Datadog Reports Strong Q4 Results but Stock Declines on Soft 2025 Outlook

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Datadog (NASDAQ: DDOG), a leading monitoring and security platform for cloud applications, announced its fourth-quarter and full-year 2024 financial results, showcasing solid revenue growth.

However, a cautious 2025 outlook has weighed on investor sentiment, leading to a drop in the company’s stock price.

Q4 Earnings Beat Expectations

In Q4 2024, Datadog reported revenue of $738 million, marking a 25% increase year-over-year. The company’s adjusted earnings per share (EPS) came in at $0.49, exceeding Wall Street’s forecast of $0.43.

Datadog also saw strong customer growth, with 462 customers now generating annual recurring revenue (ARR) exceeding $1 million—up from 396 in the previous year.

Despite these impressive figures, Datadog’s stock fell approximately 7% in after-hours trading, dropping to around $137.50. The decline was triggered by the company’s softer-than-expected guidance for 2025.

2025 Revenue Outlook Disappoints Investors

While the company’s Q4 results surpassed expectations, its forecast for the upcoming fiscal year failed to impress. Datadog projects full-year 2025 revenue of approximately $3.185 billion, which falls short of Wall Street’s estimate of $3.24 billion. Additionally, the company provided Q1 2025 revenue guidance between $737 million and $741 million, with adjusted EPS between $0.41 and $0.43.

Management cited a slowdown in cloud security spending and a more cautious approach from enterprise customers as key factors behind the conservative outlook. This news spurred concerns about the company’s near-term growth trajectory, prompting investors to react negatively.

Stock Performance and Market Reaction

Following the earnings release, Datadog’s stock took a hit, reflecting investors’ concerns over the company’s ability to maintain its rapid expansion.

The 7% decline post-earnings highlights the market’s sensitivity to future revenue projections, particularly in the high-growth tech sector.

Despite this dip, Datadog shares remain up significantly over the past year, underscoring the company’s overall strength in the cloud observability space.

Analysts remain divided on the stock. Some view the pullback as a buying opportunity, citing Datadog’s strong product offerings and expanding customer base. Others, however, express caution given the weaker-than-expected revenue outlook and macroeconomic uncertainties impacting enterprise IT spending.

Looking Ahead

While the market reaction to Datadog’s earnings has been mixed, the company continues to solidify its position as a leader in the cloud monitoring space. Its growing customer base and continued innovation in AI-driven observability solutions suggest long-term growth potential.

Investors will closely watch upcoming quarters to see whether Datadog can navigate the current economic environment and accelerate revenue growth.

For now, the stock remains volatile as Wall Street weighs its strong fundamentals against a softer near-term outlook.

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