated respective fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and
liabilities is recorded as goodwill. Such valuations require the Company to make significant estimates and assumptions, especially with respect to intangible assets.
Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, and trade
names from a market participant perspective, useful lives and discount rates. The Company’s estimates of fair value are based upon assumptions believed to be
reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, the Company
may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any
subsequent adjustments are recorded to other income, net in the consolidated statement of operations.
Accounting for Impairment of Long-Lived Assets (Including Goodwill and Intangibles)
Long-lived assets with finite lives include property and equipment, capitalized development software costs and acquired intangible assets. Long-lived assets
are amortized over their estimated useful lives which are as follows:
Computers and equipment 3 years
Furniture and fixtures 5 years
Leasehold improvements Shorter of lease term or useful life of asset
Capitalized software development costs 2 years
Developed technology 3 years
Customer relationships 4 years
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The Company evaluates long lived assets, including acquired intangible assets and capitalized software development costs, for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or the estimated useful life becomes shorter than originally estimated.
Recoverability of assets held and used is measured by comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows
expected to be generated by the asset or asset group. If the carrying amount of an asset exceeds these estimated future cash flows, an impairment charge is recognized by
the amount by which the carrying amount of the assets exceeds the fair value of the asset or asset group, based on discounted cash flows.
Goodwill is not amortized but rather tested for impairment at least annually on October 1, or more frequently if events or changes in circumstances indicate
that goodwill may be impaired. Goodwill impairment is recognized when the quantitative assessment results in the carrying value exceeding the fair value, in which case an
impairment charge is recorded to the extent the carrying value exceeds the fair value. The Company did not recognize any impairment of goodwill during the years ended
December 31, 2023, 2022 or 2021.
Operating Leases
The Company determines if an arrangement is a lease at inception. Operating lease assets and liabilities are reflected within operating lease assets, operating
lease liabilities, current, and operating lease liabilities, non-current, on the consolidated balance sheets. For short-term leases (an initial term of 12 months or less), an
operating lease asset and corresponding lease liability are not recorded and the Company records rent expense in its consolidated statements of operations on a straight-
line basis over the lease term. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the
Company’s obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present
value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate
based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease assets also
include any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably
certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease
agreements with lease and non-lease components, which are accounted for separately.
Net Income (Loss) Per Share Attributable to Common Stockholders
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of Class A common stock and Class B
common stock (together “common stock”) outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-
average number of shares of common stock outstanding during the period giving effect to all potentially dilutive securities to the extent they are dilutive. The dilutive effect
of potentially dilutive securities is reflected in diluted net income (loss) per share by application of the two-class method. During the periods when the Company is in a net
loss position, the net loss attributable to common stockholders was not allocated to the unvested common stock under the two-class method as these securities do not
have a contractual obligation to share in the Company’s losses.
Accounting Pronouncements Recently Adopted
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts
with Customers (“ASU No. 2021-08”), which intends to improve the accounting for acquired revenue contracts with customers in a business combination by addressing
diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the
acquirer. It is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. The Company early adopted ASU No. 2021-08 on
January 1, 2022 on a prospective basis with no material impact on the Company's consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU No. 2023-
07”), which intends to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments
in this ASU are effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December
15, 2024. Early adoption is permitted. The amendments in this ASU should be applied retrospectively to all prior
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periods presented in the financial statements. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU No. 2023-09”), which
intends to increase the transparency of income tax disclosures, particularly the rate reconciliation table and disclosures about income taxes paid. For public business
entities, it is effective for annual periods beginning after December 15, 2024, and interim periods beginning after December 15, 2025, with early adoption permitted. The
Company has not early adopted ASU No. 2023-09 as of December 31, 2023 and is evaluating its impact.
3. Marketable Securities
The following is a summary of available-for-sale marketable securities, excluding those securities classified within cash and cash equivalents on the
consolidated balance sheet as of December 31, 2023 and December 31, 2022 (in thousands):
December 31, 2023
Amortized Unrealized Unrealized Fair
Cost Gain Losses Value
Corporate debt securities $ 776,323 $ 770 $ (1,140) $ 775,953
Commercial paper 605,291 570 (75) 605,786
U.S. government treasury securities 460,854 390 (1,399) 459,845
Certificates of deposit 264,405 335 (15) 264,725
U.S. government agency securities 146,611 — (361) 146,250
Marketable securities $ 2,253,484 $ 2,065 $ (2,990) $ 2,252,559
December 31, 2022
Amortized Unrealized Unrealized Fair
Cost Gain Losses Value
Corporate debt securities $ 813,598 $ 64 $ (7,554) $ 806,108
Commercial paper 357,030 64 (821) 356,273
Certificates of deposit 174,080 37 (587) 173,530
U.S. government treasury securities 120,977 — (1,099) 119,878
U.S. government agency securities 89,718 12 (178) 89,552
Marketable securities $ 1,555,403 $ 177 $ (10,239) $ 1,545,341
Interest receivable of $15.1 million and $8.1 million is included in Prepaid expenses and other current assets on the consolidated balance sheets as of
December 31, 2023 and 2022, respectively. The Company did not recognize an allowance for credit losses against interest receivable as of December 31, 2023 and 2022
because such potential losses were not material.
As of December 31, 2023, the fair values of available-for-sale marketable securities, by remaining contractual maturity, were as follows (in thousands):
Due within one year $ 1,799,542
Due in one year through five years 453,017
Total $ 2,252,559
The Company does not believe that any unrealized losses are attributable to credit-related factors based on its evaluation of available evidence. To determine
whether a decline in value is related to credit loss, the Company evaluates, among other factors: the extent to which the fair value is less than the amortized cost basis,
changes to the rating of the security by a rating agency and any adverse conditions specifically related to an issuer of a security or its industry. Unrealized gains and losses
on marketable securities are presented net of tax.
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4. Fair Value Measurements
The following tables present information about the Company’s financial assets and liabilities that have been measured at fair value on a recurring basis as of
December 31, 2023 and 2022, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):
Fair Value Measurement as of December 31, 2023
Level 1 Level 2 Level 3 Total
Financial Assets:
Cash equivalents:
Money market funds $ 240,909 $ — $ — $ 240,909
Corporate debt securities — 484 — 484
U.S. government treasury securities — 53,972 — 53,972
Marketable Securities:
Corporate debt securities — 775,953 — 775,953
Commercial paper — 605,786 — 605,786
Certificates of deposit — 264,725 — 264,725
U.S. government agency securities — 146,250 — 146,250
Total financial assets $ 240,909 $ 2,307,015 $ — $ 2,547,924
Fair Value Measurement as of December 31, 2022
Level 1 Level 2 Level 3 Total
Financial Assets:
Cash equivalents:
Money market funds $ 302,902 $ — $ — $ 302,902
Marketable Securities:
Commercial paper — 356,273 — 356,273
Certificates of deposit — 173,530 — 173,530
U.S. government agency securities — 89,552 — 89,552
Total financial assets $ 302,902 $ 1,547,834 $ — $ 1,850,736
The Company considers all highly liquid investments, including money market funds with an original maturity of three months or less at the date of purchase, to
be cash equivalents. The Company uses quoted prices in active markets for assets to determine the fair value of its Level 1 investments in money market funds. The
Company classifies its commercial paper, corporate debt securities, certificates of deposit, U.S. government treasury securities, and Non-U.S. government securities within
Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for
the identical underlying security which may not be actively traded.
In addition to its cash equivalents and marketable securities, the Company measures the fair value of its outstanding convertible senior notes on a quarterly
basis for disclosure purposes. The Company considers the fair value of the convertible senior notes to be a Level 2 measurement due to limited trading activity of the
convertible senior notes. Refer to Note 8, Convertible Senior Notes, to the consolidated financial statements for further details.
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5. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
2023 2022
Computers and equipment $ 35,736 $ 33,376
Furniture and fixtures 17,202 13,315
Leasehold improvements 55,111 27,683
Capitalized software development costs 192,691 134,890
Total property and equipment $ 300,740 $ 209,264
Less: accumulated depreciation and amortization (128,868) (83,918)
Total property and equipment, net $ 171,872 $ 125,346
As discussed in Note 2, Basis of Presentation and Summary of Significant Accounting Policies—Internal-Use Software Development Costs, the Company
capitalizes costs related to the development of computer software for internal-use and is included in capitalized software development costs within property and equipment,
net.
Depreciation and amortization expense was approximately $35.6 million, $27.0 million, and $18.5 million for the years ended December 31, 2023, 2022 and
2021, respectively.
6. Acquisitions, Intangible Assets and Goodwill
2023 Acquisitions
During the year ended December 31, 2023, the Company entered into three purchase agreements for acquisitions of businesses, each of which were
accounted for as business combinations in accordance with ASC 805, Business Combinations. The Company does not consider these acquisitions to be material,
individually or in aggregate. The total purchase price was allocated to intangible assets in the amount of $2.1 million and goodwill in the amount of $3.5 million based on the
respective estimated fair values. The resulting goodwill from each of the agreements is not deductible for income tax purposes. Pro forma results of operations from these
acquisitions have not been presented because they were not material to the consolidated results of operations.
2022 Acquisitions
During the year ended December 31, 2022, the Company entered into four purchase agreements for acquisitions of businesses, each of which were
accounted for as business combinations in accordance with ASC 805, Business Combinations. The Company does not consider these acquisitions to be material,
individually or in aggregate. The total purchase price was allocated to intangible assets in the amount of $8.2 million and goodwill in the amount of $56.6 million based on
the respective estimated fair values. The resulting goodwill from each of the agreements is not deductible for income tax purposes. Pro forma results of operations from
these acquisitions have not been presented because they were not material to the consolidated results of operations.
2021 Acquisitions
In October and December 2021, the Company entered into two purchase agreements for acquisitions of businesses, each of which were accounted for as
business combinations in accordance with ASC 805, Business Combinations. The Company does not consider these acquisitions to be material, individually or in
aggregate. The total purchase price was allocated to intangible assets in the amount of $4.3 million and goodwill in the amount of $36.6 million based on the respective
estimated fair values. The resulting goodwill from both agreements is not deductible for income tax purposes. Pro forma results of operations from these acquisitions have
not been presented because they were not material to the consolidated results of operations.
In April 2021, the Company entered into a stock purchase agreement whereby the Company acquired all of the issued and outstanding shares of a SaaS
based security platform company. The consideration was approximately $219.4 million, comprising cash and Class A common stock. The acquisition was accounted for as
a business combination in accordance with ASC 805, Business Combinations. The purchase price was allocated to intangible assets in the amount of $12.0 million and
goodwill in the amount of $204.3 million based on the respective estimated fair values. The resulting
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goodwill is not deductible for income tax purposes. Intangible assets consisted of developed technology in the amount of $8.7 million and customer relationships in the
amount of $3.3 million. The useful life for developed technology and customer relationships are three and four years, respectively. Additionally, there was a one-time
severance charge of $1.3 million recorded on the acquisition date.
In February 2021, the Company entered into a stock purchase agreement whereby the Company acquired all of the issued and outstanding shares of an
observability data pipeline tool company with the purchase price paid in cash and Class A common stock. The acquisition was accounted for as a business combination in
accordance with ASC 805, Business Combinations. The purchase price was allocated to intangible assets in the amount of $1.7 million and goodwill in the amount of
$34.3 million based on the respective estimated fair values. The resulting goodwill is not deductible for income tax purposes. Pro forma results of operations for this
acquisition have not been presented because they were not material to the consolidated results of operations.
Intangible Assets
Intangible assets, net consisted of the following (in thousands):
December 31, 2023
Gross Net
Carrying Accumulated Carrying Amortization
Amount Amortization Amount Period
Developed technology $ 24,995 $ (16,428) $ 8,567 3 years
Customer relationships 3,300 (2,250) 1,050 4 years
Total $ 28,295 $ (18,678) $ 9,617
December 31, 2022
Gross Net
Carrying Accumulated Carrying Amortization
Amount Amortization Amount Period
Developed technology $ 24,460 $ (9,970) $ 14,490 3 years
Customer relationships 3,300 (1,425) 1,875 4 years
Total $ 27,760 $ (11,395) $ 16,365
Intangible amortization expense was approximately $8.9 million, $7.6 million and $4.4 million for the years ended December 31, 2023, 2022 and 2021,
respectively. Amortization of developed technology and customer relationships are included in cost of revenue and sales and marketing expense, respectively, on the
Company’s consolidated statement of operations and comprehensive loss.
As of December 31, 2023, future amortization expense by year is expected to be as follows (in thousands):
Amount
2024 $ 6,489
2025 2,597
2026 531
Total $ 9,617
Goodwill
The changes in the carrying amount of goodwill were as follows (in thousands):
Amount
Balance as of December 31, 2022 $ 348,277
2023 Acquisitions 3,540
Foreign currency translation adjustments 877
Balance as of December 31, 2023 $ 352,694
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7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
2023 2022
Accrued cloud hosting and infrastructure expenses (1) $ 13,783 $ 73,566
Accrued compensation and commissions 61,541 46,736
Other tax liability and sales tax 30,775 25,818
Other accrued expenses 21,532 25,038
Total accrued expenses and other current liabilities $ 127,631 $ 171,158
_____________________
1) Due to the timing of when invoices are received, accounts payable on the consolidated balance sheets includes cloud hosting and infrastructure expenses of $70.2 million and $12.6 million for the years ended
December 31, 2023 and 2022, respectively.
8. Convertible Senior Notes

