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Datadog Stock Before Q2 Earnings: Buy Now or Wait for Results?
ZACKSยท 2025-08-04 15:21
Core Insights - Datadog (DDOG) is expected to report second-quarter 2025 results on August 7, with projected revenues between $787 million and $791 million, indicating year-over-year growth of 22% to 23% [1][8] - The Zacks Consensus Estimate for revenues stands at $790.92 million, reflecting a 22.57% increase from the previous year's quarter [1][2] - Diluted non-GAAP earnings per share are anticipated to be between 40 and 42 cents, with the consensus estimate at 41 cents, showing a year-over-year decline of 4.65% [1][2] Revenue Growth Factors - Datadog's performance is likely to benefit from innovations in its AI-powered observability platform, including new modules like App Builder and security monitoring, which have attracted enterprise adoption [3][8] - The acquisitions of Eppo and Metaplane have enhanced the platform's functionality, promoting upsell momentum and increasing customer engagement [3][8] - The company has seen a 13% increase in large customers (3,770 clients with annual recurring revenues above $100,000), which is crucial for long-term growth [4][8] Enterprise Momentum - Datadog experienced a 70% year-over-year increase in dollar bookings for new logos in Q1 2025, along with 11 large deals exceeding $10 million, indicating strong enterprise traction [5][8] - The ongoing expansion within the large customer segment is expected to support revenue momentum and product penetration in Q2 [4][5] Margin Pressures - Operating margin pressures are anticipated due to ongoing reinvestments and elevated cloud hosting costs, with non-GAAP operating margin declining from 27% to 22% year-over-year in Q1 [6][8] - Gross margin also contracted by 300 basis points, which is expected to negatively impact margins in the upcoming quarter [6][8] Earnings Outlook - Datadog has an Earnings ESP of +2.86% and a Zacks Rank 2, indicating a favorable outlook for an earnings beat [7][9]