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For the second quarter of 2024, Datadog anticipates revenues between $620 million and $624 million. The Zacks Consensus Estimate for the same is currently pegged at $622.74 million, suggesting 22.2% growth from the year-ago period.
Non-GAAP earnings are expected in the range of 34-36 cents per share. The Zacks Consensus Estimate for earnings has remained unchanged at 35 cents per share over the past 30 days, indicating a decline of 2.8% from the year-ago period.
Image Source: Zacks Investment Research
In the last reported quarter, Datadog delivered an earnings surprise of 29.41%. Markedly, Datadog’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 23.17%.
Our proven model does not conclusively predict an earnings beat for Datadog this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Datadog’s second-quarter performance is expected to have been driven by the company's cloud-based monitoring and analytics platform. The ongoing trend of digital transformation and cloud migration across various industries is expected to have boosted demand for Datadog's services, potentially leading to significant growth in the company's customer base and revenues.
In the first quarter of 2024, Datadog reported impressive customer metrics that are likely to have continued into the second quarter. The company boasted 3,340 customers with an annual run rate (ARR) of $100,000 or more, representing a 14.8% year-over-year increase. These high-value clients generated approximately 87% of the total ARR, highlighting Datadog's success in attracting and retaining enterprise-level customers.
Datadog's strategy of investing heavily in sales and marketing appears to be paying off, as evidenced by the growing adoption of its platform and products. The company's efforts to increase brand awareness and engage customers are expected to have contributed to an expanding user base in the second quarter.
This growth is further supported by Datadog's impressive cross-selling capabilities, with 82% of customers using two or more products at the end of the first quarter, up from 81% in the year-ago period. Moreover, the percentage of customers utilizing four or more products increased to 47% from 43% in the year-ago period, indicating successful upselling efforts.
The company's dollar-based retention rate, which was in the mid-110s last quarter, reflects strong customer loyalty and increased usage of Datadog's products. This metric suggests that existing customers are not only sticking with the platform but also expanding their utilization over time, which is likely to have driven revenue growth in the to-be-reported quarter.
Datadog's strategic partnerships with major cloud providers, including Amazon (AMZN - Free Report) -owned Amazon Web Services (AWS), Alphabet (GOOGL - Free Report) -owned Google Cloud, and Microsoft (MSFT - Free Report) Azure, have further solidified its position in the multi-cloud landscape.
The company's multi-cloud and multi-vendor approach allows customers to monitor their entire cloud infrastructure from a single platform, regardless of the cloud providers they use. This unified view enables organizations to optimize performance, troubleshoot issues and maintain robust security across diverse cloud environments.
Product Innovation to Boost Growth and Market Expansion in Q2
As Datadog approaches its second-quarter earnings report, the company's recent product innovations and expansions are expected to play a crucial role in driving growth and attracting new clients. The quarter under review has seen Datadog introduce several significant additions to its portfolio, potentially strengthening its market position and appeal to a broader range of customers.
Datadog has also made strides in cloud resource optimization with the launch of Datadog Kubernetes Autoscaling. This set of capabilities leverages real-time and historical utilization metrics to intelligently automate resource optimization and scaling of customers' Kubernetes environments.
For data-driven organizations, Datadog has introduced the Data Jobs Monitoring product, now generally available. This tool is tailored for data platform teams and data engineers, enabling them to detect issues in Spark and Databricks jobs across their data pipelines.
Lastly, the company has launched Datadog App Builder, a low-code development tool that empowers teams to quickly create self-service applications and securely integrate them into their monitoring stacks. This move into the low-code space could potentially increase Datadog's appeal to a wider range of users within organizations.
Price Performance & Valuation
Datadog has seen its stock decline 13.5% year to date, underperforming the Zacks Computer and Technology sector’s return of 14.3%. This pullback has some investors wondering if it is a buying opportunity for the high-growth software company. Datadog operates in a competitive observability and monitoring market, facing rivals such as New Relic, Dynatrace and Splunk. While Datadog has differentiated itself through its unified platform and multi-cloud integrations, its competitors also offer robust solutions and have established customer bases.
