Datadog Inc (DDOG)

Interest coverage

		Mar 31, 2025	Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	90,658	101,535	65,390	4,362	-30,262	-35,762	-67,314	-82,415	-55,879	-21,535	15,436	34,912	25,788	2,630	-10,564	-20,282	-10,568	267	-2,941	2,504
Interest expense (ttm)	US$ in thousands	8,657	6,218	4,867	3,748	3,797	5,454	6,337	8,767	11,782	14,848	18,277	19,466	19,989	20,214	27,620	35,969	35,199	29,727	16,717	4,294
Interest coverage		10.47	16.33	13.44	1.16	-7.97	-6.56	-10.62	-9.40	-4.74	-1.45	0.84	1.79	1.29	0.13	-0.38	-0.56	-0.30	0.01	-0.18	0.58

March 31, 2025 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $90,658K ÷ $8,657K
= 10.47

The interest coverage ratio for Datadog Inc exhibits significant variability over the analyzed periods, indicating fluctuating capacity to meet interest obligations from operating earnings. During the fiscal year ending June 30, 2020, the ratio was approximately 0.58, suggesting limited ability to cover interest expenses solely from earnings. This ratio declined further in subsequent quarters, turning negative in several instances, notably reaching -0.18 in September 2020, -0.30 in March 2021, and continuing into negative territory through much of 2021 and 2022, with the lowest point at -10.62 on September 30, 2023. Negative interest coverage ratios imply that operating earnings were insufficient to cover interest expenses in these periods, reflecting potentially high leverage or earnings pressures.

From the most recent data, there is a marked improvement beginning around June 2024, when the ratio slightly exceeds 1 at 1.16, indicating a marginal ability to cover interest obligations. This upward trend continues into September 2024, with the ratio rising substantially to 13.44, and further improving to 16.33 by December 2024, and maintaining a robust level at 10.47 in the first quarter of 2025. This substantial recovery suggests that the company's operational earnings are now substantially surpassing interest expenses, likely due to improved profitability, debt reduction, or both.

Overall, the historical pattern reflects periods of financial strain characterized by negative interest coverage ratios, interspersed with recent signs of strong financial health. The recent upward trend signals a significant improvement in the company's ability to service its debt, although the prior negative periods highlight cyclical challenges or periods of high leverage that were subsequently addressed.