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For the first quarter of 2025, Datadog expects revenues between $737 million and $741 million. It anticipates non-GAAP net income per share between 41 and 43 cents.
The Zacks Consensus Estimate for first-quarter revenues is pegged at $739.37 million, suggesting year-over-year growth of 20.96%. The consensus mark for earnings is pinned at 42 cents per share, which has remained unchanged over the past 60 days. The estimate indicates a year-over-year decline of 4.55%.
See the Zacks Earnings Calendar to stay ahead of market-making news.
DDOG Estimate Movement
Image Source: Zacks Investment Research
DDOG Earnings Surprise History
In the last reported quarter, the company delivered an earnings surprise of 13.95%. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 21.04%.
Earnings Whispers for DDOG
Our proven model does not predict an earnings beat for Datadog this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Datadog heads into the first quarter of 2025 after a strong finish to last year, with record bookings and 25% growth in revenues. Still, the company gave a cautious growth forecast of 21% for the first quarter. This is likely to have reflected some pressure from recent customer contract renewals, where discounts and usage optimization were common. Since Datadog’s revenues are tied to how much customers use the platform, there can be a delay before bookings turn into actual revenues.
AI-native customers remain an important part of Datadog’s business, making up 6% of total recurring revenues in the fourth quarter. However, as these customers grow, they are also negotiating better terms and using resources more efficiently. This could lead to slower short-term growth. While Datadog still expects AI to be a long-term driver, the benefits may not show up right away in early 2025.
Spending on sales and marketing increased sharply in the fourth quarter, up 31% year over year, as Datadog worked to expand its reach. New hires were added to focus on less developed regions and promote new products like Flex Logs and On Call. These moves are meant to support future growth, but for now, they are adding to operating costs. Since it usually takes time for new sales staff to make an impact, margins might have stayed under pressure in the quarter to be reported.
Additionally, Datadog faces increasing pricing pressure from competitors in the observability and cloud monitoring space. Its competitors include IBM (IBM - Free Report) , Microsoft (MSFT - Free Report) and Broadcom in the on-premise infrastructure monitoring space. In the Cloud monitoring market, Datadog competes with native solutions from cloud providers, such as Amazon’s (AMZN - Free Report) Amazon Web Services, Google Cloud Platform and Microsoft Azure, besides facing stiff competition from Cisco Systems, Dynatrace and Splunk in APM and Log Management. The presence of these large, well-established players might have limited Datadog’s pricing flexibility and slowed customer expansion in the quarter under review.
DDOG’s newer products like LLM observability, Flex Logs, and security tools, are gaining strong interest, especially from enterprise customers. The company also signed several large new deals in the fourth quarter, including seven-figure contracts with Fortune 100 firms. These wins show that Datadog is expanding its role in critical IT operations. If adoption of new products ramps up faster than expected, or cloud usage grows steadily, these might have helped lift revenues and offset headwinds.
Top-Line Growth Estimates for Q1
The Zacks Consensus Estimate for International revenues is pegged at $223 million, suggesting a rise of 19.9% from the figure reported in the year-ago quarter.
The consensus estimate for North America revenues is pinned at $516 million, indicating growth of 21.1% from the figure reported in the year-ago quarter.
The Zacks Consensus Estimate for the number of customers in the first quarter of 2025 is pegged at 30,630, indicating a rise of 9.4% from the figure reported in the year-ago quarter.
The consensus estimate for the number of customers with more than $100,000 in ARR is pegged at 3,717, suggesting an increase of 11.3% from the figure reported in the year-ago quarter.
DDOG Price Performance & Stock Valuation
Shares of Datadog have lost 28.5% in the year-to-date period compared with the Zacks Computer and Technology sector and the S&P 500 index’s decline of 10.6% and 5.7%, respectively.
DDOG’s YTD Price Performance
Image Source: Zacks Investment Research
From a valuation perspective, Datadog currently trades at a forward 12-month P/S ratio of 10.36X, which is at a significant premium compared to the Zacks Internet - Software industry average of 4.88X. While this valuation gap suggests that investors have high growth expectations for this stock, it is not a good pick for a value investor. A value score of F further reinforces an unattractive valuation for DDOG at this moment.
DDOG Trades at a Premium
Image Source: Zacks Investment Research
Investment Considerations
Datadog enters the first quarter of 2025 with solid platform fundamentals, driven by strong enterprise demand, new product traction, and expanding multi-product adoption. However, investors should maintain a hold stance heading into earnings. Revenue growth is expected to be moderate amid customer optimization efforts, increased pricing pressure from competitors, and elevated sales and R&D spending. While large enterprise wins and growing AI-related workloads offer long-term promise, current valuations remain concerning, and near-term margin compression could persist. A clearer entry point may emerge as usage trends stabilize and newer products scale.
Conclusion
Datadog’s long-term outlook remains positive, but current valuations largely reflect its projected growth. With near-term revenues pressured by customer optimization, rising competition, and expanding operating costs, investors should consider maintaining existing positions. While new product momentum supports future upside, prudent investors may benefit from patience ahead of first-quarter results.
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Buy, Sell or Hold DDOG Stock? Key Tips Ahead of Q1 Earnings
Datadog (DDOG - Free Report) is slated to report first-quarter 2025 results on May 6.
