Datadog Q4 Earnings: Margins Shrink, Outlook Lags Expectations

Datadog, Inc. DDOG reported its quarterly results on Thursday. The stock declined after the report.

The software-as-a-service (SaaS) platform clocked fiscal fourth-quarter revenue growth of 25% year-on-year to $737.73 million, beating the analyst consensus estimate of $714.54 million.

Also Read: Apple Teams Up With Alibaba for AI, Analyst Says Edge Device Integration Could Boost Growth

Adjusted EPS of 49 cents beat the analyst consensus estimate of 44 cents. 

As of December 31, Datadog had 3,610 customers with an ARR of $100,000 or more, an increase of 13% year over year. The adjusted gross margin declined by 100 bps to 82%, and the adjusted operating margin decreased by 400 bps to 24%. 

Datadog held cash and equivalents of $4.2 billion as of December 31, generating $241 million in free cash flow.

Co-founder and CEO Olivier Pomel noted during 2024, it delivered new features and capabilities to help our customers as they migrate to the cloud and adopt new technologies like next-gen AI. It remains positioned to help its customers with their complex challenges in modern Observability, Cloud Security, Software Delivery, Cloud Service Management, and Product Analytics in 2025.

Outlook: Datadog expects first-quarter revenue of $737 million–$741 million versus the consensus of $740.29 million. It projects an adjusted EPS of $0.41–$0.43 below the consensus of $0.46.

Datadog expects fiscal 2025 revenue of $3.175 billion—$3.195 billion versus the consensus of $3.24 billion. It projects an adjusted EPS of $1.65–$1.70 below the consensus of $2.05.

Datadog stock gained over 12% in the last 12 months. In January, Stifel analyst Brad Reback downgraded Datadog to Hold from Buy, citing challenges to both revenue growth and margins throughout fiscal 2025.

The analyst said that Microsoft Corp’s MSFT OpenAI contract renewal will not drive significant growth, combined with typical pricing pressure during contract renewals. The potential for year-end customer churn, suggests that Datadog's Amazon.Com Inc AMZN Amazon Web Services growth will likely continue to decelerate in fourth-quarter and throughout fiscal 2025.

Price Action: DDOG stock is down 10.2% at $133.08 premarket at last check Thursday.

Also Read:

• Lam Research Commits $1.2 Billion Investment In India, Eyes $63 Billion Semiconductor Growth Market

Image by rafapress via Shutterstock