Datadog's stock drops as outlook for first quarter implies minimal growth

By Emily Bary

High point of first-quarter revenue outlook implies just about $1 million in incremental revenue relative to the fourth quarter

Datadog Inc. topped expectations with its latest quarterly results, but its revenue forecast for the current quarter implied minimal sequential growth, which seemed to be pressuring the stock in Tuesday's premarket action.

For the first quarter, Datadog (DDOG) models $587 million to $591 million in revenue, along with 33 cents to 35 cents in adjusted earnings per share. Analysts were modeling $587 million in revenue and 39 cents in adjusted EPS.

TD Cowen analyst Andrew Sherman added that the high point of the company's revenue outlook implies just about $1 million in incremental revenue over what Datadog posted in the fourth quarter, a factor he saw weighing on shares.

Datadog's full-year forecast calls for $2.555 billion to $2.575 billion in revenue as well as $1.38 to $1.44 in adjusted earnings per share. Analysts were looking for $2.586 billion on the top line and $1.77 in adjusted EPS.

Shares of the software-as-a-service company, which sells observability and security offerings, were off 10% in premarket trading Tuesday.

The company notched fourth-quarter net income of $54 million, or 15 cents a share, whereas it reported a net loss of $29 million, or 9 cents a share, in the year-prior period.

On an adjusted basis, Datadog earned 44 cents a share, ahead of the 43 cents a share that analysts tracked by FactSet were projecting.

Revenue at Datadog increased to $589.6 million from $469.4 million and came in ahead of the FactSet consensus, which was for $568.7 million.

The company said that as of the end of December, it had 396 customers doing at least $1 million in annual recurring revenue, up from a count of 317 a year before.

-Emily Bary

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02-13-24 0740ET

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