For the first quarter of 2025, Datadog expects revenues between $737 million and $741 million. It anticipates non-GAAP net income per share between 41 and 43 cents.
The Zacks Consensus Estimate for first-quarter revenues is pegged at $739.37 million, suggesting year-over-year growth of 20.96%. The consensus mark for earnings is pinned at 42 cents per share, which has remained unchanged over the past 60 days. The estimate indicates a year-over-year decline of 4.55%.
See the Zacks Earnings Calendar to stay ahead of market-making news.
DDOG Estimate Movement
Image Source: Zacks Investment Research
DDOG Earnings Surprise History
In the last reported quarter, the company delivered an earnings surprise of 13.95%. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 21.04%.
Earnings Whispers for DDOG
Our proven model does not predict an earnings beat for Datadog this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
DDOG has an Earnings ESP of -4.41% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping Upcoming Results of DDOG
Datadog heads into the first quarter of 2025 after a strong finish to last year, with record bookings and 25% growth in revenues. Still, the company gave a cautious growth forecast of 21% for the first quarter. This is likely to have reflected some pressure from recent customer contract renewals, where discounts and usage optimization were common. Since Datadog’s revenues are tied to how much customers use the platform, there can be a delay before bookings turn into actual revenues.
AI-native customers remain an important part of Datadog’s business, making up 6% of total recurring revenues in the fourth quarter. However, as these customers grow, they are also negotiating better terms and using resources more efficiently. This could lead to slower short-term growth. While Datadog still expects AI to be a long-term driver, the benefits may not show up right away in early 2025.
Spending on sales and marketing increased sharply in the fourth quarter, up 31% year over year, as Datadog worked to expand its reach. New hires were added to focus on less developed regions and promote new products like Flex Logs and On Call. These moves are meant to support future growth, but for now, they are adding to operating costs. Since it usually takes time for new sales staff to make an impact, margins might have stayed under pressure in the quarter to be reported.
Additionally, Datadog faces increasing pricing pressure from competitors in the observability and cloud monitoring space. Its competitors include IBM (IBM - Free Report) , Microsoft (MSFT - Free Report) and Broadcom in the on-premise infrastructure monitoring space. In the Cloud monitoring market, Datadog competes with native solutions from cloud providers, such as Amazon’s (AMZN - Free Report) Amazon Web Services, Google Cloud Platform and Microsoft Azure, besides facing stiff competition from Cisco Systems, Dynatrace and Splunk in APM and Log Management. The presence of these large, well-established players might have limited Datadog’s pricing flexibility and slowed customer expansion in the quarter under review.
DDOG’s newer products like LLM observability, Flex Logs, and security tools, are gaining strong interest, especially from enterprise customers. The company also signed several large new deals in the fourth quarter, including seven-figure contracts with Fortune 100 firms. These wins show that Datadog is expanding its role in critical IT operations. If adoption of new products ramps up faster than expected, or cloud usage grows steadily, these might have helped lift revenues and offset headwinds.
Top-Line Growth Estimates for Q1
The Zacks Consensus Estimate for International revenues is pegged at $223 million, suggesting a rise of 19.9% from the figure reported in the year-ago quarter.
The consensus estimate for North America revenues is pinned at $516 million, indicating growth of 21.1% from the figure reported in the year-ago quarter.
The Zacks Consensus Estimate for the number of customers in the first quarter of 2025 is pegged at 30,630, indicating a rise of 9.4% from the figure reported in the year-ago quarter.
The consensus estimate for the number of customers with more than $100,000 in ARR is pegged at 3,717, suggesting an increase of 11.3% from the figure reported in the year-ago quarter.
DDOG Price Performance & Stock Valuation
Shares of Datadog have lost 28.5% in the year-to-date period compared with the Zacks Computer and Technology sector and the S&P 500 index’s decline of 10.6% and 5.7%, respectively.
DDOG’s YTD Price Performance
Image Source: Zacks Investment Research
From a valuation perspective, Datadog currently trades at a forward 12-month P/S ratio of 10.36X, which is at a significant premium compared to the Zacks Internet - Software industry average of 4.88X. While this valuation gap suggests that investors have high growth expectations for this stock, it is not a good pick for a value investor. A value score of F further reinforces an unattractive valuation for DDOG at this moment.
DDOG Trades at a Premium
Image Source: Zacks Investment Research
Investment Considerations
Datadog enters the first quarter of 2025 with solid platform fundamentals, driven by strong enterprise demand, new product traction, and expanding multi-product adoption. However, investors should maintain a hold stance heading into earnings. Revenue growth is expected to be moderate amid customer optimization efforts, increased pricing pressure from competitors, and elevated sales and R&D spending. While large enterprise wins and growing AI-related workloads offer long-term promise, current valuations remain concerning, and near-term margin compression could persist. A clearer entry point may emerge as usage trends stabilize and newer products scale.
Conclusion
Datadog’s long-term outlook remains positive, but current valuations largely reflect its projected growth. With near-term revenues pressured by customer optimization, rising competition, and expanding operating costs, investors should consider maintaining existing positions. While new product momentum supports future upside, prudent investors may benefit from patience ahead of first-quarter results.