TLDR
- Datadog (DDOG) stock fell 11% to about $196.50 in premarket trading Wednesday, down from a $220.52 close.
- Q3 adjusted EPS of $0.81 and revenue of $1.20 billion both topped estimates.
- Full-year revenue guidance rose to $4.515 billion to $4.525 billion.
- Q4 revenue guidance has a midpoint of $1.195 billion, just under Q3’s $1.20 billion.
- Morgan Stanley says the debate is whether growth of around 30% can last into 2027.
Datadog (DDOG) stock slid 11% to about $196.50 in premarket trading Wednesday. It closed Tuesday at $220.52.
The drop followed a third-quarter report that beat estimates on both the top and bottom lines. Traders wanted something more.
Adjusted earnings came in at $0.81 a share, well above the $0.64 consensus. Revenue hit $1.20 billion, ahead of the $1.14 billion estimate.
That revenue was up 35% from $885.7 million a year earlier. Adjusted operating margin rose to 28% from 23%.
Operating cash flow was $290 million, and free cash flow was $251 million. The company also ended the quarter with about 4,860 customers paying $100,000 or more in annual recurring revenue, up 20% from about 4,060 a year ago.
Where the Guidance Landed
Datadog raised its full-year outlook. It now sees revenue of $4.515 billion to $4.525 billion, up from a prior range of $4.45 billion to $4.47 billion.
Full-year adjusted EPS is guided to $2.73 to $2.75, up from $2.50 to $2.54. The consensus was $4.48 billion in revenue and $2.53 in EPS, so both ranges clear it.
The fourth quarter is where the mood changed. Revenue guidance is $1.19 billion to $1.20 billion, with a midpoint of $1.195 billion.
That midpoint sits just under the third quarter’s $1.20 billion. Analysts had expected about $1.2 billion.
Fourth-quarter adjusted EPS guidance of $0.69 to $0.71 topped the $0.64 consensus. The revenue line drew more attention.
The stock had already climbed 62% this year through Tuesday’s close. That left little room for a report that only met the bar.
What Analysts Are Watching
Morgan Stanley’s Sanjit Singh and Adam Wood said the rise of AI agents points to strong demand for Datadog’s core products. They also noted that Wall Street wanted about 30% growth in the third quarter and around 25% in the fourth.
The new full-year revenue guide implies about 32% growth from last year. In their view, that is what investors already expected.
“The bigger debate is whether Datadog can sustain around 30% growth ex-largest customer into 2027,” the analysts wrote.
CEO Olivier Pomel said the company is seeing “strong adoption across our platform as customers scale their digital operations and use of AI.” He added that Datadog is building specialized AI models to help customers move toward autonomous operations.
In premarket trading Wednesday, Datadog stock was down 10.89% at $196.50.
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