Good day, and thank you for standing by. Welcome to the Q3 2022 Datadog earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Yuka Broderick, Vice President of Investor Relations and Strategic Finance. Please go ahead. Thank you, Lauren. Good morning, and thank you for joining us to review Datadog's third quarter 2022 financial results, which we announced in our press release issued this morning. Joining me on the call today are Olivier Pomel, Datadog's Co-founder and CEO, and David Obstler, Datadog's CFO. During this call, we will make forward-looking statements, including statements related to our future financial performance, our outlook for the fourth quarter and fiscal year 2022, our gross margins and operating margins, our strategy, our product capabilities, and our ability to capitalize on market opportunities. The words anticipate, believe, continue, estimate, expect, intend, will, and similar expressions are intended to identify forward-looking statements or similar indications of future expectations. These statements reflect our views only as of today and are subject to a variety of risks and uncertainties that could cause actual results to differ materially. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our Form 10-Q for the quarter ended June 30, 2022. Additional information will be made available in our upcoming Form 10-Q for the quarter ended September 30, 2022, and other filings with the SEC. The information is also available on the investor relations section of our website, along with a replay of this call. We will also discuss non-GAAP financial measures, which are reconciled to their most directly comparable GAAP financial measures in the tables in our earnings release, which is available at investors.datadoghq.com. With that, I'd like to turn the call over to Olivier. Thanks, Yuka, and thank you all for joining us this morning. We are pleased to report strong results in Q3 as we continue to execute on our platform vision. Let me start with a review of our financial performance. In Q3, revenue was $437 million, an increase of 61% year-over-year, and above the high end of our guidance range. We had about 22,200 customers, up from about 17,500 in the year-ago quarter. We ended the quarter with about 2,600 customers with ARR of $100,000 or more, up from about 1,800 in the year-ago quarter. These customers generated about 85% of our ARR. We generated free cash flow of $67 million, with a free cash flow margin of 16%. Our dollar-based net retention rate continued to be over 130% as customers increased their usage and adopted more products. Next, our platform strategy continued to resonate in the market. At the end of Q3, 80% of customers were using two or more products, up from 77% a year ago. 40% of customers were using four or more products, up from 31% a year ago, and 16% of our customers were using six or more products, up from 8% a year ago. We continue to be pleased with this continued adoption of multiple products in our platform, which indicates the additional value we are bringing to our customers. We continue to see strong ARR growth with our newer offerings and our products introduced since 2019, which, except for process monitoring, core APM, and Log Management remain in hypergrowth mode. I also want to highlight a couple of our newer products, Database Monitoring and CI Visibility. We started charging for these products three and two quarters ago, respectively, and each has already exceeded eight-figure in ARR and more than 1,000 customers. As we are further developing them, we are confident these products will meet a broader set of use cases for a larger set of customers over time. Now moving on to this quarter's business drivers. At a high level, Q3 was overall very similar to Q2, with strong performance in new logos and new product attach activities, tempered by growth of usage from existing customers that, although healthy, was below our long-term historical averages. This added up to sequential net ARR added that was similar to Q2. To give a bit more color, first on the usage trends. As we said, usage growth was overall solid but consistent with Q2 trends. From a product perspective, growth was more homogeneous among our major products than it had been in Q2. Looking at industry verticals similar to last quarter, we continue to see a more pronounced effect in consumer discretionary, and in particular with our customers that are cloud native and fully scaled into public cloud. Note that the consumer discretionary vertical represents low teens% of our ARR and includes e-commerce as well as food and delivery. All that said, we are pleased with our continuously strong performance. Revenue in Q3 grew 61% year-over-year and 7% quarter-over-quarter, with all of our products meaningfully outperforming the growth of the large cloud providers. While the macroeconomic environment is likely to remain a headwind in the near term, we continue to see positive trends underpinning our business and remain bullish about our long-term opportunities and aggressive with our investment plan. First, we continue to see strong growth in new logo ARR, including some large wins in traditional industries. We'll talk about some of those in a bit. Second, our sales pipeline is strong heading into Q4 for both new logos and new products, and we're seeing great opportunities across customer sizes, geography, and industries. Alongside our strength in new logo ARR, this gives us confidence that digital transformation and cloud migration remain a top priority. It is perhaps even more critical in difficult times when businesses need to be more agile and do more with less. Remember that given our usage-based revenue model, new logo wins generally do not immediately translate into meaningful revenue, but they are very important to us as new customers expand their usage into different quarters and different years. Third, we are seeing continued expansion on our platform, as indicated by customers adopting more of our products. Finally, churn remains low and hasn't changed, with gross revenue retention steady in the mid- to high 90s%. We believe this high gross revenue retention is indicative of the business criticality of Datadog for our customers. Now let's move on to product and R&D. Two weeks ago, we had our DASH user conference, which was an occasion to showcase the expansion of our products and the results of our R&D investments. Let me go through some of