On June 2, 2020, the Company issued $747.5 million aggregate principal amount of 0.125% convertible senior notes due 2025 (the “2025 Notes”) in a private
placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (“Securities Act”). The total net proceeds from the sale of
the 2025 Notes, after deducting the initial purchasers’ discounts and debt issuance costs, were approximately $730.2 million. The 2025 Notes bear interest at a rate of
0.125% per year, payable semiannually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020. The 2025 Notes will mature on June 15,
2025, unless earlier converted, redeemed or repurchased.
Holders may convert their notes at their option at any time prior to the close of business on the business day immediately preceding March 15, 2025 only under
the following circumstances:
(1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last
reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive
trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the
conversion price on each applicable trading day;
(2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000
principal amount of 2025 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the
Company’s Class A common stock and the conversion rate on each such trading day;
(3) if the Company calls such 2025 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the
redemption date; or
(4) upon the occurrence of specified corporate events, as set forth in the indenture governing the 2025 Notes (“the Indenture”).
On or after March 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all
or any portion of their notes, in integral multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. The conversion rate for
the 2025 Notes is initially 10.8338 shares of Class A common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $92.30
per share of Class A common stock), subject to adjustment as set forth in the Indenture. Upon conversion, the Company will pay or deliver, as the case may be, cash,
shares of Class A common stock or a combination of cash and shares of Class A common stock, at the Company’s election. If the Company satisfies its conversion
obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of Class A common stock, the amount of cash and
shares of Class A common stock, if any, due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 30
trading day observation period as described in the Indenture. In addition, if specific corporate events occur prior to the applicable maturity date, or if the Company elects to
redeem the 2025 Notes, the Company will increase the conversion rate for a holder who elects to convert their notes in connection with such a corporate event or
redemption in certain circumstances.
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During the three months ended December 31, 2023, the conditional conversion feature of the 2025 Notes was not triggered as the last reported sale price of
the Company’s Class A common stock was not greater than or equal to 130% of the conversion price for at least 20 trading days (whether or not consecutive) during a
period of 30 consecutive trading days ending on, and including, the last trading day of the quarter ended December 31, 2023. Therefore the 2025 Notes are not
convertible, in whole or in part, at the option of the holders between January 1, 2024 through March 31, 2024. Whether the 2025 Notes will be convertible in future periods
will depend on the continued satisfaction of this condition or another conversion condition.
When a conversion notice is received, the Company has the option to pay or deliver cash, shares of the Company’s common stock, or a combination thereof.
Since the issuance of the 2025 Notes, the Company received and settled an immaterial amount of conversion notices from the holders in cash. As of December 31, 2023,
the 2025 Notes were classified as long-term debt on the Company's consolidated balance sheet.
The Company may redeem for cash all or any portion of the 2025 Notes prior to the 31st scheduled trading day immediately preceding the maturity date, at its
option, if the last reported sale price of its Class A common stock was at least 130% of the conversion price then in effect for at least 20 trading days (whether or not
consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding
the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus
accrued and unpaid interest to, but excluding, the redemption date.
In accounting for the issuance of the 2025 Notes, the 2025 Notes were separated into liability and equity components. The carrying amount of the liability
component was calculated by measuring the fair value of similar liabilities that do not have associated convertible features. The carrying amount of the equity component
representing the conversion option was determined by deducting the fair value of the liability component from the par value of the respective 2025 Notes. This difference
represents the debt discount that is amortized to interest expense over the contractual terms of the 2025 Notes using the effective interest rate method. The carrying
amount of the equity component representing the conversion option was $177.2 million. The equity component was recorded in additional paid-in capital and is not
remeasured as long as it continues to meet the conditions for equity classification.
In accounting for the debt issuance costs of $17.3 million related to the 2025 Notes, the Company allocated the total amount incurred to the liability and equity
components of the 2025 Notes in the same proportion as the allocation of the proceeds. Issuance costs attributable to the liability component were $13.2 million and will be
amortized, along with the debt discount, to interest expense over the contractual term of the 2025 Notes at an effective interest rate of 5.97%. Issuance costs attributable to
the equity component were $4.1 million and are netted against the equity component in additional paid-in capital.
On January 1, 2021 the Company adopted ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. As a result of
the adoption, the debt conversion option of $177.2 million and debt issuance costs of $4.1 million previously attributable to the equity component are no longer presented in
equity. Similarly, the debt discount, that is equal to the carrying value of the embedded conversion feature upon issuance, is no longer amortized into income as interest
expense over the life of the instrument. This resulted in a $16.8 million decrease to the opening balance of accumulated deficit, a $173.1 million decrease to the opening
balance of additional paid-in capital and a $156.3 million increase to the opening balance of convertible senior notes, net on the consolidated balance sheet.
The net carrying amount of the liability component of the 2025 Notes was as follows (in thousands):
2023 2022
Convertible senior notes, net:
Principal $ 747,496 $ 747,496
Unamortized debt issuance costs (5,261) (8,649)
Net carrying amount $ 742,235 $ 738,847
As of December 31, 2023, the total estimated fair value of the 2025 Notes was approximately $1,050.2 million. The fair value was determined based on the
closing trading price or quoted market price per $100 of the 2025 Notes as of the last day of trading for the period. The fair value of the 2025 Notes is primarily affected by
the trading price of the Company’s Class A common stock and market interest rates.
The following table sets forth the interest expense related to the 2025 Notes for the years ended December 31, 2023, 2022, and 2021 (in thousands):
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2023 2022 2021
Contractual interest expense $ 934 $ 934 $ 934
Amortization of issuance costs 3,388 3,369 3,349
Total $ 4,322 $ 4,303 $ 4,283
Capped Calls
In connection with the pricing of the 2025 Notes, the Company entered into privately negotiated capped call transactions with certain counterparties (“Capped
Calls”). The Capped Calls each have an initial strike price of approximately $92.30 per share, subject to certain adjustments, which corresponds to the initial conversion
price of the 2025 Notes. The Capped Calls have initial cap prices of $151.04 per share, subject to certain adjustments. The Capped Calls are expected to partially offset
the potential dilution to the Company’s Class A common stock upon any conversion of the 2025 Notes, with such offset subject to a cap based on the cap price. The
Capped Calls cover, subject to anti-dilution adjustments, approximately 8.1 million shares of the Company’s Class A common stock. For accounting purposes, the Capped
Calls are separate transactions, and not part of the 2025 Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders'
equity and are not accounted for as derivatives. The cost of $89.6 million incurred to purchase the Capped Calls was recorded as a reduction to additional paid-in capital
and will not be remeasured.
9. Commitments and Contingencies
The Company enters into non-cancelable purchase commitments and operating leases in the normal course of business. Non-cancelable purchase
commitments for business operations and operating lease obligations total $485.0 million and $347.1 million, respectively, as of December 31, 2023, due primarily over the
next 5 years. Purchase commitments for business operations are primarily related to cloud hosting and other software-based services.
The Company also issued long-term debt to finance the business. The principal and future interest payments related to the 2025 Notes are $749.0 million.
401(k) Plan—The Company sponsors a 401(k) defined contribution plan covering all eligible U.S. employees. The Company is responsible for administrative
costs of the 401(k) plan and beginning on January 1, 2022, the Company began making matching contributions to the 401(k) plan. For the years ended December 31,
2023 and 2022, the Company incurred expense of $6.3 million and $5.7 million for matching contributions, respectively. The Company did not make any matching
contributions to the 401(k) plan for the year ended December 31, 2021.
Legal Matters—The Company is involved from time to time in various claims and legal actions arising in the ordinary course of business. While it is not
feasible to predict or determine the ultimate outcome of these matters, the Company believes that none of its current legal proceedings will have a material adverse effect
on its financial position or results of operations.
Indemnification—The Company enters into indemnification provisions under some agreements with other parties in the ordinary course of business,
including business partners, investors, contractors, customers, and the Company’s officers, directors and certain employees. The Company has agreed to indemnify and
defend the indemnified party claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claim because of the Company’s
activities or non-compliance with certain representations and warranties made by the Company. It is not possible to determine the maximum potential loss under these
indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular
provision. To date, losses recorded in the Company’s consolidated statements of operations in connection with the indemnification provisions have not been material.
10. Leases
The Company has entered into various non-cancelable operating leases for its facilities expiring between 2024 and 2033. Certain lease agreements contain an
option for the Company to renew a lease for a term of up to three years or an option to terminate a lease early within one year. The Company considers these options,
which may be elected at the Company’s sole discretion, in determining the lease term on a lease-by-lease basis.
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Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those
payments are incurred.
Rent expense for the years ended December 31, 2023, 2022 and 2021 was $43.5 million, $34.0 million, and $23.8 million, respectively.
The Company recorded $0.9 million, $1.0 million, and $1.0 million in sub-lease income for the years ended December 31, 2023, 2022 and 2021, respectively.
Sub-lease income is recorded as a credit to rent expense.
The components of lease cost recognized within the Company’s consolidated statements of operations were as follows (in thousands):
2023 2022 2021
Operating lease cost (1) $ 34,670 $ 25,212 $ 20,198
Short-term lease cost 8,797 8,739 3,609
_____________________
1) Includes non-cash lease expense of $26.4 million, $21.4 million, and $17.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Supplemental cash flow information and non-cash activity related to the Company’s operating leases are as follows (in thousands):
2023 2022 2021
Cash paid for amounts included in measurement of lease liabilities $ 13,273 $ 24,752 $ 20,741
Operating lease assets obtained in exchange for new lease liabilities 61,594 48,404 17,476
Maturities of lease liabilities by fiscal year for the Company’s operating leases are as follows (in thousands):
Amount
2024 $ 17,995
2025 34,234
2026 31,050
2027 27,747
2028 24,479
Thereafter 73,102
Total lease payments $ 208,607
Less: imputed interest (48,505)
Present value of lease liabilities $ 160,102
As of December 31, 2023, the Company had various operating leases that had not yet commenced, which are excluded from the table above. The operating
leases will commence between fiscal year 2024 and 2025 with total undiscounted future payments of $138.5 million and a weighted-average lease term of 9 years.
Weighted average remaining lease term and discount rate for the Company’s operating leases are as follows:
2023 2022
Weighted average remaining lease term (years) 6.7 6.2
Weighted average discount rate 6.00% 5.12%
11. Revenue
Geographical Information
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Revenue by location is determined by the billing address of the customer. The following table sets forth revenue by geographic area (in thousands):
2023 2022 2021
North America (1) $ 1,487,319 $ 1,200,719 $ 736,218
International 641,040 474,381 292,566
Total $ 2,128,359 $ 1,675,100 $ 1,028,784
1) Includes revenue from the United States of $1,411.0 million, $1,134.1 million, and $691.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Other than the United States, no other individual country accounted for 10% or more of total revenue for the years ended December 31, 2023, 2022, or 2021.
Accounts Receivable
As of December 31, 2023 and 2022, unbilled accounts receivable of approximately $61.2 million and $60.0 million, respectively, was included in accounts
receivable on the Company’s consolidated balance sheets.
During the years ended December 31, 2023 and 2022, the Company charged $5.5 million and $2.7 million, respectively, of accounts receivable deemed
uncollectible against the allowance for credit losses.
Deferred Revenue and Remaining Performance Obligations
Revenue recognized during the years ended December 31, 2023, 2022 and 2021 which was included in the deferred revenue balances at the beginning of
each respective period, was $525.5 million, $374.6 million, and $206.6 million.
As of December 31, 2023, and 2022, the aggregate transaction price allocated to remaining performance obligations was $1,839.4 million and $1,057.2
million, respectively. There is uncertainty in the timing of revenues associated with the Company’s drawdown contracts, as future revenue can often vary significantly from
past revenue. However, the Company expects to recognize substantially all of the remaining performance obligations over the next 24 months.
Deferred Contract Costs
Deferred contract costs on the Company’s consolidated balance sheets were $118.7 million and $88.4 million as of December 31, 2023 and 2022,
respectively. Amortization expense was $39.2 million, $28.0 million and $17.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.
12. Stockholders’ Equity
Class A and Class B Common Stock
The Company has two classes of common stock, Class A and Class B. The rights of the holders of Class A and Class B common stock are identical, except with
respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes
per share. Shares of Class B common stock may be converted into Class A common stock at any time at the option of the stockholder and are automatically converted to
Class A common stock upon sale or transfer, subject to certain limited exceptions.
During the year ended December 31, 2023, 2,016,413 shares of Class B common stock were converted into Class A common stock.
As of December 31, 2023, the Company had authorized 2,000,000,000 shares of Class A common stock and 310,000,000 shares of Class B common stock, each
at a par value per share of $0.00001, of which 305,395,175 shares of Class A common stock and 25,684,571 shares of Class B common stock were issued and
outstanding.
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As of December 31, 2023 and 2022, the Company had reserved shares of common stock for future issuance as follows:
December 31,
2023 2022
Options, RSUs and PSUs outstanding 25,741,136 30,930,540
Shares available for future grants 73,189,660 63,291,013
Shares subject to the employee stock purchase plan 17,481,059 14,806,591
Total shares of common stock reserved for future issuance 116,411,855 109,028,144
Equity Incentive Plans

