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Why Is Datadog (DDOG) Down 5.8% Since Last Earnings Report?
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A month has gone by since the last earnings report for Datadog (DDOG - Free Report) . Shares have lost about 5.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Datadog due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Datadog reported first-quarter 2024 non-GAAP earnings per share (EPS) of 44 cents, which increased 57.1% from the year-ago quarter and beat the Zacks Consensus Estimate by 29.41%.
The company’s net revenues of $611.25 million rose 26.9% year over year and beat the consensus estimate by 3.61%.
Quarter Details
The company ended the quarter with 28,000 customers, up from 25,500 in the prior-year period.
In the first quarter, Datadog had 3,340 customers with an annual run rate (ARR) of $100,000 or more, which increased 14.8% year over year. These customers generated about 87% of the total ARR.
As of Mar 31, 2024, 82% of customers used two or more products, up from 81% in the year-ago quarter. Additionally, 47% of customers utilized four or more products, up from 43% in the year-ago quarter.
Datadog’s net revenue retention was in the mid-110s as customers increased their usage and adopted more products.
Operating Details
Datadog’s adjusted gross margin increased 280 basis points (bps) on a year-over-year basis to 83.3%.
Research & development expenses gained 13.7% on a year-over-year basis to $170.8 million, driven by increased investments in DDOG’s platform. Research & development, as a percentage of revenues, decreased 320 bps to 27.9%.
Sales and marketing expenses rose 18.2% year over year to $143 million. Sales and marketing expenses, as a percentage of revenues, contracted 170 bps to 23.4%.
General & administrative expenses increased 2% year over year, reaching $30.7 million in the reported quarter. General & administrative expenses, as a percentage of revenues, contracted 120 bps to 5%.
Datadog reported a non-GAAP operating income of $164.5 million compared with $86.4 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2024, Datadog had cash, cash equivalents, restricted cash and marketable securities of $2.8 billion compared with $2.6 billion as of Dec 31, 2023.
Operating cash flow was $212 million in the reported quarter, down from $220.2 million reported in the previous quarter.
Free cash flow during the quarter was $187 million compared with $201.3 million in the previous quarter.
Guidance
For the second quarter of 2024, Datadog anticipates revenues between $620 million and $624 million. Non-GAAP EPS is expected in the range of 34-36 cents. Non-GAAP operating income is expected in the band of $134-$138 million.
For 2024, DDOG expects revenues between $2.59 billion and $2.61 billion. Non-GAAP EPS is projected between $1.51 and $1.57. Non-GAAP operating income is expected in the range of $585-$605 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 183.64% due to these changes.
VGM Scores
Currently, Datadog has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Datadog has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Datadog is part of the Zacks Internet - Software industry. Over the past month, Meta Platforms (META - Free Report) , a stock from the same industry, has gained 4.8%. The company reported its results for the quarter ended March 2024 more than a month ago.
Meta Platforms reported revenues of $36.46 billion in the last reported quarter, representing a year-over-year change of +27.3%. EPS of $4.71 for the same period compares with $2.64 a year ago.
Meta Platforms is expected to post earnings of $4.66 per share for the current quarter, representing a year-over-year change of +44.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.2%.
Meta Platforms has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Why Is Datadog (DDOG) Down 5.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Datadog (DDOG - Free Report) . Shares have lost about 5.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Datadog due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Datadog Q1 Earnings Beat Estimates, Revenues Rise Y/Y
Datadog reported first-quarter 2024 non-GAAP earnings per share (EPS) of 44 cents, which increased 57.1% from the year-ago quarter and beat the Zacks Consensus Estimate by 29.41%.
The company’s net revenues of $611.25 million rose 26.9% year over year and beat the consensus estimate by 3.61%.
Quarter Details
The company ended the quarter with 28,000 customers, up from 25,500 in the prior-year period.
In the first quarter, Datadog had 3,340 customers with an annual run rate (ARR) of $100,000 or more, which increased 14.8% year over year. These customers generated about 87% of the total ARR.
As of Mar 31, 2024, 82% of customers used two or more products, up from 81% in the year-ago quarter. Additionally, 47% of customers utilized four or more products, up from 43% in the year-ago quarter.
Datadog’s net revenue retention was in the mid-110s as customers increased their usage and adopted more products.
Operating Details
Datadog’s adjusted gross margin increased 280 basis points (bps) on a year-over-year basis to 83.3%.
Research & development expenses gained 13.7% on a year-over-year basis to $170.8 million, driven by increased investments in DDOG’s platform. Research & development, as a percentage of revenues, decreased 320 bps to 27.9%.
Sales and marketing expenses rose 18.2% year over year to $143 million. Sales and marketing expenses, as a percentage of revenues, contracted 170 bps to 23.4%.
General & administrative expenses increased 2% year over year, reaching $30.7 million in the reported quarter. General & administrative expenses, as a percentage of revenues, contracted 120 bps to 5%.
Datadog reported a non-GAAP operating income of $164.5 million compared with $86.4 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2024, Datadog had cash, cash equivalents, restricted cash and marketable securities of $2.8 billion compared with $2.6 billion as of Dec 31, 2023.
Operating cash flow was $212 million in the reported quarter, down from $220.2 million reported in the previous quarter.
Free cash flow during the quarter was $187 million compared with $201.3 million in the previous quarter.
Guidance
For the second quarter of 2024, Datadog anticipates revenues between $620 million and $624 million. Non-GAAP EPS is expected in the range of 34-36 cents. Non-GAAP operating income is expected in the band of $134-$138 million.
For 2024, DDOG expects revenues between $2.59 billion and $2.61 billion. Non-GAAP EPS is projected between $1.51 and $1.57. Non-GAAP operating income is expected in the range of $585-$605 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 183.64% due to these changes.
VGM Scores
Currently, Datadog has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Datadog has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Datadog is part of the Zacks Internet - Software industry. Over the past month, Meta Platforms (META - Free Report) , a stock from the same industry, has gained 4.8%. The company reported its results for the quarter ended March 2024 more than a month ago.
Meta Platforms reported revenues of $36.46 billion in the last reported quarter, representing a year-over-year change of +27.3%. EPS of $4.71 for the same period compares with $2.64 a year ago.
Meta Platforms is expected to post earnings of $4.66 per share for the current quarter, representing a year-over-year change of +44.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.2%.
Meta Platforms has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.