these, starting with observability before moving on to security, developer experience, and finally, the ability to take action within Datadog. First, we are doubling down on our investment in observability, starting with two new products, Data Streams Monitoring and Cloud Cost Management, both addressing growing needs and strong demand from our customers. We also extended our APM suite to offer Mobile App Testing, user heat map, and Dynamic Instrumentation. On the network side, we added dependency maps and network monitoring to our products. On the logging side, we announced Log Forwarding, which coupled with Online Archives and Observability Pipelines, places us at the center of our customers' data management. Responding to customer demand, we also expanded our Sensitive Data Scanner beyond logs to identify sensitive data across APM and RUM. Across the platform, we've announced expanded support for OpenTelemetry, PCI compliance for APM and logs, as well as HIPAA compliance across most of Datadog. Second, we are expanding our security platform, and we announced Cloud Security Management, which brings together Cloud Workload Security, Cloud Security Posture Management, and Resource Catalog as a frictionless, rich, and context-aware cloud-native application protection platform or CNAPP. We launched native protection for Application Security Management to enable blocking attacks in real time directly within the Datadog platform. We now provide vulnerability monitoring to give our users a high-fidelity picture of all applications in production, as well as their dependencies, vulnerabilities, and the attacks they face. Third, we followed through with our recent entry in developer experience. We announced Continuous Testing to facilitate end-to-end testing as soon as the code is developed, which increases quality and velocity at the same time. We showcased Intelligent Test Runner using our rich APM and profiling data to automatically skip unneeded tests and drastically reduce time and money spent on CI/CD. Fourth and last but not least, we announced new product areas that take our platform from observing to allowing our users to take action and respond, all within Datadog. We announced our Event Management product to allow users to correlate and summarize alerts, events, and issues from a variety of sources in order to resolve problems directly from the Datadog AIOps console. We also announced Datadog Workflows, which allows customers to develop and run automatic DevOps or security remediation using a no-code editor and over more than 200 integrations to services and APIs they use. We announced limited availability for CoScreen, the collaboration meeting tool that we acquired last year, and that allows real-time screen sharing and collaborative problem-solving within Datadog. Finally, we kept on expanding the scope of our Watchdog AI ML engine, further automating the detection and guiding the resolution of application and infrastructure problems. That's it for the many announcements from DASH, and as you can tell, the team has been hard at work, and I'm extremely proud of our innovation velocity and focus on our customers. One last thing on products. As announced in the press release issued this morning, we acquired Cloudcraft, a planning and design tool used by tens of thousands of cloud architects to create live diagrams of their infrastructure, including real-time health, configuration, and cost data. We are very excited for their team to join Datadog. Now moving on to sales and marketing. Let's discuss some of our wins in Q3. First, we signed a seven-figure land with a Fortune 100 grocery chain. This company was migrating to Azure but was held back by their open source solution. Because this grocery chain has pharmacy inside stores, they needed better control around personally identifiable information. Our Sensitive Data Scanner and our HIPAA compliance filled that gap and were differentiators for Datadog to win this opportunity. Next, we signed a seven-figure deal with a major multinational restaurant chain. This company had a legacy observability solution that wasn't able to scale with their vision of a Kubernetes and serverless environment. They also needed an end-to-end view of their customer journey and will now use six Datadog products, including Synthetics and RUM, to drive customer experience improvements. Next, we signed a seven-figure deal with a social networking app. This company was previously a Datadog customer but had moved several years ago to a competitor, as they needed certain languages or APM products we didn't support well at the time. Today, our APM not only matched the capabilities of their existing solution but presented significant advantages in terms of ease of deployment, alerting, and anomaly detection. They also plan to take advantage of our new Service Catalog, placing Datadog at the center of their operation. Next, we had a seven-figure upsell with a large Asia-based technology conglomerate. This company's many business units include consumer electronics and IoT, and their use of Datadog has grown rapidly with the number of devices they are managing. They have seen a number of benefits from using Datadog, including lowering the amount of bug checks by 25% and mean time to resolution by 50%. They have also seen a significant time savings in incident response activities by their engineers from 20 hours to only two hours per week. With this annual, this customer has now adopted 14 Datadog products. Next, we had an eight-figure multi-year upsell with a large e-commerce company. This customer had been using primarily Infrastructure Monitoring and APM with Datadog and was also operating an open source logging tool. Using Datadog led to significant efficiencies, including cutting customer impacting incidents by close to 2/3 and reducing the number of employees required to address each incident by 1/3. With this renewal, they are adopting Datadog Log Management and RUM and consolidating multiple home-grown and cloud-native tools as well as a commercial competitor. That's it for this quarter's customer highlights. I'd like to thank our go-to-market team for their hard work and for delivering another strong quarter. Now let me stick to our longer-term outlook. We recognize the macro environment remains uncertain, but we continue to see no change to the multi-year trend towards digital transformation and cloud migration. We remain confident that we