The Company has two equity incentive plans, the 2012 Equity Incentive Plan (the “2012 Plan”) and the 2019 Equity Incentive Plan (the “2019 Plan”). In
connection with the Company's initial public offering (“the IPO”), the Company ceased granting awards under the 2012 Plan, and all shares that remained available for
issuance under the 2012 Plan at that time were transferred to the 2019 Plan. Additionally, as of December 31, 2023, there were 12,054,709 shares of Class A common
stock issuable upon conversion of Class B common stock underlying options outstanding under the 2012 Plan. Under the 2019 Plan, the Board and any other committee or
subcommittee of the Board may grant stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), and performance stock units
(“PSUs”) and other awards, each equity award valued or based on the Company’s Class A common stock, to employees, directors, consultants, and advisors of the
Company. As of December 31, 2023, there were 73,189,660 shares available for grant under the 2019 Plan.
Stock Options
The following table summarizes the Company's stock option activity and weighted-average exercise prices:
Weighted-
Average
Number of Weighted- Remaining Aggregate
Options Average Contractual Life Intrinsic Value
Outstanding Exercise Price (in Years) (in thousands)
Balance—December 31, 2022 18,551,857 $ 3.24 4.4 $ 1,303,464
Options granted — —
Options exercised (6,455,931) 3.24
Options forfeited or expired (18,291) 5.50
Balance—December 31, 2023 12,077,635 $ 3.24 3.4 $ 1,426,912
Exercisable—December 31, 2023 12,074,409 $ 3.23 3.4 $ 1,426,607
As of December 31, 2023, there were 22,926 shares of Class A common stock and 12,054,709 shares of Class B common stock issuable upon the exercise
of options outstanding. As of December 31, 2022, there were 28,557 shares of Class A common stock and 18,523,300 shares of Class B common stock issuable upon the
exercise of options outstanding.
Approximately all compensation cost related to unvested awards was recognized as of December 31, 2023. Compensation cost related to unvested awards
not yet recognized was approximately $10.1 million as of December 31, 2022. The weighted-average period over which this compensation cost related to unvested
employee awards will be recognized is 1.0 year and 0.6 years as of December 31, 2023 and December 31, 2022, respectively.
There were no options granted during the years ended December 31, 2023, 2022 and 2021. The Company received approximately $20.9 million, $10.0 million
and $14.9 million in cash proceeds from options exercised during the years ended December 31, 2023, 2022 and 2021, respectively. The intrinsic value of options
exercised during the years ended December 31, 2023, 2022 and 2021 was approximately $565.9 million, $301.6 million and $579.6 million, respectively. The aggregate
fair value of options vested during the years ended December 31, 2023, 2022 and 2021 was $12.5 million, $23.9 million and $28.1 million, respectively.
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Restricted Stock Units, Restricted Stock and Performance Stock Units
The following table summarizes the activity for the Company’s unvested RSUs and PSUs:
Aggregate
Weighted-Average Intrinsic Value
Shares Fair Value (in thousands)
Unvested and outstanding balance as of December 31, 2022 12,378,683 $ 106.19 $ 909,833
Awarded 7,382,006 89.09
Vested (4,794,318) 101.02
Forfeited/canceled (1,302,870) 102.42
Unvested and outstanding balance as of December 31, 2023 13,663,501 $ 99.13 $ 1,658,476
The Company issued a total of 122,224 shares of restricted Class A common stock in connection with acquisitions, net of shares retired, during the year
ended December 31, 2023, which are subject to service-based vesting conditions over approximately four years from the respective grant dates.
Total compensation cost related to unvested RSUs and restricted shares of common stock not yet recognized was approximately $1,187.3 million and
$1,151.1 million as of December 31, 2023 and December 31, 2022, respectively. The weighted-average period over which this compensation cost related to unvested
RSUs and restricted shares of common stock will be recognized is 2.8 years and 2.9 years as of December 31, 2023 and December 31, 2022, respectively.
Total compensation cost related to unvested PSUs not yet recognized was approximately $25.1 million and $19.0 million as of December 31, 2023, and
December 31, 2022, respectively. The weighted-average period over which this compensation cost related to unvested PSUs will be recognized is 1.3 years and 1.4 years
as of December 31, 2023, and December 31, 2022, respectively. There were no PSUs outstanding during the year ended December 31, 2021.
Stock-Based Compensation
Stock-based compensation was included in the consolidated statement of operations as follows (in thousands):
2023 2022 2021
Cost of revenue $ 17,578 $ 10,827 $ 4,565
Stock-based compensation, net of amounts capitalized 482,300 363,154 163,737
Capitalized stock-based compensation 13,597 14,853 9,660
Total stock-based compensation $ 495,897 $ 378,007 $ 173,397
Employee Stock Purchase Plan