Year-to-date Performance
Image Source: Zacks Investment Research
Additionally, the company's valuation may be a concern for some investors, as the stock trades at a premium compared to the broader Zacks Internet - Software industry. As of the latest data, Datadog’s forward 12-month P/S ratio hovers around 11.96, reflecting investors' high growth expectations. This valuation is justified by Datadog's strong revenue growth, expanding customer base and increasing product adoption.
DDOG’s P/S F12M Ratio Depicts Stretched Valuation
Image Source: Zacks Investment Research
Investment Thesis
Datadog presents a compelling investment opportunity in the rapidly growing cloud monitoring and analytics market. The company's robust platform, which integrates seamlessly across various cloud environments, positions it as a leader in the DevOps and IT operations space. Datadog's strong customer retention rates and ability to upsell additional products demonstrate its value proposition and sticky ecosystem. With continuous innovation and expansion of its product suite, including recent forays into security and low-code development, Datadog is well-positioned to capture a larger share of IT budgets. The company's focus on AI-driven solutions and its ability to address emerging market needs suggest strong potential for sustained growth and market outperformance in the long term.
Final Thought
Despite a premium valuation and fierce competition, Datadog's Growth Score of A indicates exceptional expansion potential, reflecting its strong revenue growth, increasing market share, and successful product innovations in the rapidly evolving cloud observability and security sectors. By aligning itself with industry giants like Amazon, Google, and Microsoft, Datadog has established itself as a trusted partner for organizations, helping them navigate the complexities of modern cloud architectures and setting the stage for sustained success in the evolving cloud monitoring and analytics market. This makes the stock worth buying ahead of its second-quarter earnings report.
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Datadog (DDOG) Stock Before Q2 Earnings: To Buy or Not to Buy?
Datadog (DDOG - Free Report) is set to release second-quarter 2024 results on Aug 8.
For the second quarter of 2024, Datadog anticipates revenues between $620 million and $624 million. The Zacks Consensus Estimate for the same is currently pegged at $622.74 million, suggesting 22.2% growth from the year-ago period.
Non-GAAP earnings are expected in the range of 34-36 cents per share. The Zacks Consensus Estimate for earnings has remained unchanged at 35 cents per share over the past 30 days, indicating a decline of 2.8% from the year-ago period.
Image Source: Zacks Investment Research
In the last reported quarter, Datadog delivered an earnings surprise of 29.41%. Markedly, Datadog’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 23.17%.
Datadog, Inc. Price and EPS Surprise
Datadog, Inc. price-eps-surprise | Datadog, Inc. Quote
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Datadog this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Datadog has an Earnings ESP of 0.00% and a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors to Consider
Datadog’s second-quarter performance is expected to have been driven by the company's cloud-based monitoring and analytics platform. The ongoing trend of digital transformation and cloud migration across various industries is expected to have boosted demand for Datadog's services, potentially leading to significant growth in the company's customer base and revenues.
In the first quarter of 2024, Datadog reported impressive customer metrics that are likely to have continued into the second quarter. The company boasted 3,340 customers with an annual run rate (ARR) of $100,000 or more, representing a 14.8% year-over-year increase. These high-value clients generated approximately 87% of the total ARR, highlighting Datadog's success in attracting and retaining enterprise-level customers.
Datadog's strategy of investing heavily in sales and marketing appears to be paying off, as evidenced by the growing adoption of its platform and products. The company's efforts to increase brand awareness and engage customers are expected to have contributed to an expanding user base in the second quarter.
This growth is further supported by Datadog's impressive cross-selling capabilities, with 82% of customers using two or more products at the end of the first quarter, up from 81% in the year-ago period. Moreover, the percentage of customers utilizing four or more products increased to 47% from 43% in the year-ago period, indicating successful upselling efforts.