can help our customers with their efforts to save on costs, drive greater engineering efficiency, and take advantage of the benefits of cloud and other next-gen technologies. We are continuing to invest in our strategic priorities to capture our long-term opportunities, and we remain laser-focused on bringing value to our customers as they manage through a more challenging economic environment. With that, I will turn the call over to our CFO for a review of our financial performance and guidance. David? Thanks, Olivier. In Q3, we continued to execute well and support our customers. Revenue was $437 million, up 61% year-over-year and up 7% quarter-over-quarter. To dive into some of the drivers, first, we experienced strong new logo ARR growth and continued low churn again this quarter. We saw existing customer usage growth remain at levels similar to Q2 as customers continue to be more cost conscious as they manage their businesses. As Olivier noted, we saw a roughly similar sequential growth in ARR dollars added in Q3 as in Q2. We saw a relatively homogeneous usage growth amongst our major products during Q3. As with Q2, we saw relatively more deceleration in the consumer discretionary vertical, particularly in e-commerce and food and delivery. We saw similar growth across geographies. As a reminder, we bill all of our revenue in U.S. dollars, and we do not price in local currencies. Our dollar-based net retention remained at strong levels above 130% for the 21st consecutive quarter. Our land and expand model, aggressive product innovation, and our customers' motion to the cloud continue to drive expansion opportunities with our existing customer base. Overall, the customer usage growth we're seeing remains higher than the trough growth we experienced at the beginning of COVID in 2020, and we're pleased with our 61% year-over-year and 7% quarter-over-quarter revenue growth this quarter. Meanwhile, gross revenue retention was unchanged and steady in the mid- to high 90s. Regardless of the macroeconomic environment, our customers still need to serve their clients, and moving to the cloud enables better service and cost saving against people-intensive or on-prem technology-based offerings. We believe our high and steady growth retention indicates that Datadog is critical to our customers' ability to deliver services to their clients digitally. As Oli mentioned on new logos, we saw continued strong new logo ARR growth across geographies, industries, and company sizes. We have a strong pipeline of opportunities in Q4. Finally, our platform strategy continues to resonate with customers. With 80% of our customers using two or more products, 40% using four or more products, and 16% using six or more products as of the end of Q3. Moving on to our financial statements. Billings were $467 million, up 51% year-over-year. Billings duration was slightly lower year-over-year. Remaining performance obligations or RPO was $941 million, up 31% year-over-year. Current RPO growth was in the mid-40s% year-over-year. As a reminder, we signed several large multi-year renewals in Q3 2021, which may make current RPO a more useful indicator, as it excludes the multi-year duration impact. We also had a challenging comparables of that metric as Q3 of last year's current RPO growth was about 100%. We continue to believe revenue is a better indication of our business trends than billings or RPO, as those can fluctuate relative to revenue based on the timing of invoices and the duration of customer contracts. Now let's review some key income statement results. Unless otherwise noted, all metrics are non-GAAP. We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release. First, gross profit in the quarter was $348 million, representing a gross margin of 80%. This compares to a gross margin of 81% last quarter and 78% in the year-ago quarter. We continue to experience efficiencies in cloud costs reflected in our cost of goods sold this quarter. In the medium to long term, we continue to expect gross margin to be in the high 70s range. Our Q3 non-GAAP OpEx grew 65% year-over-year as we continued to grow our head count in R&D and go-to-market. Q3 operating income was $75 million, or a 17% operating margin, compared to an operating income of $44 million or a 16% operating margin in the year-ago quarter. Turning to the balance sheet and cash flow statements. We ended the quarter with $1.8 billion in cash equivalents, restricted cash, and marketable securities. Our cash flow from operations was $84 million in the quarter. After taking into consideration capital expenditures and capitalized software, free cash flow was $67 million, for a free cash flow margin of 15%. Now for our outlook for the fourth quarter and fiscal year 2022. First, in forming our guidance, we continue to use conservative assumptions as to the organic growth of our customers. As usual, we are basing our guidance on current economic conditions, which includes slower than historical growth in usage among existing customers, as we have seen in Q2 and Q3. For the fourth quarter, we expect revenue to be in the range of $445 million-$449 million, which represents 37% year-over-year growth at the midpoint. Non-GAAP operating income is expected to be in the range of $56 million-$60 million. Non-GAAP net income per share is expected to be in the $0.18-$0.20 per share range based on an approximate 347 million weighted average diluted shares outstanding. For fiscal year 2022, we expect revenue to be in the range of $1.65 billion-$1.654 billion, which represents 61% year-over-year growth at the midpoint. Non-GAAP operating income is expected to be in the range of $300 million-$304 million, with non-GAAP net income per share expected to be in the range of $0.90-$0.92 per share, again based on an approximate 346 million weighted average annual diluted shares. Now some notes on guidance. As we discussed last quarter, Q4 includes some large in-person events, including our DASH user conference, which was held two weeks ago, and AWS re:Invent, our largest trade show event of the year. The cost of those events will result in an approximate 300 basis points-400 basis points effect on margins. As relates to our capital expenditures, we are adding more office space around the world as we continue to return to office. We expect CapEx of about $15 million in Q4. In conclusion, while we recognize macroeconomic uncertainty continued into Q3, we see no change in the importance of cloud migration and digital transformation, which are critical to our customers' competitive advantage. We believe we are well positioned to help our customers embark on these journeys, and we are investing aggressively into our long-term opportunities while maintaining our financial strength. I wanna thank Datadog's worldwide for their participation in these efforts. With that, we will open the call for questions. Operator, let's begin the Q&A. Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. Our first question comes from the line of Raimo Lenschow with Barclays. Raimo, your line is live. Thank you. Congrats on a great Q3. Olivier, like quick question for me. The first one is on how if you compare the current situation and the current environment and what you saw in the pandemic. Back then, the hyperscalers kind of talked about cost optimization and customers pulling back a little bit. It does seem it's slightly different now. Could you maybe talk a bit about some of the factors that you're seeing out there? I had one follow-up for David. The situation is fairly different now from what we saw in COVID. First of all, in COVID, we saw very brutal, very broad, everyone was scrambling to save money as quickly as possible, which is not what we're seeing today. What we're seeing today, it's a mix of things actually. First of all, everything that is related to direct transactions with customers, you know, whether that's new logos or new products, all of that is actually working great. Like, the demand we can see there is as strong as we've seen it. When you look at the usage and where you might see cost optimization, I think there are two different stories there. Like, there's the customers that are largely cloud native and largely fully scaled on the cloud environment, so they have cloud end-to-end on public cloud. They are definitely trying to save money. These are companies that in general could tend to have their own growth rates affected or probably affected in the future by the macro trends, so that's why they're doing that. But when you look at the other customers, the ones that are earlier in their cloud migration, they're actually not slowing down, and we see the same urgency and eagerness for them to keep scaling and keep moving into the cloud. That's also where the bulk of our opportunity is. When you compare us to the hyperscalers, we are seeing some of the same things they're seeing when. By the way, I should say it's always hard to do a direct comparison between the numbers of the hyperscalers and ours. Their numbers include a bunch of other things beyond infrastructure, and we're also not just in public cloud, we also might serve quite a bit of private environments as well. We're seeing some of what they're seeing, you know, in terms of optimization. We're a little bit less sensitive to it because of what we do, we tend to skew towards more critical environments than everything that might be in the hyperscaler. Overall, all of our products meaningfully outperformed the growth of the hyperscalers. Okay, perfect. Thank you. David, you know, in these kind of uncertain times, a lot of the time you have negotiations or a vendor has negotiations with customers around billings terms, et cetera. Have you seen anything that is impacting you or that you can note? Thank you. No, we really haven't seen any difference in billing terms or DSOs for that matter. On that side, given the mission-critical nature of the product, we haven't seen any material changes in that. It's different from COVID in that COVID was really a cash crunch that most companies were worried about, and so they were trying to prevent money from going out of the door right away. Whereas in this case it is more preparing for an environment where they might want to watch their profitability a bit more. Customers, when they negotiate on this, especially the ones that are fully scaled, the one thing they look for is more optionality in terms of, you know, how long they commit for and how much they commit for long periods of time, when they're especially a little bit unsure of their own growth rates. Okay, perfect. Thank you. Congress? Thank you. One moment while we compile the next question. Our next question comes from Fred Lee with Credit Suisse. Fred, your line is now open. Hey, good morning, and thank you for taking my question. I was wondering if you could comment a little bit on your traction in security, what segments you're seeing the most traction and also bigger picture, what you're seeing in the rate of the silos breaking down between Sec and DevOps overall. Yeah. Bigger picture, I mean, everywhere, like, everybody's talking about it, you know, we're not the only ones talking about the need to bring security to DevOps and have DevOps bear a lot of responsibility in that. We're confident that we see that developing in a way that's very similar to what we've seen with DevOps about a decade ago. This gives us confidence. In terms of our traction, we're happy with where we are. Like, we have, we mentioned earlier, thousands of customers using our security products. The customer base is growing fast. The revenue is growing fast, but we're sort of also growing the surface area of these products pretty fast. What we see, there's a lot of market pull, a lot of traction with it. There's a lot of customers who want us to be there, and there's a lot of product investment we still need to do. Some of that at DASH and there's a lot more coming. It's working as planned, I would say, at this point. Thank you. Great quarter. Thank you. Our next question comes from the line of Mark Murphy with JP Morgan. Mark, your line is open. Oh, yes. Thank you very much. I will add my congratulations on a nice performance. So Olivier, many customers had said that your Cloud Cost Management solution is extremely well timed. They're saying that because they're seeing interest in cost optimizations that didn't exist about six months ago. I'm wondering if that aligns with your view and does that feel like a product to you that can get off to a pretty fast start in this environment? I have a quick follow-up. I mean, you're right that, you know, cost management is on a lot of people's minds right now. I would say that was already the case six months ago and, you know, even a year ago. I think any company that is fully scaled into the cloud cares about their efficiency and it seems like they