In September 2019, the Board adopted and approved the 2019 ESPP, which became effective on the date of the final prospectus for the Company’s IPO.
The ESPP is implemented through a series of offerings under which eligible employees are granted purchase rights to purchase shares of the Company’s
Class A common stock on specified dates during such offerings. Under the ESPP, the Company may specify offerings with durations of not more than 27 months and may
specify shorter purchase periods within each offering. Historically offering periods have been approximately 6 months. On each purchase date, eligible employees will
purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s Class A common stock on the first trading day of the
offering period, or (2) the fair market value of the Company’s Class A common stock on the purchase date, as defined in the ESPP.
The Company recognized $16.0 million, $11.2 million, and $7.6 million of stock-based compensation expense related to the ESPP during the years ended
December 31, 2023, 2022, and 2021, respectively.
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As of December 31, 2023, and 2022, $6.6 million and $6.0 million, respectively has been withheld on behalf of employees for a future purchase under the
ESPP due to the timing of payroll deductions.
During the years ended December 31, 2023, 2022, and 2021, the Company issued 517,430, 316,875, and 291,871 shares of Class A common stock under
the ESPP. As of December 31, 2023, 17,481,059 shares of Class A common stock remain available for grant under the ESPP.
Total compensation cost related to the ESPP not yet recognized was approximately $6.8 million and $7.1 million as of December 31, 2023 and 2022,
respectively. The weighted average period over which this compensation cost will be recognized is 0.4 years as of December 31, 2023 and 2022, respectively.
13. Interest Income and Other Income, Net
Interest income and other income, net consist of the following (in thousands):
2023 2022 2021
Interest income $ 103,459 $ 34,931 $ 21,412
Other (loss) income, net (3,458) 2,229 374
Interest income and other income, net $ 100,001 $ 37,160 $ 21,786
14. Income Taxes

Income Taxes—For financial reporting purposes, income (loss) before income taxes, includes the following components (in thousands):
2023 2022 2021
Domestic $ 42,811 $ (76,694) $ (29,617)
Foreign 17,424 38,624 11,195
Income (loss) before income taxes $ 60,235 $ (38,070) $ (18,422)
Total income taxes allocated to operations for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):
2023 Current Deferred Total
Federal $ (261) $ — $ (261)
State 2,551 — 2,551
Foreign 10,262 (885) 9,377
Total $ 12,552 $ (885) $ 11,667
Federal $ 3,122 $ — $ 3,122
State 183 — 183
Foreign 9,179 (394) 8,785
Total $ 12,484 $ (394) $ 12,090

