Datadog (DDOG) AI Stock Analysis

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Datadog

(NASDAQ:DDOG)

77Outperform

Datadog's strong financial performance and robust earnings call outlook are key strengths, with notable growth in revenue and customer base. However, technical indicators suggest caution due to potential overbought conditions, and the high P/E ratio indicates potential overvaluation risks. The stock's overall score reflects these strengths and challenges, highlighting a positive yet cautious investment outlook.

Positive Factors

Customer Growth

Net new customer bookings rose by 70% year-over-year, supporting a strong increase in guidance for the next quarter and the full year.

Earnings

Datadog reported solid 1Q results, with revenue 2.6% above Street expectations.

Market Position

Datadog is positioned to be a share gainer in a $50 billion observability total addressable market, driving long-term durable revenue growth.

Negative Factors

Customer Churn Risk

There is a risk of churn from the AI segment, particularly from a major customer, which could lead to a rationalization event.

Operating Margins

The company reduced its operating margin guidance due to increased hosting costs driven by the rapid growth in the Born-in-AI segment.

Profitability

Management has revised down the operating profit guidance due to the rising cloud hosting costs affecting the gross profit margin assumption.

Datadog (DDOG) vs. S&P 500 (SPY)

Market Cap

$36.59B

Dividend YieldN/A

Average Volume (3M)4.92M

Price to Earnings (P/E)229.8

Beta (1Y)1.46

Revenue Growth25.54%

EPS Growth40.02%

CountryUS

Employees6,500

SectorTechnology

Sector Strength67

IndustrySoftware - Application

Share Statistics

EPS (TTM)0.46

Shares Outstanding319,478,450

10 Day Avg. Volume4,753,301

30 Day Avg. Volume4,918,056

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market Cap0.91

Enterprise Value/RevenueN/A

Enterprise Value/Gross Profit15.42

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$139.52

Price Target Upside27.74% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering36

Datadog Business Overview & Revenue Model

Company DescriptionDatadog, Inc. provides monitoring and analytics platform for developers, information technology operations teams, and business users in the cloud in North America and internationally. The company's SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, and security monitoring to provide real-time observability of its customers technology stack. Its platform also provides user experience monitoring, network performance monitoring, cloud security, developer-focused observability, and incident management, as well as a range of shared features, such as dashboards, analytics, collaboration tools, and alerting capabilities. The company was incorporated in 2010 and is headquartered in New York, New York.

How the Company Makes MoneyDatadog generates revenue through a subscription-based model, where customers pay for access to its cloud-based platform and services. The company's revenue streams are primarily derived from the sale of its software services, which are billed on a monthly or annual basis. Key revenue drivers include the number of hosts or instances a customer monitors, the volume of data ingested, and the specific features and capabilities utilized, such as advanced analytics, real-time alerting, or security functionalities. Datadog also benefits from a usage-based pricing strategy, where costs scale with the level of service consumption, making it attractive for businesses of all sizes. Significant partnerships with major cloud providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP) further enhance Datadog's market reach and integration capabilities, contributing to its earnings by facilitating customer adoption and deployment.

Datadog Key Performance Indicators (KPIs)

Any

Total Customers

Total Customers
Tracks the overall number of customers, providing a measure of market penetration and the company's ability to attract and retain clients.

Chart InsightsDatadog's customer growth has been robust, reaching approximately 30,000 by the end of 2024, reflecting strong product adoption and strategic enterprise expansion. However, the earnings call highlighted a plateau in usage growth among existing customers, suggesting potential challenges in maximizing customer value. Despite this, the company's record revenue and significant bookings growth indicate a positive outlook, supported by continued investments in sales, marketing, and product innovation. The balance between growth and financial discipline will be crucial as Datadog navigates these dynamics in 2025.

Data provided by:

Main Street Data

Datadog Financial Statement Overview

Summary

Datadog's financial performance is impressive with strong revenue growth of 26.1% and improving profitability reflected in a net profit margin of 6.8%. The balance sheet shows financial stability with manageable leverage and effective use of equity, while cash flow performance is robust, with a significant increase in free cash flow and strong cash generation. Operational margins could be improved, but overall financial health is strong.