have quite a bit of leverage, you know, in terms of cost improvement, you know, if they get it the right way with the right tool. We think it's a product that, yes, it's well-timed, but we think it's a product that's going to be that has the potential of being widely adopted and very useful for a very long time, even after we come out of this challenging macro environment. Okay, understood. Then David, just as a quick follow-up. Looking at the sequential growth in Q3 is around 7%. The way it appears in guidance for Q4, just thinking about your cadence, it would seem to compound out at a year-over-year growth rate around 30%. You know, thinking forward, is that type of cadence a fair way to try to conceptualize the glide path into next year, just figuring somewhere around 30% if we want to kind of de-risk the models? Or do you think that Q3 and Q4 are maybe not so representative of where the puck is gonna be heading here? As a reminder, we provide guidance in a consistent way. We essentially look at the environment, the performance, and given the usage model, we put conservative assumptions on top of that. We employed that for the guidance we gave here in Q4. For next year, we'll provide guidance when we report Q4 and plan to update everybody at that time. Thank you. Keep in mind, there's different aspects. Part of it is driven by the new logos where we're getting from customers. Part of it is driven by the growth of existing customers. One way to look at it also is it's tougher to grow customers very, very fast, you know, when they've grown with us a lot over the past few years, you know, when customers are growing, they're spending 80% year-over-year or 70% year-over-year for a few years. They might grow a little bit slower after that. In turn, it might give us an easier compare for the future. Yeah. Thank you, Olivier. Thank you. One moment, please. Our next question comes from the line of Sanjit Singh with Morgan Stanley. Sanjit, your line is now open. Hey, Sanjit, we can't hear you. Can you please get nearer to your mic? Sorry about that. Appreciate you guys taking the question. My question is really around competitive displacements and potentially observability consolidation within your customer base. To what extent are you seeing customers either consolidate open source or other sort of commercial tools and standardize on Datadog, not just to benefit from the innovation that you're seeing from the Datadog platform, but also to lower their overall observability monitoring spend as they go into next year? Well, we do see a little bit of both. I think it's consistent with what we've seen in the past. There's no completely new trend there. We see that happen across our customers. We think also, you know, in the future, this will only become more compelling when customers also bring to us more of their security use cases, more of their user analytics use cases or behavior analytics use cases. Because these so far have required different copies of the data to different vendors. These tend to be the most expensive part of the other one, the product that the cost structure that scales, you know, with each of these vendors. We think we make a very compelling long-term proposition there with these customers. That makes a lot of sense. I think, Olivier, in your script, you called out a customer that's using 14 different products, which is pretty incredible to think about. For customers that's adopting that many different product capabilities, how is that contract sort of structured, and how does that adoption sort of happen? Is it through some broader, flexible sort of credit system, or are these products being, you know, sold or priced individually? Can you just give us a sense for a customer that gets up to that level of adoption, how does the sort of contracting work for that type of customer? Yeah. For the majority of those contracts, for large customers with a lot of products, are made on a what we call a draw down, you know, which is basically a certain committed amount of credits that customers can use. In relation to that, they get a rate card for all the various SKUs they're going to consume. Those rate cards can also be negotiated. You know, some customers use very large amounts of certain products. They can get a better rate of those specific products as well, as we negotiate that. That's where it gets a little bit tailored to the specific use case and specific needs. That to add, you know, that's what we've been talking about, the frictionless adoption, where the client is using the platform, and given this drawdown with a rate card, they can use the products in a frictionless way as they expand their use of the Datadog platform. Yeah. The benefit for them is they usually don't know how much of each of the products they're going to consume ahead of time. of time. They don't know overall what the shape of their or the size of their environment is going to be, but I also don't know within this environment how much, you know, APM traces they will need versus logs versus metrics versus within the flexibility there. That's another reason to bring and to sell that more tools on our platform because they don't have to pre-commit to everything in separate buckets basically. Thanks to all. Thank you for the color. Thank you. One moment for the next question. Our next question comes from the line of Koji Ikeda with BFA Securities. Koji, your line is open. Hey, Olivier. Hey, David. Thanks for taking the questions. I just kind of wanted to dig in here on the consumer discretionary and appreciate all the comments you had in the prepared remarks. Was really kind of wondering, you know, how much of that vertical is international? You know, just thinking about FX and the potential effects of FX there if the USD strength persists in the future. Thanks, guys. Yeah. On FX, sorry, David, if I'm stepping on you. Go ahead. We charge in dollars everywhere, right? We don't have any formal FX risk. We don't provide any adjusted numbers for FX, any of that. Our customers who buy our products from Europe and from, say, you know, Japan, their budgets are still in Japanese yen or in euros. We do think that the strong dollar is a headwind for us. We don't see very dramatically different growth rates between Europe, Americas and APAC. We think we might see higher growth in APAC and Europe, which are smaller parts of our revenues and less mature if the dollar was weaker. It is conjecture. We