Datadog Faces Revenue And Margin Headwinds In 2025, Analyst Downgrades Stock

Core Viewpoint - Stifel analyst Brad Reback downgraded Datadog Inc from Buy to Hold, lowering the price forecast from $165 to$140, citing concerns over growth and margin challenges [1][6] Group 1: Contract and Revenue Outlook - Datadog has secured a one-year contract renewal with OpenAI, but OpenAI is optimizing its use of Datadog's services, which may limit growth potential [1][2] - The expected annualized value of the contract with OpenAI is $80 million, leading to only modest growth expectations despite increased usage [2] - There is a forecast for a potential significant quarter-over-quarter revenue decline in the first quarter as new contract terms take effect [2] Group 2: Growth and Margin Challenges - The optimization strategies by OpenAI, along with typical pricing pressures during contract renewals, suggest a deceleration in Datadog's AWS growth in the fourth quarter and throughout FY25 [3] - The company will need to significantly increase sales and marketing spending to support future revenue expansion, given modest headcount growth in FY23 [4] - Current projections for operating margins in FY25, expected to remain stable at around 25$143.18 [6]