Federal $ 232 $ — $ 232
State 44 — 44
Foreign 2,091 (44) 2,047
Total $ 2,367 $ (44) $ 2,323
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Tax Rate Reconciliation—Income tax expense was $11.7 million, $12.1 million and $2.3 million for the years ended December 31, 2023, 2022 and 2021,
respectively, and differed from the amounts computed by applying the U.S. federal statutory income tax rate of 21% for the years ended December 31, 2023, 2022 and
2021, to pretax income (loss) from operations as a result of the following (in thousands):
2023 2022 2021
Income tax expense at federal statutory rate $ 12,650 $ (7,995) $ (3,868)
Meals and entertainment 1,957 1,717 416
State taxes (net of federal benefit) 1,090 140 18
Net change in valuation allowance 68,770 25,573 62,173
Uncertain tax positions (94) 3 (728)
U.S. tax costs on international operations 2,037 5,722 1,478
Foreign taxes 1,149 (835) 424
Share based compensation deductions (69,784) (1,580) (57,350)
Return to provision (3,335) (1,149) (193)
U.S. R&D tax credits (2,973) (9,467) —
Other 200 (39) (47)
Total $ 11,667 $ 12,090 $ 2,323
Certain reclassifications have been made to the components of Tax Rate Reconciliation for the year ending December 31, 2022 and 2021 to conform to the
2023 presentation.
For the year ended December 31, 2023, the Company has evaluated the available evidence supporting the realization of its deferred tax assets, including the
amount and timing of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in the United States. Due to
uncertainties surrounding the realization of the deferred tax assets, the Company recorded a full valuation allowance against substantially all of its net deferred tax assets.
When the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets
would have the effect of increasing net income in the period such determination is made.
The Company is subject to tax laws in the United States and numerous foreign jurisdictions. The United States and many international legislative and
regulatory bodies continually propose and enact legislation that could significantly impact how U.S. multinational corporations are taxed. The Company is closely monitoring
proposed legislation and its potential impact. For tax years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct
research and development expenditures, as defined under IRC Section 174, in the year incurred. Instead, taxpayers are required to amortize such expenditures over five
years if incurred in the U.S. and over fifteen years if incurred in a foreign jurisdiction.
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Components of Deferred Taxes—The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities at
December 31, 2023 and 2022 are presented below (in thousands):
December 31,
2023 2022
Deferred tax assets:
Net operating losses $ 49,057 $ 54,974
U.S. R&D tax credits 46,639 13,841
Stock-based compensation 47,652 48,872
Section 174 capitalization 181,721 76,625
Lease liability 27,004 18,793
Other 21,593 15,494
Total deferred tax assets $ 373,666 $ 228,599
Less: valuation allowance (321,612) (188,817)
Deferred tax assets, net of valuation allowance $ 52,054 $ 39,782
Deferred tax liabilities:
Commissions (29,782) (22,182)
Right of use asset (20,916) (17,151)
Total deferred tax liabilities $ (50,698) $ (39,333)
Deferred tax assets, net $ 1,356 $ 449
The Company accounts for income taxes using an asset and liability method and deferred income tax assets and liabilities are measured using the currently
enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled. The Company’s deferred
tax assets and liabilities consist primarily of federal and state net operating loss carryforwards and basis differences for financial reporting and tax purposes of certain
assets and liabilities. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those
temporary differences become deductible. Based upon the weight of all available evidence, which includes the historical operating performance and the recorded
cumulative losses in prior fiscal periods, management does not believe as of December 31, 2023 and 2022 that it is more likely than not that the Company will realize its
U.S. deferred tax assets. As a result, a valuation allowance of $321.6 million and $188.8 million has been provided at December 31, 2023 and 2022, respectively. The
valuation allowance changed by $132.8 million and $40.2 million at December 31, 2023 and 2022, respectively. Certain reclassifications have been made to the
components of deferred tax for the year ending December 31, 2022 to conform to the 2023 presentation.
At December 31, 2023 and 2022, the Company has net operating loss carryforwards for federal tax purposes of approximately $148.9 million and $243.4
million, respectively, which is available to offset federal taxable income. The federal net operating loss carryforwards generated at December 31, 2017 and prior will begin
to expire in 2031, if not utilized. Net operating losses generated after December 31, 2017 have an indefinite carryforward period but are subject to an 80% of taxable
income limitation after December 31, 2020. The Company has approximately $206.4 million and $92.0 million of post-apportioned net operating loss carryforwards as of
December 31, 2023 and 2022, respectively for various state tax purposes. The state net operating loss carryforwards will begin to expire in 2026, if not utilized.
Generally, the utilization of net operating losses may be subject to an annual limitation provided for in the Internal Revenue Code of 1986, as amended, under
Section 382 and similar state codes. The Company has prepared an analysis to determine whether its net operating losses may be limited under such provisions. It has
been determined that any annual limitation would not result in the expiration of net operating loss carryforwards before utilization.
In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. Historically, the Company
has not made a provision for U.S. income tax with respect to accumulated earnings of foreign subsidiaries where the foreign investment of such earnings is essentially
permanent in duration. Generally, such amounts would become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. The
Company has not provided U.S. taxes on unremitted earnings of its foreign subsidiaries as it asserts permanent reinvestment on any accumulated earnings and profits.
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Consistent with the provisions of ASC 740, Income Taxes, the Company recognizes the effect of income tax positions only if those positions are more likely
than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in judgment occurs.
The following table shows the changes in the gross amount of unrecognized tax benefits as of December 31, 2023, 2022 and 2021 (in thousands):
December 31,
2023 2022 2021
Beginning balance $ 106 $ 106 $ 532
Increases based on tax positions during the current period — — —
(Decreases) based on tax positions during the current period (47) — (426)
Ending balance $ 59 $ 106 $ 106
The total amount of unrecognized tax benefits that, if recognized would impact the effective tax rate would be $0.1 million for the year ended December 31,
2023.
The Company’s policy for classifying interest and penalties associated with unrecognized income tax benefits is to include such items in income tax expense.
The total amount of interest and penalties associated with unrecognized income tax benefits is $0.1 million and $0.1 million for the years ended December 31, 2023 and
2022.
It is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next 12 months due to tax examination changes,
settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other
similar activities. As such the Company anticipates insignificant changes to unrecognized tax benefits over the next 12 months.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and in various international jurisdictions. Tax years 2017 and
forward generally remain open for examination for federal and state tax purposes. To the extent utilized in future years’ tax returns, net operating loss carryforwards at
December 31, 2023 and 2022 will remain subject to examination until the respective tax year is closed.
15. Net Income (Loss) Per Share
Basic and diluted net income (loss) per common share is presented in conformity with the two-class method required for participating securities. Immediately
prior to the consummation of the Company’s IPO in September 2019, all outstanding shares of convertible preferred stock and common stock were converted into shares
of Class B common stock. As a result, Class A and Class B common stock are the only outstanding equity in the Company.
Basic and diluted net income (loss) per share is computed using the weighted-average number of common shares of common stock outstanding during the
period. The undistributed earnings are allocated based on the contractual participation rights of the Class A and Class B common stock as if the earnings for the year have
been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. Further, as the conversion of Class
B common stock is assumed in the computation of the diluted net loss per share of Class A common stock, the undistributed earnings are equal to net loss for that
computation.
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The following table presents the calculation of basic and diluted net income (loss) per share (in thousands, except per share data):
2023 2022 2021
Basic net income (loss) per share: Class A Class B Class A Class B Class A Class B
Numerator:
Net income (loss) $ 44,684 $ 3,884 $ (45,163) $ (4,997) $ (16,177) $ (4,568)
Denominator:
Weighted average shares used in calculating net
income (loss) per share, basic 298,116 25,918 283,989 31,421 240,999 68,049
Basic net income (loss) per share $ 0.15 $ 0.15 $ (0.16) $ (0.16) $ (0.07) $ (0.07)
Diluted net income (loss) per share:
Numerator:
Allocation of distributed income (loss) for basic
computation $ 44,684 $ 3,884 $ (45,163) $ (4,997) $ (16,177) $ (4,568)
Reallocation of undistributed income (loss) as a
result of conversion of Class B to Class A shares 3,884 — (4,997) — (4,568) —
Allocation of undistributed income (loss) $ 48,568 $ 3,884 $ (50,160) $ (4,997) $ (20,745) $ (4,568)
Denominator:
Number of shares used in basic calculation 298,116 25,918 283,989 31,421 240,999 68,049
Weighted average effect of diluted securities:
Conversion of Class B to Class A common
shares outstanding 25,918 — 31,421 — 68,049 —
Employee stock options 14,828 — — — — —
Employee stock purchase plan 15 — — — — —
Restricted stock units and performance stock
units 2,731 — — — — —
Unvested restricted stock in connection with
acquisitions 586 — — — — —
Shares issuable upon conversion of the
convertible senior notes 8,098 — — — — —
Number of shares used in diluted calculation 350,292 25,918 315,410 31,421 309,048 68,049
Diluted net income (loss) per share $ 0.14 $ 0.15 $ (0.16) $ (0.16) $ (0.07) $ (0.07)
For the periods presented where the Company was in a loss position, basic net loss per share is the same as diluted net loss per share as the inclusion of all
potential common shares outstanding would have been anti-dilutive. Potentially dilutive securities that were not included in the diluted per share calculations because they
would be anti-dilutive were as follows (in thousands):
2023 2022 2021
Shares subject to outstanding stock options and RSUs 2,248 30,931 29,454
Unvested early exercised stock options and restricted shares of common stock 31 1,120 946
Shares subject to the employee stock purchase plan — 316 94
Shares issuable upon conversion of the convertible senior notes — 8,098 8,098
Total 2,279 40,465 38,592
ASU No. 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share when the
instruments may be settled in cash or shares. See Note 2, Basis of
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Presentation and Summary of Significant Accounting Policies—Accounting Policies Recently Adopted for more information. During the three months ended December 31,
2023, the conditional conversion feature of the 2025 Notes was not triggered and the 2025 Notes are not convertible, in whole or in part, at the option of the holders
between January 1, 2024 through March 31, 2024. The Company uses the if-converted method for calculating any potential dilutive effect of the conversion options
embedded in the 2025 Notes on diluted net income per share; however, since the Company is in a net loss position, there was no dilutive effect during any period
presented.
The Company entered into Capped Calls in connection with the issuance of the 2025 Notes. The effect of the Capped Calls was also excluded from the calculation
of diluted net income per share as the effect of the Capped Calls would have been anti-dilutive. The Capped Calls are expected to partially offset the potential dilution to the
Company’s Class A common stock upon any conversion of the 2025 Notes.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act, that are designed to ensure that
information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management,
including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls
and procedures as of December 31, 2023. Based on the evaluation of our disclosure controls and procedures as of December 31, 2023, our Chief Executive Officer and
Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate “internal control over financial reporting,” as defined in Rule 13a-15(f) and Rule
15d-15(f) under the Exchange Act. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023
based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on the results of its evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2023. Our
independent registered public accounting firm, Deloitte & Touche LLP, has issued an auditors’ report on the effectiveness of our internal control over financial reporting,
which is included in Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and Rule 15d15(d)
of the Exchange Act that occurred during the fiscal quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control
over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our
management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the
design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been
detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or
mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree
of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may
occur and not be detected.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Datadog, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Datadog, Inc. and its subsidiaries (the “Company”) as of December 31, 2023, based on criteria established
in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control —
Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial
statements as of and for the year ended December 31, 2023, of the Company and our report dated February 23, 2024, expressed an unqualified opinion on those financial
statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
New York, New York
February 23, 2024
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Item 9B. Other Information
Trading Arrangements
During the three months ended December 31, 2023, the Company’s directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted written
plans intended to satisfy the affirmative defense conditions of Securities Exchange Act Rule 10b5-1(c) for the sale of the Company’s securities as set forth in the table
below.
Total Shares of Class A Common Stock to be
Name Position Adoption Date Expiration Date
Sold
David Obstler Chief Financial Officer December 10, 2023 200,000 (1) March 15, 2025
Armelle de Madre Chief People Officer December 12, 2023 Up to 72,870 (2) March 31, 2025
Dev Ittycheria Director December 12, 2023 135,000 February 28, 2025
Sean Walters Chief Revenue Officer December 14, 2023 Up to 86,510 (2) February 11, 2025
(1) The amount includes 100,000 shares to be sold under the Rule 10b5-1 trading plan by the Obstler Children 2019 Trust.
(2) The actual number of shares that will be sold under the Rule 10b5-1 trading plan will be reduced by the number of shares sold pursuant to the Company’s election under its equity incentive plans to require the
satisfaction of tax withholding obligations realized upon the vesting of RSUs and PSUs to be funded by a sell-to-cover transaction. The number of Company shares to be sold to satisfy the Company’s tax
withholding obligation is not known at this time as it is dependent on future events, including the future trading price of the Company’s shares.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item (other than as set forth below) will be included in the proxy statement for our 2024 annual meeting of stockholders to be
filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023, or the 2024 Proxy Statement, and is incorporated herein by reference.
We have adopted a Code of Conduct that applies to all our employees, officers and directors. The Code of Conduct is available on our website at
www.investors.datadoghq.com. The nominating and corporate governance committee of our board of directors is responsible for overseeing the Code of Conduct and must
approve any waivers of the Code of Conduct for employees, executive officers and directors. We expect that any amendments to the Code of Conduct, or any waivers of its
requirements, will be disclosed on our website, as required by applicable law or the listing standards of Nasdaq. Our website is not incorporated by reference into this
Annual Report on Form 10-K, and you should not consider information on our website to be part of this Annual Report on Form 10-K.
Item 11. Executive Compensation
The information required by this Item will be included in the 2024 Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
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PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) Documents filed as part of this report
(1) All financial statements
Index to Consolidated Financial Statements Page
Report of Independent Registered Public Accounting Firm 57
Consolidated Balance Sheets as of December 31, 2023 and 2022 59
Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021 60
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023, 2022 and 2021 61
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2023, 2022 and 2021 62
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 63
Notes to Consolidated Financial Statements 64
(2) Financial Statement Schedules