can't actually quantify that because we charge in dollars everywhere. That's something that we're aware of. In that sector we commented on, the predominant effect would be what's happening in their business, in their sector, rather than the geographical location of the company and its customers. Got it. Great, guys. Thanks so much for that. Just one follow-up, if I may, here on the Cloudcraft acquisition. Just any color on how big this company is? You know, the press release did say hundreds of thousands of engineers. You know, how does that equate to maybe customer overlap? Does Cloudcraft open the door to maybe new personas to sell into within organizations? You know, thanks so much to you guys for taking my questions. Cloudcraft is very interesting because it is. One, it's a great product. There are lots of opportunities in terms of integrating the product with ours. There are opportunities also with some part of this product remaining standalone. It's a product that works very well for planning and for, you know, cloud architects in general to start their planning, their documenting their cloud migration. It's also interesting for us from a distribution perspective because it has a lot of different users today. It has a very broad reach. It's also very easy to embed on third-party sites. There are a number of opportunities we're excited about with Cloudcraft. We'll see more as we integrate and as we pursue these opportunities, but we're very excited. It's a company that we have been tracking for a while. Just to make sure it's clear. It's a small company. It's an acqui-hire like we've done, meaning we are bringing on board the engineers. It does come with a customer base. It's an immaterial amount of revenues relative to our total, and as Olivier mentioned, provides an extension of the platform as well as potentially some leads, some lead generation in the customers and personas. Thanks, Olivier. Thanks, David. Thanks so much. Thank you. One moment for the next question. Our next question comes from Matt Hedberg with RBC. Matt, your line is now open. Great. Thanks, guys. David, for you. You know, last quarter, you talked about a stronger July versus June. I'm wondering if you could comment a little bit on how the linearity of the quarter played out, and then maybe also, you know, how did October trend relative to September? Yeah. For linearity, it was very similar linear to what we've had. There was no difference. We saw, unlike last quarter a bit, pretty much of a pro rata type of quarter. We normally have a strong October in terms of the flow of our customers and what they're doing in the platform before code freezes. We're pleased with what we have seen so far, but still recognize that October is usually a strong for us. You know, it's only the beginning of the quarter. Oli, anything else you wanna add there? No, I mean, I think one thing you're trying to get to, the whole trending over time during the quarter, we exited the quarter pretty much the way we entered it. There's no change there. Mm-hmm. Again, as David said, we're happy with what we've seen in October, but we're also usually happy with October. Q4 has a bit more seasonality than other quarters. In particular, December tends to be a little bit weaker as a lot of our customers take time off and shut down their development environment and their lab. It's also been a little bit harder to forecast in recent years with the pandemic and the behavior that, you know, the vacation behavior that changed after the pandemic. We have to be careful with that, and that's all incorporated in our guidance. Remind everybody what we said in the script was that the Q3 performance was very similar in its drivers to Q2. That's further evidence of, as Oli said, that the conditions that we ended Q2 with continued throughout Q3. Yep. Thanks. Thanks for the color, guys. Appreciate it. Mm-hmm. Thank you. One moment for the next question. Our next question comes from Brent Thill with Jefferies. Brent, your line is now open. David, a question on investment philosophy. Going into the pandemic, you didn't really pull the throttle back. You had it at eleven. Going into these times, are you thinking differently about your investment philosophy in this cycle? Can you talk about, you know, quota-carrying reps, in terms of are you on pace to hire what you thought at the beginning of the year? Are you pulling back a little bit given some of the current macro jitters? Yeah. I think as we remind everybody, we've always lived within our means and been limited more by our ability to integrate in a responsible way of quota-carrying reps or R&D for that matter into our company. We really have not made changes. We had a sort of prudent plan and continued. As a reminder to everybody, we think there's a very long-term opportunity and we're investing behind that. We are cognizant that there's more volatility in macroeconomic conditions and you know, we're looking at everything, but we didn't get out over our skis to begin with in our plan, so it allows us, given our model and the way we run the company, to you know, continue that investment in a systematic way. Just to restate that, you know, we didn't make changes. We are investing from an R&D perspective. We're so early. There's so much we want to do, and we have great traction on the products, so we keep investing there. From a go-to-market perspective, as I mentioned on the call, we actually have a very strong pipeline and the conversations with customers are going great in terms of new logos and new products. There is value in growing the sales team, and there is short-term and long-term value there. We'll keep doing that. The last thing I'd say, even though it's a number I keep repeating, but we burned only $30 million from inception to taking the company public, which generates a lot more cash since then. We have efficiency that's one of the core part of our culture. That's how we run the business, that's how we built it. That's sort of the model we've built in terms of frictionless expansion and evolution of our products. We trust that we have the levers and the way we're going to use them to make sure we have the right profitability as well. Just a quick follow-up on the CRPO. I know, David, you mentioned stay focused on that. It is continuing to decelerate. I guess, is that just a function of the large comps, or are you seeing larger enterprise customers? Are you seeing the