Datadog Inc. exceeded expectations in its recent quarterly results, yet the stock encountered premarket pressure on Tuesday due to a revenue forecast for the current quarter indicating minimal sequential growth.
For the first quarter, Datadog projected revenue in the range of $587 million to $591 million, along with adjusted earnings per share between 33 cents and 35 cents.
Analysts had expected revenue of $587 million and 39 cents in adjusted EPS.
TD Cowen analyst Andrew Sherman pointed out that the upper limit of Datadog’s revenue outlook only implies approximately $1 million in incremental revenue compared to the fourth quarter, a factor influencing the stock’s decline.
In premarket trading on Tuesday, shares of Datadog, a software-as-a-service company specializing in observability and security offerings, experienced a 10% decline.
The company’s full-year forecast anticipates revenue between $2.555 billion and $2.575 billion, along with adjusted earnings per share ranging from $1.38 to $1.44. Analysts, however, held higher expectations, foreseeing $2.586 billion in revenue and $1.77 in adjusted EPS.
Datadog reported fourth-quarter net income of $54 million, equivalent to 15 cents per share, marking a significant improvement from the net loss of $29 million, or 9 cents per share, recorded in the same period the previous year.
On an adjusted basis, Datadog achieved earnings of 44 cents per share, surpassing the FactSet consensus estimate of 43 cents per share.
Revenue for the fourth quarter surged to $589.6 million from $469.4 million, exceeding the FactSet consensus of $568.7 million. The robust financial performance in the fourth quarter contributed to the positive outlook for Datadog.
By the end of December, Datadog disclosed that it had garnered 396 customers generating annual recurring revenue of at least $1 million, marking a notable increase from the 317 customers reported a year earlier.
This surge in high-value clientele underscores the company’s ability to broaden its market presence and attract significant recurring revenue streams.
Although the stock saw a downturn in response to the revenue forecast for the current quarter, Datadog’s overall performance and expanding customer base suggest resilience and a promising trajectory.
Investors and analysts are likely to closely observe how the company tackles upcoming challenges and capitalizes on opportunities in the dynamic software and services sector.
