As an investor in Datadog (DDOG) stock, the recent earnings report may have left you feeling a bit disappointed. While the company’s second-quarter earnings and revenue topped estimates, the third-quarter revenue outlook fell short of expectations. This led to a plunge in DDOG stock in early trading on Tuesday.
For the second quarter, Datadog reported an adjusted profit of 36 cents per share, a 50% increase from the previous year. The company’s revenue also saw strong growth, jumping 25% to $509 million. Analysts had predicted earnings of 28 cents per share on revenue of $501.6 million, so Datadog exceeded those expectations.
However, it was the third-quarter revenue outlook that caused concern among investors. Datadog forecasts a profit in the range of 33 cents to 35 cents per share for the current quarter, which is slightly above analysts’ estimates of 29 cents. However, the company’s revenue guidance of $523 million at the midpoint fell short of Wall Street’s target of $536.2 million.
Datadog, founded in 2010, provides a monitoring and analytics platform for software developers and information-technology departments. The company has a partnership with Amazon Web Services, which has helped drive its growth. Additionally, some analysts believe that Datadog could benefit from the increasing deployment of generative artificial intelligence software by companies.
At the recent user conference in July, Datadog announced over 15 new products, many of which are geared towards monitoring AI workloads. Wells Fargo analyst Andrew Nowinski sees this as a positive indicator for the company’s future growth.
Despite the dip in DDOG stock following the earnings report, the overall performance of the stock has been impressive this year. In fact, leading up to the earnings report, Datadog stock had gained 43% in 2023.
As an investor, it’s important to keep a close eye on the developments and announcements from Datadog. The company’s partnership with Amazon Web Services and its focus on AI monitoring could drive future growth. While the third-quarter revenue outlook may have missed expectations, Datadog still has potential, especially if more companies adopt AI software.
Stay tuned for updates on 5G wireless, artificial intelligence, cybersecurity, and cloud computing by following Reinhardt Krause on Twitter (@reinhardtk_tech). And as always, consult with a financial advisor to make informed investment decisions.