slower cadence of large deals come in? Can you give us your take on that? Yeah. I think we had the comps are very significant in this quarter. In Q3 of last year, and I think we said this at the time, we had some large multi-year deals. A reminder, we don't try to target multi-year deals. We had them from the client side. That's why the current probably is more over time correlated. This also moves. If you look at sort of the average of this, it tends over the longer time to correlate with revenues. There's a lot of noise in this number, so we steer everyone back to revenues and then the computation we've given everybody of how to convert revenues into ARR. One big driver for this is our early customers renew because they're trying to get ahead of their growth and secure better economics. Mm-hmm. In times of, particularly like this one, customers tend to wait and see more, and sometimes they'll have slightly worse economics for a little bit, but they maintain some optionality. This is why those numbers move quite a bit. Again, the best predictor of what's gonna happen next is the revenue run rate on which we are. Everything else is sort of a little bit more distorted. Thank you. Welcome. Thank you. One moment for the next question. Our next question comes from Kamil with William Blair. Kamil, your line is open. Thank you, congrats on the strong quarter. It sounds like international demand has remained relatively unchanged from June. Was that consistent across regions? What do you think is unique about Datadog that has major sales in Europe more resilient than some of your peers? I mean, look, we see demand everywhere. We're growing the teams everywhere. We're growing the teams on a relative basis faster in Europe and in APAC than we are in the U.S. We're also growing the teams in Latin America, which is doing very well for us. From what we see, we see demand everywhere. We see Europe and Asia as still a little bit behind the Americas in terms of maturity of the cloud migration. They are scaling and it's happening there the same way it's happened in the past. From a competitive perspective, the situation is about the same everywhere, and it hasn't changed in any notable way over the past year, I would say. You know, there's nothing sharp to say there. That's helpful. If I could just follow up. You called out some vendor displacement in your prepared remarks. Can you maybe comment on how much of your new customer wins are coming from competitive displacements versus greenfield opportunities? Between the two, are you seeing any difference in the macro impact? Are companies that are using competitors maybe revisiting alternative solutions to optimize pricing or is the mix shift pretty consistent? Yeah, it's still a small minority of the deals we make, right? It tends to be the only ones that are very large because these are customers who already had something, they already have a large footprint, and they need to migrate it over. These are deals that are large from day one, which is not the vast majority of the deals. The vast majority of the deals we make are small, and they grow from there. These are the ones we tend to mention because these are the ones that are most interesting to look at from day one. This is still a small minority of what we do. We also don't particularly seek those deals. We train our sales team to land as many new logos and new products as possible. It's better for them to do 10 smaller ones than 1 larger one, as those 10 smaller ones will each be as big as the one large one in the end. So that's, you know, in terms of dollar we make for dollar of sales activity we spend, that's most productive. That's helpful. Thanks again. Thank you. One moment for the next question. Our next question comes from Fatima Boolani with Citi. Fatima, your line is now open. Hey, good morning. Thank you for taking my questions. Oli, I've got one for you and one for you, David. Oli, to your commentary on the usage moderation persisting in the consumer discretionary vertical. I know this is a hard question, but what are some of the signs or signals from that vertical that would lead you to suggest or lead you to conclude that maybe there's more moderation to come? I'm thinking about this in the context of sort of, you know, big tech, right? In the realm of digital advertising and all of the larger companies just beyond and outside of CDP, the CDP vertical. Just any signals or signs that would lead you to conclude one way or the other is sort of the worst of the moderation on the platform expansion is behind us. Then a quick follow-up for David, please. Well, I think the question is, and it's mostly that we see the most is in the customers that are fully in the cloud, fully sharing the cloud. And they're basically. We should expect their, you know, cloud spend to grow at the same rate of their top line, you know, in the end. When their top line started slowing down a bit or what they fear has been slowed down a bit, they try and slow their expenses as well, you know, which is what we've seen. I think what we can't tell yet is whether their top line will, you know, just slow down and stagnate a little bit or, you know, it will contract. I think it all depends on how big of an economic downturn we face, if any. We're not really in the business of predicting that. What we see for each of those customers, we get a pretty good idea of where they stand because we see what their projected spend growth is and what relates to the relative growth of their business. Thank you. David, last quarter you sort of mentioned to us that a lot of customers and prospects are thinking about reduced commitment levels out the gate, right? I'm curious about how that's trending this quarter and what your expectations are with what you're seeing with new customers in terms of commitment levels out the gate. Within this quarter, how much of that austerity, if you will, around commitment levels, how much of that austerity contributed to maybe usage upside beyond the commitment levels this quarter, just kind of given the strength in the quarter? Thank you. Just to clarify, that's, you know, that's not exactly correct what you said. Essentially most of our customers are essentially land and expand and then commit and then grow their usage over time. That has been going on in the whole model of the company. What we said last time was this is not related to they're cutting their commitment. This is