All financial schedules have been omitted because the required information is either presented in the consolidated financial statements filed as part of this
Annual Report on Form 10-K or the notes thereto or is not applicable or required.
(3) Exhibits
Incorporated by Reference
Exhibit Filed
Number Description Form File No. Exhibit Filing Date Herewith
3.1 Amended and Restated Certificate of Incorporation of 8-K 001-39051 3.1 September 23,
Datadog, Inc. 2019
3.2 Amended and Restated Bylaws of Datadog, Inc. S-1 333-233428 3.4 August 23, 2019
4.1 Form of Class A Common Stock Certificate. S-1/A 333-233428 4.1 September 9, 2019
4.2 Description of Securities. 10-K 001-39051 4.2 February 25, 2020
4.3 Indenture, dated June 2, 2020, between Datadog, Inc. 8-K 001-39051 4.1 June 2, 2020
and U.S. Bank National Association, as Trustee.
4.4 Form of Global Note representing Datadog, Inc.’s 0.125% 8-K 001-39051 4.2 June 2, 2020
Convertible Senior Notes due 2025
10.1 Fourth Amended and Restated Investor Rights S-1 333-233428 10.1 August 23, 2019
Agreement, dated December 28, 2015.
10.2# Datadog, Inc. 2012 Equity Incentive Plan, and terms of S-1 333-233428 10.2 August 23, 2019
agreements thereunder.
10.3# Datadog, Inc. 2019 Equity Incentive Plan and terms of S-1/A 333-233428 10.3 September 9, 2019
agreements thereunder.
10.4# Datadog, Inc. 2019 Employee Stock Purchase Plan. S-1/A 333-233428 10.4 September 9, 2019
10.5# Performance Stock Units (PSU) Grant Notice and Award 10-Q 001-39051 10.1 August 8, 2022
Agreement
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10.6# Form of Indemnity Agreement entered into by and S-1/A 333-233428 10.5 September 9, 2019
between Datadog, Inc. and each director and executive
officer.
10.7# Offer Letter, by and between Datadog, Inc. and Olivier S-1/A 333-233428 10.6 September 9, 2019
Pomel, dated May 20, 2011.
10.8# Offer Letter, by and between Datadog, Inc. and David S-1/A 333-233428 10.7 September 9, 2019
Obstler, dated August 28, 2018.
10.9# Offer Letter, by and between Datadog, Inc. and Alexis Lê- 10-Q 001-39051 10.1 May 7, 2021
Quôc, dated May 20, 2011.
10.10# Offer Letter, by and between Datadog, Inc. and Amit 10-Q 001-39051 10.2 May 7, 2021
Agarwal, dated May 4, 2012.
10.11# Offer Letter, by and between Datadog, Inc. and Adam 10-Q 001-39051 10.1 May 6, 2022
Blitzer, dated April 23, 2021.
10.12# Amended Offer Letter, by and between Datadog, Inc. and 10-K 001-39051 10.12 February 24, 2023
Sean Walters, dated January 5, 2022
10.13 Agreement of Sub-Sub-Sublease, by and between S-1 333-233428 10.9 August 23, 2019
Datadog, Inc. and Ideeli Inc., dated April 14, 2016.
10.14 Agreement of Sub-Sublease, by and between Datadog, S-1 333-233428 10.10 August 23, 2019
Inc. and BT Americas Inc., dated September 18, 2017.
10.15# Amended and Restated Non-Employee Director 10-Q 001-39051 10.1 August 9, 2023
Compensation Policy.
10.16# Form of Change of Control and Severance Agreement. S-1/A 333-233428 10.13 September 9, 2019
10.17 Form of Confirmation for Capped Call Transaction. 8-K 001-39051 10.1 June 2, 2020
10.18 Agreement of Sublease, by and between Datadog, Inc. 10-K 001-39051 10.14 March 1, 2021
and Clearbridge Investments, LLC, dated July 9, 2020
10.19 Lease, by and between Datadog, Inc. and FC Eighth Ave., 10-Q 001-39051 10.2 August 8, 2022
LLC, dated July 28,2022.
21.1 List of Subsidiaries of Datadog, Inc. X
23.1 Consent of Deloitte & Touche LLP, independent X
registered public accounting firm.
24.1 Power of Attorney (incorporated by reference to the X
signature pages of this Annual Report on Form 10-K).
31.1 Certification of Principal Executive Officer Pursuant to X
Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange Act of 1934, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
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31.2 Certification of Principal Financial Officer Pursuant to X
Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange Act of 1934, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1* Certification of Principal Executive Officer Pursuant to 18 X
U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2* Certification of Principal Financial Officer Pursuant to 18 X
U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
97.1* Policy Relating to Recovery of Erroneously Awarded X
Compensation
101.INS XBRL Instance Document X
101.SCH XBRL Taxonomy Extension Schema Document X
101.CAL XBRL Taxonomy Extension Calculation Linkbase X
Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB XBRL Taxonomy Extension Label Linkbase Document X
101.PRE XBRL Taxonomy Extension Presentation Linkbase X
Document
# Indicates management contract or compensatory plan.

