Datadog Beats Estimates for Results, Outlook; Analysts Blame Initial Drop on ‘Slight’ Revenue Growth Deceleration By Investing.com

Datadog (NASDAQ:) reported better-than-expected Q1 results and guidance.

The company adjusted EPS of 24c in the first quarter, compared to 6c in the year-ago period and well above the consensus estimates of 11c per share. Revenue came in at $363 million, up 83% YoY and topping the analyst consensus of $337.3 million. Adjusted gross margin stood at 80% in the period, compared to 77% in the same period last year.

Looking ahead, DDOG expects adjusted EPS in the range of 13c to 15c in the second quarter, while analysts were looking for 12c per share. Revenue is expected to range between $376 million and $380 million in the quarter, beating the estimated $361 million.

Datadog expects FY adjusted EPS in the range of 70c to 77c, up from its previous forecast of 45c to 51c, and well above the consensus projection of 50c. The company expects FY revenue in the range of $1.6 billion to $1.62 billion, up from the $1.51 billion to $1.53 billion range it previously guided, and above the expected $1.53 billion.

J.P. Morgan’s TMT Research team of analysts blamed the initial drop of 10% on “slight decelerations”. Shares in the meantime erased losses to trade nearly unchanged.

Revenue soared 83% in the quarter, down from 84% growth seen in the last quarter.

“Overall looks pretty good so bit of a head-scratcher on the negative reaction other than its one of the more favored growth software longs AND retains an elevated multiple of ~30x FY22 Sales estimates,” analysts wrote.

Goldman Sachs analyst Kash Rangan said DDOG delivered “a solid beat.”

“We see Datadog poised to grow into a preeminent infrastructure software business. We point to comparison vs ServiceNow (NYSE:) at +$5bn in revenues and +30% FCF margins, valued at +$110bn. We believe that Datadog is a strategic infrastructure software provider with its end-to-end observability platform poised to benefit from IT departments shifting usage from multiple point solutions into an integrated suite… With a ~$1bn revenue run rate vs a $50bn+ addressable market ($20bn APM/infrastructure + parts of security + parts of digital engagement), we see substantial runway ahead,” Rangan said in a note.

By Senad Karaahmetovic