Income Statement

―

Datadog exhibits strong revenue growth with TTM revenue growing by 26.1% compared to the previous year. The gross profit margin remains robust at 80.8%, and the net profit margin improved significantly to 6.8%. While the EBIT margin is relatively low at 2.0%, indicating higher operational costs, the EBITDA margin of 4.4% suggests improved earnings potential. Overall, the company shows healthy growth and improving profitability.

Balance Sheet

The company maintains a solid equity position with a debt-to-equity ratio of 0.68, reflecting manageable leverage. The return on equity (ROE) stands at 6.8%, indicating efficient use of equity to generate profits. The equity ratio is 46.9%, signifying a healthy balance between assets and equity. Overall, the balance sheet reflects financial stability with moderate leverage and effective use of equity.

Cash Flow

―

Datadog demonstrates strong cash flow performance with a significant increase in free cash flow of 39.9% year over year. The operating cash flow to net income ratio is high at 4.7, highlighting strong cash generation relative to net income. The free cash flow to net income ratio of 4.6 further emphasizes efficient cash management. Overall, the cash flow statement indicates robust cash generation and liquidity.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
2.68B	2.13B	1.68B	1.03B	603.47M
	Gross Profit
2.17B	1.72B	1.33B	794.54M	473.27M
	EBIT
54.28M	-33.46M	-24.90M	2.63M	8.21M
	EBITDA
265.94M	150.21M	41.10M	25.57M	34.11M
	Net Income Common Stockholders
183.75M	48.57M	-50.16M	-20.75M	-24.55M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
4.19B	2.58B	1.88B	1.55B	1.52B
	Total Assets
5.79B	3.94B	3.00B	2.38B	1.89B
	Total Debt
1.84B	902.34M	837.52M	807.75M	643.62M
	Net Debt
595.20M	572.00M	498.54M	536.77M	418.70M
	Total Liabilities
3.07B	1.91B	1.59B	1.34B	932.85M
	Stockholders Equity
2.71B	2.03B	1.41B	1.04B	957.43M
Cash Flow		Free Cash Flow
835.88M	597.55M	353.52M	250.52M	83.21M
	Operating Cash Flow
870.60M	659.95M	418.41M	286.55M	109.09M
	Investing Cash Flow
-736.84M	-731.37M	-384.67M	-273.74M	-1.15B
	Financing Cash Flow
787.08M	58.28M	36.02M	34.94M	670.28M

Datadog Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price109.22

Price Trends

50DMA

101.60

Positive

100DMA

120.99

Negative

200DMA

122.73

Negative

Market Momentum

MACD

1.99

Negative

RSI

61.45

Neutral

STOCH

80.73

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DDOG, the sentiment is Neutral. The current price of 109.22 is above the 20-day moving average (MA) of 99.40, above the 50-day MA of 101.60, and below the 200-day MA of 122.73, indicating a neutral trend. The MACD of 1.99 indicates Negative momentum. The RSI at 61.45 is Neutral, neither overbought nor oversold. The STOCH value of 80.73 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for DDOG.

Datadog Risk Analysis

Datadog disclosed 60 risk factors in its most recent earnings report. Datadog reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Datadog Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DDOG	77 Outperform	$36.59B	229.77	6.48%	―	25.54%	40.02%
DT	74 Outperform	$14.17B	29.73	21.59%	―	19.81%	139.58%
BL	73 Outperform	$2.94B	20.96	44.83%	―	8.93%	102.77%
SNOW	72 Outperform	$56.28B	―	-31.43%	―	29.21%	-51.47%
Sector *	60 Neutral	$10.94B	10.37	-6.73%	2.98%	7.75%	-12.61%
GTLB	59 Neutral	$7.68B	―	-0.20%	―	30.93%	99.45%
U	55 Neutral	$8.86B	―	-14.17%	―	-16.74%	49.75%