related to when there are in an overage or on demand, whether they decide to do a new commitment or stay on demand longer and to be able to get greater visibility. The comment from last quarter was really more about billing and those metrics than about customer usage. We said that customer usage has been lower than historical trends, but, you know, not as low as it was in COVID. That's another effect. What we talked about last quarter was more about the billing effect. We continue to see that customers are, as we talked about, cautious, but that really only has a marginal effect in the billing. Actually, when a client decides that and stays on demand, it has a positive effect on the revenue side in that micro decision. I just add one thing to your first question, and it is that in terms of, you know, some part of the question is, how do we know things are going to get better or worse, you know, in the future? We remind you that we have a usage-based model for revenue, and we don't have to wait until the next renewal to get the news from customers on, you know, whether the business is better or worse, you know. Whether the news is good or bad, we get it early. An example of that is that while globally in the world, we see Q3 being worse at the macro level than Q2. As far as our business is concerned, Q3 is very, very much in line with Q2, and whatever step function there was, in terms of changing the growth rate for some customers happened in Q2 already and didn't change in Q3. We are fairly confident that whatever happens, we see it pretty early. Thank you. One moment for our next question. Our next question comes from Ittai Kidron with Oppenheimer & Co. Ittai, your line is open. Thanks, Yuka, and congrats, guys. Great quarter. David, just wanna have one question for you on the net dollar expansion rate. Great to see it stay well above 130. I was hoping to give a little bit more color on that specifically. Directionally, did it go down quarter-over-quarter? Perhaps is there a way for you to break down the mix of existing solution expansion in that mix versus new solution adoption? I'm just wondering, maybe not in absolute terms, but perhaps on a relative basis, how that mix has changed over the last two, three quarters. Sure. We don't give more pointed net retention, but it is a fact that if the organic rate of expanding ratio rate of customers is lower than it was in previous periods, and we said that the rate is lower than it was at the, you know, peak, but not as low as it was at the low in COVID in the middle, that would indicate that net retention would be going down mathematically. We don't give more information than that. I think we said a little bit about this in the past, as far as the mix between expansion of existing solutions and new, as clients adopt more of the solution in their land, which we said is happening, what would happen, again, mathematically, is that the percentage of the net retention from existing products goes up. Mm-hmm. Despite the fact that, as we said, we have very strong adoption of additional products, but we also have very strong momentum in clients landing with more products, which affects that number directionally, if that makes sense. Got it. Yeah. No, that's helpful. Then maybe, Oli, for you on the Database Monitoring, seems like you're off to a good start there. Just from a persona standpoint, does this expand the personas that you're touching? I mean, do you need to be engaged more with these database admins in order to sell this product? Or, you know, I'm just trying to think from a go-to-market standpoint, what is needed to keep driving progress here? Well, in terms of from a go-to-market perspective, it works the same way as the rest of what we do, right? It expands nicely on top of the rest of the platform. You're right, though, that we're reaching to some of the more specialized function around like DBAs and people like that. But we also have people who are not trained as DBAs solve these issues, and you know, broader DBA skills in a way. You're right that there's a bit of a difference there. I think today, because of the database we support today, it's not as pronounced as it might be in the future when we start supporting databases like Oracle, for example, where the profession of DBA is more formalized, I would say. Very good. Thanks. Thank you. Our final question will come from the line of Michael Turits with KeyBanc. Michael, your line is live. Hey, guys. Two quick quantitative questions. I think you talked about the growth rates of number of hosts monitored last quarter as an indication that you really weren't seeing any slowing in the underlying capacity of what needed to be monitored. Is that growth rate still the same? If you look at the growth by product this time, it's already closer than it used to be. You know, there's some variation quarter to quarter. A lot is about the same in growth rate. APM is a little bit better. Infrastructure is a bit down. There's nothing really meaningful there. I think some of the effects you might expect from what you heard from the hyperscalers, we've seen maybe some of that in the infrastructure, but it's not extremely pronounced. That's why I didn't comment on it. Sorry, Oli. Okay. Then David, just on the CapEx that you called out, that was having to do with headquarters, $15 million extra, I believe you said, in this quarter. You know, how? Any just? I know you're not giving guidance for next year, but is that a one quarter phenomenon, a multi-quarter phenomenon? How big an impact longer term on CapEx? Yeah. That, to clarify, that wasn't extra. That's just the total amount, not the delta between the quarters. You know, we haven't provided that type of guidance. We are, you know, expanding and building out offices, and when we provide guidance for next year, we'll endeavor to provide, you know, some guidance that'll help in the modeling. Thanks. Okay. Great, guys. Thank you very much. Thank you. At this time, I would like to turn it back to Olivier Pomel for any further comments. Thank you. Thank you all for listening. I also want to thank, obviously, all Datadogs around the world for working so hard this quarter and delivering another great quarter. I want to thank our customers for trusting us with their business and joining us at DASH a few weeks ago. This was a great event. Thank you all, and we'll see you again in Q4. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.