The company's dollar-based retention rate, which was in the mid-110s last quarter, reflects strong customer loyalty and increased usage of Datadog's products. This metric suggests that existing customers are not only sticking with the platform but also expanding their utilization over time, which is likely to have driven revenue growth in the to-be-reported quarter.
Datadog's strategic partnerships with major cloud providers, including Amazon (AMZN - Free Report) -owned Amazon Web Services (AWS), Alphabet (GOOGL - Free Report) -owned Google Cloud, and Microsoft (MSFT - Free Report) Azure, have further solidified its position in the multi-cloud landscape.
The company's multi-cloud and multi-vendor approach allows customers to monitor their entire cloud infrastructure from a single platform, regardless of the cloud providers they use. This unified view enables organizations to optimize performance, troubleshoot issues and maintain robust security across diverse cloud environments.
Product Innovation to Boost Growth and Market Expansion in Q2
As Datadog approaches its second-quarter earnings report, the company's recent product innovations and expansions are expected to play a crucial role in driving growth and attracting new clients. The quarter under review has seen Datadog introduce several significant additions to its portfolio, potentially strengthening its market position and appeal to a broader range of customers.
Datadog has also made strides in cloud resource optimization with the launch of Datadog Kubernetes Autoscaling. This set of capabilities leverages real-time and historical utilization metrics to intelligently automate resource optimization and scaling of customers' Kubernetes environments.
For data-driven organizations, Datadog has introduced the Data Jobs Monitoring product, now generally available. This tool is tailored for data platform teams and data engineers, enabling them to detect issues in Spark and Databricks jobs across their data pipelines.
Lastly, the company has launched Datadog App Builder, a low-code development tool that empowers teams to quickly create self-service applications and securely integrate them into their monitoring stacks. This move into the low-code space could potentially increase Datadog's appeal to a wider range of users within organizations.
Price Performance & Valuation
Datadog has seen its stock decline 13.5% year to date, underperforming the Zacks Computer and Technology sector’s return of 14.3%. This pullback has some investors wondering if it is a buying opportunity for the high-growth software company. Datadog operates in a competitive observability and monitoring market, facing rivals such as New Relic, Dynatrace and Splunk. While Datadog has differentiated itself through its unified platform and multi-cloud integrations, its competitors also offer robust solutions and have established customer bases.
Year-to-date Performance
Image Source: Zacks Investment Research
Additionally, the company's valuation may be a concern for some investors, as the stock trades at a premium compared to the broader Zacks Internet - Software industry. As of the latest data, Datadog’s forward 12-month P/S ratio hovers around 11.96, reflecting investors' high growth expectations. This valuation is justified by Datadog's strong revenue growth, expanding customer base and increasing product adoption.
DDOG’s P/S F12M Ratio Depicts Stretched Valuation
Image Source: Zacks Investment Research
Investment Thesis
Datadog presents a compelling investment opportunity in the rapidly growing cloud monitoring and analytics market. The company's robust platform, which integrates seamlessly across various cloud environments, positions it as a leader in the DevOps and IT operations space. Datadog's strong customer retention rates and ability to upsell additional products demonstrate its value proposition and sticky ecosystem. With continuous innovation and expansion of its product suite, including recent forays into security and low-code development, Datadog is well-positioned to capture a larger share of IT budgets. The company's focus on AI-driven solutions and its ability to address emerging market needs suggest strong potential for sustained growth and market outperformance in the long term.
Final Thought
Despite a premium valuation and fierce competition, Datadog's Growth Score of A indicates exceptional expansion potential, reflecting its strong revenue growth, increasing market share, and successful product innovations in the rapidly evolving cloud observability and security sectors. By aligning itself with industry giants like Amazon, Google, and Microsoft, Datadog has established itself as a trusted partner for organizations, helping them navigate the complexities of modern cloud architectures and setting the stage for sustained success in the evolving cloud monitoring and analytics market. This makes the stock worth buying ahead of its second-quarter earnings report.