* Technology Sector Average

Performance Comparison

DDOG

Datadog

107.88

-11.09

-9.32%

BlackLine

53.23

-4.99

-8.57%

Dynatrace

48.66

2.45

5.30%

SNOW

Snowflake

174.14

16.99

10.81%

Unity Software

20.56

-1.13

-5.21%

GTLB

Gitlab

49.16

-3.71

-7.02%

Datadog Earnings Call Summary

Earnings Call Date:May 06, 2025

(Q1-2025)

% Change Since: 3.33%|

Next Earnings Date:Aug 07, 2025

Earnings Call Sentiment Positive

The earnings call for Datadog Q1 2025 presented a strong start to the year with significant revenue growth, customer expansion, and successful product launches, notably in AI integration and product adoption. The company also made strategic acquisitions to strengthen its portfolio. However, there were some areas of concern, including a decline in gross margin and potential volatility in AI cohort revenue. Despite these challenges, the highlights suggest a robust performance and positive outlook.

Q1-2025 Updates

Positive Updates

Strong Revenue Growth

Datadog reported Q1 2025 revenue of $762 million, marking a 25% year-over-year increase and exceeding the high end of their guidance range.

Customer Expansion

Datadog ended Q1 with approximately 30,500 customers, up from about 28,000 a year ago, and 3,770 customers with an ARR of $100,000 or more, up from 3,340 a year ago.

Increase in Product Adoption

83% of customers were using two or more products, up from 82%; 51% were using four or more products, up from 47%; 28% were using six or more products, up from 23%; and 13% were using eight or more products, up from 10% a year ago.

Successful Product Launches

Flex Logs exceeded $50 million in ARR, achieving this milestone in six quarters. Database Monitoring is also approaching $50 million ARR, growing 60% year-over-year.

Strong Bookings and Retention

Bookings for new logos increased by over 70% year-over-year, with 11 deals of $10 million TCV or more. Gross revenue retention remained stable in the mid to high-90s.

AI Integration Growth

More than 4,000 customers used one or more Datadog AI integrations, doubling year-over-year.

Strategic Acquisitions

Acquired Eppo and Metaplane to enhance product analytics and data observability capabilities.

Negative Updates

Gross Margin Decline

Gross margin decreased to 80.3% from 83.3% a year ago, due to higher cloud hosting costs and new product investments.

AI Cohort Volatility

Potential volatility in revenue growth from AI native customers, which represented about 8.5% of Q1 ARR, up from 6% last quarter.

Enterprise Usage Volatility

Year-over-year usage growth with enterprise customers was slightly lower than last quarter due to quarter-to-quarter volatility.

Company Guidance

During the Q1 2025 earnings call, Datadog provided guidance for the second quarter and the full fiscal year 2025. For Q2 2025, Datadog expects revenue to range between $787 million and $791 million, representing a year-over-year growth of 22% to 23%. The non-GAAP operating income is projected to be between $148 million and $152 million, implying a 19% operating margin. Furthermore, the non-GAAP net income per share is anticipated to be $0.40 to $0.42 based on approximately 361 million weighted average diluted shares outstanding. For the full fiscal year 2025, revenue is expected to be between $3.215 billion and $3.235 billion, indicating a growth rate of 20% to 21%. The non-GAAP operating income is projected to range from $625 million to $645 million, reflecting an operating margin of 19% to 20%. The non-GAAP net income per share is forecasted to be between $1.67 and $1.71, based on an estimated 362 million weighted average diluted shares outstanding. The guidance incorporates considerations of cloud cost efficiencies and the impact of recent acquisitions, while maintaining a focus on long-term growth opportunities.

Datadog Corporate Events

Executive/Board Changes

Datadog Expands Board with New Director Appointment

Neutral

Dec 23, 2024

Datadog, Inc. has announced the expansion of its Board of Directors from eight to nine members, with the appointment of Amit Agarwal as a Class II director effective January 1, 2025. This strategic move does not involve any committee assignment or compensation for Mr. Agarwal, potentially reflecting a strong commitment to governance and operational integrity, as he brings his expertise to the company without direct financial incentives.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.