Datadog Earnings: Enterprise Penetration Remains Strong as 2023 Closes on a High Note

We are maintaining our $115 fair value estimate for narrow-moat Datadog after the firm reported strong fourth-quarter results offset by weaker-than-expected guidance for 2024. On the macro front, Datadog noted continued demand stabilization, giving further credence to our belief that while 2023 was affected by customers cutting back spending on Datadog’s solutions, we will see a gradual recovery in 2024 and beyond. With its consumption-based model, Datadog is particularly susceptible to customer behavior; its quarterly results and outlook ebb and flow with customer usage trends. Although the shares traded down slightly on Feb. 13 after the earnings report, they still appear marginally overvalued relative to our fair value estimate.