* This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section,
nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
DATADOG, INC.
Date: February 23, 2024 By: /s/ Olivier Pomel

Name: Olivier Pomel
Title: Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Olivier Pomel and Alexis Lê-
Quôc, and each one of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in their name,
place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or her substitute or substitutes, may lawfully do or
cause to be done by virtue hereof
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
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Signature Title Date
/s/ Olivier Pomel Chief Executive Officer and Director February 23, 2024
Olivier Pomel (Principal Executive Officer)
/s/ David Obstler Chief Financial Officer February 23, 2024

David Obstler (Principal Financial and Accounting Officer)
/s/ Alexis Le-Quôc

Chief Technology Officer and Director February 23, 2024
Alexis Le-Quôc
/s/ Michael Callahan
Director February 23, 2024
Michael Callahan
/s/ Matthew Jacobson

Matthew Jacobson
/s/ Dev Ittycheria

Dev Ittycheria
/s/ Julie Richardson

Julie Richardson
/s/ Shardul Shah

Shardul Shah
/s/ Titi Cole

Titi Cole
96
Exhibit 21.1
List of Subsidiaries of Datadog, Inc.
Name Jurisdiction
Datadog France SAS France
Datadog Ireland Limited Ireland
Datadog Cloud Spain SL Spain
Datadog Ireland Limited UK Branch United Kingdom
Datadog Netherlands BV Netherlands
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-233903, 333-237176, 333-254229 and 333-270280 on Form S-8 of our reports dated February 23, 2024
relating to the consolidated financial statements of Datadog, Inc. and subsidiaries (the “Company”), and the effectiveness of the Company's internal control over financial reporting, appearing
in this Annual Report on Form 10-K for the year ended December 31, 2023.
New York, New York
Page 99 of 106
February 23, 2024
Exhibit 31.1
Certification by the Chief Executive Officer pursuant to
Securities Exchange Act Rules 13a-14(a) and 15d-14(a)
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Olivier Pomel, certify that:
1. I have reviewed this Annual Report on Form 10-K of Datadog, Inc. (the “registrant”) for the fiscal year ended December 31, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the internal control over financial
reporting.

Name: Olivier Pomel
(Principal Executive Officer)
Exhibit 31.2
Certification by the Chief Financial Officer pursuant to
Securities Exchange Act Rules 13a-14(a) and 15d-14(a)
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, David Obstler, certify that:
1. I have reviewed this Annual Report on Form 10-K of Datadog, Inc. (the “registrant”) for the fiscal year ended December 31, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
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a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the internal control over financial
reporting.
Date: February 23, 2024 By: /s/ David Obstler

