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Datadog Slides 5% Despite Q2 Beat

Story Highlights

Datadog has delivered another robust quarter, and the full-year outlook remains buoyant. Insiders, though, may not seem very positive about the stock at the moment. 

Datadog shares (DDOG) are down nearly 5% during the pre-market session today despite the company’s robust second-quarter showing.

The monitoring and security platform for cloud operations delivered revenue of $406.14 million, a year-over-year increase of around 74%. The figure was ahead of estimates by $24.9 million. Earnings per share (EPS) at $0.24, too, outperformed expectations by $0.09. In comparison, the company had posted an EPS of $0.09 versus the Street’s expectations of $0.03 a year ago.

At the end of Q2, the company had 2,420 customers with annual recurring revenue of $100,000 or higher. This is a 54% year-over-year increase in the number of customers. During the quarter, Datadog launched Audit Trail and Observability Pipelines and announced the OpenTelemtry Protocol support. These products promise higher customer engagement for the company.

Looking ahead, for full-year 2022, the company projects revenue to be between $1.61 billion and $1.63 billion. EPS is expected to range between $0.74 and $0.81. Impressively, this points to around 60% higher revenue and about 62.5% higher EPS over 2021.

Furthermore, the company has also boosted its unified platform with the acquisition of application programming interface (API) observability company Seekret. The move enhances Datadog’s ability to provide API observability, governance, and automation in the complete API lifecycle.

Datadog’s Senior Vice President of Product, Renaud Boutet, remarked, “Adding Seekret’s platform will give us an opportunity to build many different capabilities for our customers for API observability, security, and collaboration.”

Insiders Are Selling DDOG Stock

Despite these steadily improving fundamentals, TipRanks data indicates insiders have sold Datadog shares worth $4.8 million in the last three months, which indicates a very negative insider confidence signal in the stock. Notably, David Obstler, the CFO of the company, sold shares worth $2.08 million two days ago.

Additionally, yesterday, Acocella Kerry, the General Counsel/Corporate Secretary, offloaded 1,950 Datadog shares at $100 per share. Most interestingly, these insider Sells have come while the company’s shares have climbed 15% over the past five days alone.

Retail Investors Are Sticking with Datadog

While insiders are exiting Datadog, retail investors continue to be buoyant about the stock. Our data dive at TipRanks shows the number of top investor portfolios on TipRanks that hold Datadog shares has increased by 16.4% in the past thirty days alone. This implies a very positive investor sentiment about Datadog.

Closing Note

Datadog continues to make steady gains even as the macro backdrop remains challenging. While shares may gyrate in the short term, the longer growth story remains intact. While a price-to-sales ratio of 27.75 may indicate shares are not exactly cheap at present, a beta of 0.68 means the stock is less susceptible to market churns as well.

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