DDOG Q4 Results Shine, '25 View Disappoints: How to Play the Stock

Core Viewpoint - Datadog delivered strong Q4 2024 results, exceeding expectations, but shares fell approximately 9% due to conservative 2025 guidance overshadowing the performance [1] Financial Performance - Q4 2024 revenue reached $738 million, up 25.1$714 million [6] - Non-GAAP earnings per share were 49 cents, exceeding the consensus mark of 43 cents and increasing 11.4% from the previous year [6] - The company reported approximately 30,000 customers, up from 27,300 a year ago, with significant growth in high-value customers [7] Customer Metrics - Customers generating annual recurring revenue (ARR) of $1 million or more increased to 462, a 17$3.175 billion and $3.195 billion, suggesting 18-19$737-$741 million implies just 21% year-over-year growth [10] Strategic Initiatives - Datadog's AI-related business shows promise, with AI native customers contributing about five percentage points to year-over-year revenue growth [14] - The company plans to increase operating expenses in the high 20% range year over year in 2025, focusing on sales, marketing, and R&D investments [15] Product Developments - Datadog launched several strategic products, including Datadog On-Call and enhanced security offerings, which strengthen its competitive position [16][17] Investment Perspective - Current shareholders may consider holding positions due to strong platform adoption metrics and expanding product portfolio [18] - New investors might benefit from waiting for a better entry point, given the disconnect between record bookings and conservative revenue guidance [20] Valuation - The stock trades at a forward 12-month price-to-sales (P/S) ratio of 13.54x, compared to the broader Zacks Internet - Software industry's 3.15x, indicating a pricey valuation [21]