TLDR
- Datadog forecast Q4 revenue between $912M-$916M, beating analyst estimates of $887.27M, and expects adjusted earnings per share of 54-56 cents versus estimates of 46 cents
- Q3 revenue rose 28% to $885.65M, surpassing estimates of $852.78M, with adjusted earnings of 55 cents per share beating the 47 cents estimate
- The company raised its full-year revenue forecast to $3.386B-$3.39B, above the previous consensus of $3.33B
- Shares jumped nearly 10% in premarket trading following the earnings announcement, with stock up 8.5% year-to-date
- Growing demand for cloud-security products driven by AI adoption and cloud migration is fueling the company’s growth
Datadog reported third-quarter earnings that topped Wall Street expectations. The cloud monitoring company also issued a strong forecast for the fourth quarter.
The company posted Q3 revenue of $885.65 million. That represents a 28% increase from the same period last year. Analysts had expected $852.78 million.
Adjusted earnings came in at 55 cents per share. Wall Street was looking for 47 cents per share. The beat on both metrics sent shares soaring in premarket trading.
The stock jumped nearly 10% before regular trading hours on Thursday. Datadog shares have gained 8.5% so far this year.
Strong Q4 Guidance Drives Investor Optimism
Looking ahead, Datadog projects fourth-quarter revenue between $912 million and $916 million. Analysts had estimated $887.27 million for the period.
The company expects adjusted profit per share of 54 to 56 cents. That’s well above the analyst estimate of 46 cents per share.
Datadog also raised its full-year revenue outlook. The company now expects $3.386 billion to $3.39 billion in revenue. The previous consensus estimate stood at $3.33 billion.
The revised guidance reflects the company’s strong momentum. It also shows confidence in sustained demand for its products.
Datadog joined the S&P 500 in July. The addition to the benchmark index marked a milestone for the company.
AI and Cloud Migration Fuel Demand
Businesses adopting artificial intelligence technology are driving demand for Datadog’s products. The company provides cloud-security and monitoring tools that offer real-time protection.
Organizations moving to the cloud need oversight of their infrastructure. Datadog’s platform helps companies monitor servers, applications, and entire IT systems.
The company’s software analyzes machine-generated data in real time. This allows clients to ensure their systems meet uptime and performance targets.
Access control and device oversight are key features. These capabilities become more critical as companies expand their cloud operations.
Datadog counts major corporations among its client base. Shell, PayPal, and Comcast use the company’s monitoring solutions.
The company’s three-year revenue growth rate stands at 31%. That shows consistent expansion over an extended period.
The company maintains a strong balance sheet. Its current ratio of 3.43 points to solid liquidity. The debt-to-equity ratio of 0.4 indicates conservative leverage.
Despite strong revenue growth, the operating margin is slightly negative at -0.56%. However, the net margin of 4.13% shows the company remains profitable overall.
Insider selling activity has picked up recently. There were 28 insider transactions over the past three months. This selling could raise questions among some investors.
The stock’s valuation metrics show a premium pricing. The P/E ratio of 442.8 exceeds industry averages by a wide margin. The P/S ratio stands at 18.58.
Analysts have set a target price of $167.44 for the stock. Technical indicators show mixed signals with an RSI of 50.6 suggesting neutral sentiment.
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