Datadog Stock Is Slumping Despite Beating Earnings Expectations

While Datadog DDOG beat fourth-quarter earnings and revenue expectations, its projections for this year look less promising, sending the stock lower.

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Datadog (ticker: DDOG) provides software that is used to monitor network infrastructure, in order to help customers identify issues with their performance. Analysts have warned that there may be a slowdown in cloud spending, which could be detrimental to companies such as Datadog, which enable cloud services to be delivered. 

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For the first quarter of 2023, the company expects revenues between $466 million and $470 million and adjusted earnings per share between 22 cents and 24 cents. From $484 million in revenue, analysts expected adjusted earnings of 24 cents a share. 

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It projected revenue of $2.07 billion to $2.09 billion for 2023, and adjusted earnings per share of $1.02 to $1.09. FactSet expected revenue of $2.19 billion and earnings per share of $1.12. 

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RBC Capital Markets analysts said that the guidance, which implies a 24% annual growth in revenue, appeared to be conservative to them. Based on the company's guidance, the operating margin is expected to be 14.9%, as opposed to a consensus expectation of 17.3%.

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On Thursday, shares were down 9.5% at $80.30 in premarket trading. Despite a 21% rise so far this year, the stock remains well below the levels of nearly $200 reached late last year.

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“With our broadening platform, we delivered more value to more customers while driving strong profitability and cash generation,” commented CEO Olivier Pomel. 

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It has been reported that Datadog's adjusted earnings for the quarter that ended December were 26 cents a share. As a result, its revenue grew by 44% over the same period last year, to reach $469.4 million. FactSet predicted that Datadog would post earnings of 19 cents per share on revenue of $450.25 million, which translates into adjusted earnings of 19 cents per share. 

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