Name: David Obstler
Title: Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Olivier Pomel, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-K
of Datadog, Inc. for the fiscal year ended December 31, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended, and that information contained in such Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of
Datadog, Inc.
Name: Olivier Pomel
(Principal Executive Officer)
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, David Obstler, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-K
of Datadog, Inc. for the fiscal year ended December 31, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended, and that information contained in such Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of
Datadog, Inc.
Date: February 23, 2024 By: /s/ David Obstler
Name: David Obstler
Title: Chief Financial Officer
(Principal Financial and Accounting Officer)
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Datadog, Inc.
Incentive Compensation Recoupment Policy
1. Introduction
The Board of Directors (the “Board”) of Datadog, Inc., a Delaware corporation (the “Company”), has determined that it is in the best interests of
the Company and its stockholders to adopt this Incentive Compensation Recoupment Policy (this “Policy”) providing for the Company’s recoupment of
Recoverable Incentive Compensation that is received by Covered Officers of the Company under certain circumstances. Certain capitalized terms used in
this Policy have the meanings given to such terms in Section 3 below.
This Policy is designed to comply with, and shall be interpreted to be consistent with, Section 10D of the Exchange Act, Rule 10D-1 promulgated
thereunder (“Rule 10D-1”) and Nasdaq Listing Rule 5608 (the “Listing Standards”).
2. Effective Date
This Policy shall apply to all Incentive Compensation that is received by a Covered Officer on or after October 2, 2023 (the “Effective Date”).
Incentive Compensation is deemed “received” in the Company’s fiscal period in which the Financial Reporting Measure specified in the Incentive
Compensation award is attained, even if the payment or grant of such Incentive Compensation occurs after the end of that period.
3. Definitions
“Accounting Restatement” means an accounting restatement that the Company is required to prepare due to the material noncompliance of the
Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously
issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were
corrected in the current period or left uncorrected in the current period.
“Accounting Restatement Date” means the earlier to occur of (a) the date that the Board, a committee of the Board authorized to take such
action, or the officer or officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have
concluded, that the Company is required to prepare an Accounting Restatement, or (b) the date that a court, regulator or other legally authorized body
directs the Company to prepare an Accounting Restatement.
“Administrator” means the Compensation Committee or, in the absence of such committee, the Board.
“Code” means the U.S. Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
“Compensation Committee” means the Compensation Committee of the Board.
“Covered Officer” means each current and former Executive Officer.
“Exchange” means the Nasdaq Stock Market.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“Executive Officer” means the Company’s president, principal financial officer, principal accounting officer (or if there is no such accounting officer,
the controller), any vice-president of the Company in charge of a principal business unit, division, or function (such as sales, administration, or finance), any
other officer who performs a policy-making function, or any other person who performs
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similar policy-making functions for the Company. Executive officers of the Company’s parent(s) or subsidiaries are deemed executive officers of the
Company if they perform such policy-making functions for the Company. Policy-making function is not intended to include policy-making functions that are
not significant. Identification of an executive officer for purposes of this Policy would include at a minimum executive officers identified pursuant to Item
401(b) of Regulation S-K promulgated under the Exchange Act.
“Financial Reporting Measures” means measures that are determined and presented in accordance with the accounting principles used in
preparing the Company’s financial statements, and any measures derived wholly or in part from such measures, including Company stock price and total
stockholder return (“TSR”). A measure need not be presented in the Company’s financial statements or included in a filing with the SEC in order to be a
Financial Reporting Measure.
“Incentive Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of a Financial
Reporting Measure.
“Lookback Period” means the three completed fiscal years immediately preceding the Accounting Restatement Date, as well as any transition
period (resulting from a change in the Company’s fiscal year) within or immediately following those three completed fiscal years (except that a transition
period of at least nine months shall count as a completed fiscal year). Notwithstanding the foregoing, the Lookback Period shall not include fiscal years
completed prior to the Effective Date.
“Recoverable Incentive Compensation” means Incentive Compensation received by a Covered Officer during the Lookback Period that exceeds
the amount of Incentive Compensation that would have been received had such amount been determined based on the Accounting Restatement, computed
without regard to any taxes paid (i.e., on a gross basis without regard to tax withholdings and other deductions). For any compensation plans or programs
that take into account Incentive Compensation, the amount of Recoverable Incentive Compensation for purposes of this Policy shall include, without
limitation, the amount contributed to any notional account based on Recoverable Incentive Compensation and any earnings to date on that notional amount.
For any Incentive Compensation that is based on stock price or TSR, where the Recoverable Incentive Compensation is not subject to mathematical
recalculation directly from the information in an Accounting Restatement, the Administrator will determine the amount of Recoverable Incentive
Compensation based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or TSR upon which the Incentive
Compensation was received. The Company shall maintain documentation of the determination of that reasonable estimate and provide such documentation
to the Exchange in accordance with the Listing Standards.
“SEC” means the U.S. Securities and Exchange Commission.
4. Recoupment
(a) Applicability of Policy. This Policy applies to Incentive Compensation received by a Covered Officer (i) after beginning services as an
Executive Officer, (ii) who served as an Executive Officer at any time during the performance period for such Incentive Compensation, (iii) while the
Company had a class of securities listed on a national securities exchange or a national securities association, and (iv) during the Lookback Period.
(b) Recoupment Generally. Pursuant to the provisions of this Policy, if there is an Accounting Restatement, the Company must reasonably
promptly recoup the full amount of the Recoverable Incentive Compensation, unless the conditions of one or more subsections of Section 4(c) of this Policy
are met and the Compensation Committee, or, if such committee does not consist solely of independent directors, a majority of the independent directors
serving on the Board, has made a determination that recoupment would be impracticable. Recoupment is required regardless of whether the Covered
Officer engaged in any misconduct and regardless of fault, and the Company’s obligation to recoup Recoverable Incentive Compensation is not dependent
on whether or when any restated financial statements are filed.
(c) Impracticability of Recovery. Recoupment may be determined to be impracticable if, and only if:
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(i) the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount of the applicable Recoverable
Incentive Compensation; provided that, before concluding that it would be impracticable to recover any amount of Recoverable Incentive
Compensation based on expense of enforcement, the Company shall make a reasonable attempt to recover such Recoverable Incentive
Compensation, document such reasonable attempt(s) to recover, and provide that documentation to the Exchange in accordance with the Listing
Standards; or
(ii) recoupment of the applicable Recoverable Incentive Compensation would likely cause an otherwise tax-qualified retirement plan,
under which benefits are broadly available to employees of the Company, to fail to meet the requirements of Code Section 401(a)(13) or Code
Section 411(a) and regulations thereunder.
(d) Sources of Recoupment. To the extent permitted by applicable law, the Administrator shall, in its sole discretion, determine the timing and
method for recouping Recoverable Incentive Compensation hereunder, provided that such recoupment is undertaken reasonably promptly. The
Administrator may, in its discretion, seek recoupment from a Covered Officer from any of the following sources or a combination thereof, whether the
applicable compensation was approved, awarded, granted, payable or paid to the Covered Officer prior to, on or after the Effective Date: (i) direct
repayment of Recoverable Incentive Compensation previously paid to the Covered Officer; (ii) cancelling prior cash or equity-based awards (whether vested
or unvested and whether paid or unpaid); (iii) cancelling or offsetting against any planned future cash or equity-based awards; (iv) forfeiture of deferred
compensation, subject to compliance with Code Section 409A; and (v) any other method authorized by applicable law or contract. Subject to compliance
with any applicable law, the Administrator may effectuate recoupment under this Policy from any amount otherwise payable to the Covered Officer, including
amounts payable to such individual under any otherwise applicable Company plan or program, e.g., base salary, bonuses or commissions and
compensation previously deferred by the Covered Officer. The Administrator need not utilize the same method of recovery for all Covered Officers or with
respect to all types of Recoverable Incentive Compensation.
(e) No Indemnification of Covered Officers. Notwithstanding any indemnification agreement, applicable insurance policy or any other
agreement or provision of the Company’s certificate of incorporation or bylaws to the contrary, no Covered Officer shall be entitled to indemnification or
advancement of expenses in connection with any enforcement of this Policy by the Company, including paying or reimbursing such Covered Officer for
insurance premiums to cover potential obligations to the Company under this Policy.
(f) Indemnification of Administrator. Any members of the Administrator, and any other members of the Board who assist in the
administration of this Policy, shall not be personally liable for any action, determination or interpretation made with respect to this Policy and shall be
indemnified by the Company to the fullest extent under applicable law and Company policy with respect to any such action, determination or interpretation.
The foregoing sentence shall not limit any other rights to indemnification of the members of the Board under applicable law or Company policy.
(g) No “Good Reason” for Covered Officers. Any action by the Company to recoup or any recoupment of Recoverable Incentive
Compensation under this Policy from a Covered Officer shall not be deemed (i) “good reason” for resignation or to serve as a basis for a claim of
constructive termination under any benefits or compensation arrangement applicable to such Covered Officer, or (ii) to constitute a breach of a contract or
other arrangement to which such Covered Officer is party.
5. Administration
Except as specifically set forth herein, this Policy shall be administered by the Administrator. The Administrator shall have full and final authority to
make any and all determinations required under this Policy. Any determination by the Administrator with respect to this Policy shall be final, conclusive and
binding on all interested parties and need not be uniform with respect to each individual covered by this Policy. In carrying out the administration of this
Policy, the Administrator is authorized and directed to consult with the full Board or such other committees of the Board as may be necessary or appropriate
as to matters within the scope of such other committee’s responsibility and authority. Subject to applicable
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law, the Administrator may authorize and empower any officer or employee of the Company to take any and all actions that the Administrator, in its sole
discretion, deems necessary or appropriate to carry out the purpose and intent of this Policy (other than with respect to any recovery under this Policy
involving such officer or employee).
6. Severability
If any provision of this Policy or the application of any such provision to a Covered Officer shall be adjudicated to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Policy, and the invalid, illegal or unenforceable
provisions shall be deemed amended to the minimum extent necessary to render any such provision or application enforceable.
7. No Impairment of Other Remedies
Nothing contained in this Policy, and no recoupment or recovery as contemplated herein, shall limit any claims, damages or other legal remedies the
Company or any of its affiliates may have against a Covered Officer arising out of or resulting from any actions or omissions by the Covered Officer. This
Policy does not preclude the Company from taking any other action to enforce a Covered Officer’s obligations to the Company, including, without limitation,
termination of employment and/or institution of civil proceedings. This Policy is in addition to the requirements of Section 304 of the Sarbanes-Oxley Act of
2002 (“SOX 304”) that are applicable to the Company’s Chief Executive Officer and Chief Financial Officer and to any other compensation recoupment
policy and/or similar provisions in any employment, equity plan, equity award, or other individual agreement, to which the Company is a party or which the
Company has adopted or may adopt and maintain from time to time; provided, however, that compensation recouped pursuant to this Policy shall not be
duplicative of compensation recouped pursuant to SOX 304 or any such compensation recoupment policy and/or similar provisions in any such
employment, equity plan, equity award, or other individual agreement except as may be required by law.
8. Amendment; Termination
The Administrator may amend, terminate or replace this Policy or any portion of this Policy at any time and from time to time in its sole discretion.
The Administrator shall amend this Policy as it deems necessary to comply with applicable law or any Listing Standard.
9. Successors
This Policy shall be binding and enforceable against all Covered Officers and, to the extent required by Rule 10D-1 and/or the applicable Listing
Standards, their beneficiaries, heirs, executors, administrators or other legal representatives.
10. Required Filings
The Company shall make any disclosures and filings with respect to this Policy that are required by law, including as required by the SEC.
* * * * *
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Datadog, Inc.
Incentive Compensation Recoupment Policy
Form of Executive Acknowledgment
I, the undersigned, agree and acknowledge that I am bound by, and subject to, the Datadog, Inc. Incentive Compensation Recoupment Policy, as may be
amended, restated, supplemented or otherwise modified from time to time (the “Policy”). In the event of any inconsistency between the Policy and the
terms of any employment agreement, offer letter or other individual agreement with Datadog, Inc. (the “Company”) to which I am a party, or the terms of
any compensation plan, program or agreement, whether or not written, under which any compensation has been granted, awarded, earned or paid to me,
the terms of the Policy shall govern.
In the event that the Administrator (as defined in the Policy) determines that any compensation granted, awarded, earned or paid to me must be forfeited or
reimbursed to the Company pursuant to the Policy, I will promptly take any action necessary to effectuate such forfeiture and/or reimbursement. I further
agree and acknowledge that I am not entitled to indemnification, and hereby waive any right to advancement of expenses, in connection with any
enforcement of the Policy by the Company.
Agreed and Acknowledged:
Name:
Title:
Date:
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Sales and Marketing

Comparison of the Years Ended December 31, 2023 and 2022

Year Ended December 31,

Revenue $ 2,128,359 $ 1,675,100 $ 453,259 27 %

Year Ended December 31,

Year Ended December 31,

Year Ended December 31,

Year Ended December 31,

Year Ended December 31,

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

CASH FLOWS FROM INVESTING ACTIVITIES:

CASH FLOWS FROM FINANCING ACTIVITIES:

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

See accompanying notes to consolidated financial statements.

8. Convertible Senior Notes

Equity Incentive Plans

Employee Stock Purchase Plan

14. Income Taxes

2021 Current Deferred Total

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

(2) Financial Statement Schedules

# Indicates management contract or compensatory plan.

Date: February 23, 2024 By: /s/ Olivier Pomel

/s/ David Obstler Chief Financial Officer February 23, 2024

/s/ Alexis Le-Quôc

/s/ Matthew Jacobson

/s/ Dev Ittycheria

/s/ Julie Richardson

/s/ Shardul Shah

/s/ Titi Cole

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Date: February 23, 2024 By: /s/ Olivier Pomel

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Date: February 23, 2024 By: /s/ David Obstler

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Agreed and Acknowledged:

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