Datadog's 4Q Outlook Fails To Top Expectations, Largest Customer Reins in Usage — Market Talk

What happened

Datadog said its fourth-quarter outlook assumes its largest customer, an undisclosed AI company, will cut usage to its minimum commitment after reducing usage in the third quarter. Datadog reported third-quarter revenue growth of 35%, while its forecast of $1.19 billion to $1.2 billion did not exceed expectations.

Confirmed

Global impact / market context

The customer’s lower usage can directly limit Datadog’s revenue because the company sells observability software, tools that help organizations monitor technology systems. The company said this customer weighed on third-quarter revenue growth; its outlook indicates that reduced usage is expected to continue into the fourth quarter.

Analyst inference

Datadog’s reported 35% revenue growth was slower than the 36% rise in the prior quarter, but the company said growth accelerated when excluding its largest customer. The fourth-quarter forecast fell short of expectations, and the article reports shares down 12% before regular trading.

Confirmed

What to watch

1. Whether the largest customer keeps usage at its minimum commitment in the fourth quarter, and how much that customer’s spending contributes to Datadog’s reported revenue. Analyst inference
2. Datadog’s fourth-quarter revenue against its $1.19 billion to $1.2 billion forecast, which will show whether the outlook’s expected customer reduction matches results. Analyst inference
3. Whether revenue growth excluding the largest customer continues to accelerate, as that could indicate demand from other customers is offsetting the account’s lower usage. Analyst inference

Evidence

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