Datadog shares fall 18% after in-line fourth-quarter revenue outlook

What happened

Datadog shares fell 18% in premarket trading after the company forecast fourth-quarter revenue of $1.19 billion to $1.20 billion, in line with analyst estimates. The outlook followed third-quarter revenue growth of 35.4% to $1.2 billion and adjusted earnings of 81 cents per share, both above expectations.

Confirmed

Global impact / market context

The forecast points to growth slowing to about 26% from 35% in the third quarter, while the company added fewer large-spending customers than in the prior quarter. If customer usage or new large accounts weaken, revenue growth could slow further, affecting investors’ expectations for future sales.

Analyst inference

The article describes a sharp share decline despite stronger-than-expected quarterly results, suggesting investors focused more on the forward outlook than past performance. The forecast’s upper end matched analyst estimates, but slower expected growth and fewer additions of major customers raise questions about the pace of future revenue expansion.

Analyst inference

What to watch

1. Watch whether fourth-quarter revenue reaches the $1.19 billion to $1.20 billion forecast and whether reported growth tracks the implied rate of about 26%. Analyst inference
2. Track customer usage, especially among Datadog’s largest customers, because TD Cowen identified possible usage declines as a key issue for the outlook. Confirmed
3. Watch whether additions of customers generating over $100,000 in annual recurring revenue recover from 140 net additions, after falling from 170 in the previous quarter. Analyst inference

Evidence

• seekingalpha.com