Datadog Stock Plunges After Sharing Weak FY23 Outlook - What's Going On?

Datadog, Inc DDOG reported second-quarter FY23 revenue growth of 25% year-on-year to $509.5 million, beating the consensus of $500.4 million.

As of June 30, Datadog had 2,990 customers with an ARR of $100,000 or more, increasing 24% Y/Y.

The non-GAAP gross margin remained firm at 81%. The non-GAAP operating margin was flat at 21%. Non-GAAP EPS of $0.36 beat the consensus of $0.28.

Datadog held cash and equivalents of $2.2 billion, generating $141.7 million in free cash flow.

"We continued to execute well in the second quarter, with 25% year-over-year revenue growth, strong new logo bookings, continued customer growth, and increased multi-product adoption by our customers," said Olivier Pomel, co-founder and CEO of Datadog.

Pomel added, "Last week at our annual user conference, DASH, we announced dozens of new products and capabilities, showcasing our rapid innovation at scale. We launched new AI offerings, including LLM Observability, the Bits AI assistant, and over a dozen new AI-related integrations."

Outlook: Datadog sees Q3 revenue of $521 million - $525 million versus the consensus of $534.48 million. It sees non-GAAP EPS of $0.33 - $0.35 versus the consensus of $0.29.

Datadog cut FY23 revenue to $2.05 billion - $2.06 billion (prior $2.08 billion - $2.10 billion) versus the consensus of $2.09 billion. It raised non-GAAP EPS to $1.30 - $1.34 (prior $1.13 - $1.20) versus the consensus of $1.19.

Price Action: DDOG shares traded lower by 16.20% at $89.10 on the last check Tuesday.