Datadog Q4 Earnings: Margins Shrink, Outlook Lags Expectations

Core Insights - Datadog reported a fiscal fourth-quarter revenue growth of 25% year-on-year, reaching $737.73 million, surpassing analyst expectations of $714.54 million [1] - The adjusted EPS of 49 cents exceeded the consensus estimate of 44 cents [1] Financial Performance - As of December 31, Datadog had 3,610 customers with an ARR of $100,000 or more, marking a 13% year-over-year increase [2] - The adjusted gross margin decreased by 100 basis points to 82%, while the adjusted operating margin fell by 400 basis points to 24% [2] - Datadog held cash and equivalents of $4.2 billion and generated $241 million in free cash flow [2] Strategic Initiatives - The CEO highlighted that in 2024, Datadog introduced new features to assist customers in cloud migration and adopting next-gen AI technologies [3] - The company aims to address complex challenges in Observability, Cloud Security, Software Delivery, Cloud Service Management, and Product Analytics through 2025 [3] Future Outlook - For the first quarter, Datadog expects revenue between $737 million and $741 million, slightly below the consensus of $740.29 million, with an adjusted EPS projected at $0.41–$0.43, below the consensus of $0.46 [4] - For fiscal 2025, the revenue forecast is $3.175 billion to $3.195 billion, compared to the consensus of $3.24 billion, with an adjusted EPS of $1.65–$1.70, also below the consensus of $2.05 [4] Market Reaction - Datadog's stock experienced a decline of over 10.2% to $133.08 in premarket trading following the earnings report [6] - Analyst sentiment has shifted, with a downgrade from Buy to Hold due to anticipated challenges in revenue growth and margins throughout fiscal 2025 [5]