Datadog Reports Strong Q4 Earnings, Shares Surge
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 4 days ago
0mins
Should l Buy DDOG?
Source: Fool
- Earnings Beat: Datadog reported non-GAAP earnings per share of $0.59 and sales of $935 million for Q4, both exceeding Wall Street expectations, indicating strong profitability and market demand.
- Significant Revenue Growth: The company's revenue surged approximately 29% year-over-year, with a gross profit of $776 million and a gross margin of 81.4%, highlighting Datadog's competitive edge in the cloud monitoring market.
- Optimistic Guidance: Datadog projects current quarter sales between $951 million and $961 million, with a midpoint year-over-year growth rate of 25.5%, reflecting the company's confidence in future growth.
- Positive Market Reaction: Despite a 0.4% drop in the S&P 500 and a 0.6% drop in the Nasdaq Composite, Datadog's stock surged 13.7%, demonstrating strong investor confidence in its performance and outlook.
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Analyst Views on DDOG
Wall Street analysts forecast DDOG stock price to rise
33 Analyst Rating
30 Buy
3 Hold
0 Sell
Strong Buy
Current: 126.130
Low
140.00
Averages
207.39
High
255.00
Current: 126.130
Low
140.00
Averages
207.39
High
255.00
About DDOG
Datadog, Inc. provides an observability and security platform for cloud applications. The Company’s SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, user experience monitoring, cloud security and many other capabilities to provide unified, real-time observability and security for its customers’ entire technology stack. Its platform consists of products that can be used individually or as a unified solution and includes a marketplace where customers can access products built by its partners on top of the Datadog platform. Its products include Infrastructure Monitoring, Application Performance Monitoring, Log Management, Digital Experience Monitoring, Continuous Profiler, Database Monitoring, Data Observability, Universal Service Monitoring, Network Monitoring and others. It owns Metaplane, an end-to-end data observability platform that provides advanced machine learning-powered monitoring and column-level lineage.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Surge in AI Product Users: By the end of 2025, 5,500 of Datadog's customers were using at least one AI product, a 57% increase from the previous year, demonstrating a rapid rise in the adoption of its AI integrations and solidifying its market position.
- Analysts Bullish on Outlook: According to The Wall Street Journal, 36 out of 48 analysts have rated Datadog as a buy, with an average price target of $185.92, suggesting a potential 47% upside in the stock over the next 12 to 18 months, reflecting confidence in its continued growth.
- Significant Market Opportunity: Datadog estimates its addressable market in the observability segment at $52 billion, expected to grow at 9% annually through 2029, and with new AI products on the horizon, the company's market potential is set to expand even further.
See More
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- Market Rebound Expectations: JPMorgan believes that while the market's outlook on AI disruption in the software sector is overly pessimistic, certain software companies are demonstrating greater resilience, potentially providing rebound opportunities for investors, especially given the current overly bearish sentiment.
- Extreme Price Volatility: Analysts point out that the extreme price action in software stocks has led to unrealistic expectations regarding AI disruption, which may prompt a rotation back into higher-quality companies, thereby improving portfolio performance.
- AI Profitability Gains: Companies in the S&P 500 that have adopted AI have seen net margins expand by approximately 2 to 3 percentage points more than their peers, indicating that AI technology is already delivering productivity gains and reflecting that corporate adoption is enhancing profitability.
- ETF Performance Decline: The State Street SPDR S&P Software & Services ETF (NYSE:XSW) is down 20.58% year-to-date, illustrating the overall pessimistic sentiment towards the software sector, despite some companies potentially benefiting from AI infrastructure demand.
See More
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- Strong Employment Data: US nonfarm payrolls for January increased by 130,000, surpassing expectations of 65,000, indicating labor market stability, while the unemployment rate unexpectedly fell by 0.1% to 4.3%, which is likely to have a positive impact on economic recovery.
- Interest Rate Expectations Shift: Following the robust employment report, the market's expectation for a Fed rate cut next month dropped from 23% to 6%, with the 10-year T-note yield rising by 3 basis points to 4.17%, reflecting a cautious outlook on future monetary policy.
- Mixed Market Performance: The S&P 500 closed unchanged, the Nasdaq 100 rose by 0.29%, while the Dow Jones Industrial Average fell by 0.13%, highlighting a contrast between strong tech stock performance and weakness in software stocks.
- Optimistic Earnings Outlook: Over 78% of the 335 S&P 500 companies that reported earnings exceeded expectations, with Q4 earnings growth projected at 8.4%, indicating that sustained corporate profitability will support long-term stock market gains.
See More
US Stocks Mixed as Software Sector Declines
- Strong Employment Data: US nonfarm payrolls rose by 130,000 in January, exceeding expectations of 65,000, while the unemployment rate unexpectedly fell by 0.1% to 4.3%, indicating labor market stability that could influence Fed policy decisions.
- Interest Rate Expectations Shift: Following the stronger-than-expected jobs report, the 10-year T-note yield increased by 3 basis points to 4.17%, with market expectations for a Fed rate cut next month dropping from 23% to 8%, reflecting investor caution regarding future monetary policy.
- Corporate Earnings Performance: So far, 78% of the 319 S&P 500 companies have reported earnings that beat expectations, with Q4 earnings growth projected at 8.4%, demonstrating corporate resilience that may support the stock market.
- Market Volatility Overview: The Dow Jones Industrial Average fell by 0.19%, the S&P 500 dipped 0.02%, while the Nasdaq 100 rose by 0.10%, indicating a mixed market performance amid declines in software stocks.
See More
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- Significant Revenue Growth: Datadog's revenue grew by 29% year-over-year to $953.2 million, surpassing the market consensus of $918.7 million, indicating a robust recovery in its core business and bolstering confidence in its sustained growth.
- Strong Performance from Non-AI Customers: Revenue from non-AI customers accelerated to 23%, up from 20% in the previous quarter, demonstrating strong customer support in the adoption of cloud and modern technologies, further solidifying its market share.
- Conservative Future Outlook: Although the 2026 revenue guidance of $4.06 to $4.1 billion suggests an 18%-20% growth potential, it falls short of the market expectation of $4.106 billion, reflecting management's cautious stance on future growth.
- Robust Operating Profit: Datadog reported an operating margin of 24.1%, and while the first-quarter revenue outlook exceeded expectations, the conservative guidance for 2026 may impact investor confidence in its long-term profitability.
See More
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Service Now Sales Decline: ServiceNow reported a sales decrease of 4.4%.
Salesforce Performance: Salesforce experienced a 3.4% drop in sales.
Datadog Sales Figures: Datadog's sales also fell by 3.5%.
Overall Market Trends: The reported declines indicate a broader trend of decreasing sales across these tech companies.
See More
