Shares of Datadog Inc. took a significant hit in premarket trading on Tuesday, dropping 20% as a result of the software company’s failure to meet its revenue forecast for the rest of the year.
Third Quarter Expectations
For the third quarter, Datadog expects to generate between $521 million and $525 million in revenue, with adjusted earnings per share ranging from 33 cents to 35 cents. This falls short of the FactSet consensus, which anticipated $536 million in revenue and 29 cents in adjusted EPS.
Annual Outlook
Looking ahead to the full year, Datadog’s executives anticipate revenue between $2.05 billion and $2.06 billion, along with adjusted EPS of $1.30 to $1.34. However, analysts had projected $2.24 billion in revenue and $1.18 in adjusted EPS.
Positive Second Quarter Results
Despite the disappointment in its revenue forecast, Datadog did surpass expectations in the previous quarter. The company reported a net loss of $4.0 million, or 1 cent per share, compared to a loss of $4.88 million, or 2 cents per share, in the same quarter last year. Adjusted earnings per share came in at 36 cents, exceeding the FactSet consensus of 28 cents.
Revenue Growth and Customer Expansion
Datadog witnessed a significant increase in revenue, with figures rising from $406.1 million to $509.5 million. Although slightly higher than the FactSet consensus of $501.6 million, it still fell short of analysts’ expectations.
Chief Executive Olivier Pomel expressed satisfaction with the company’s performance in the second quarter, pointing out a 25% year-over-year revenue growth, strong new logo bookings, steady customer growth, and increased multi-product adoption.
At the close of the second quarter, Datadog boasted approximately 2,990 customers, all generating annual recurring revenue of over $100,000.
The stock decline for Datadog Inc. raises concerns, but the company’s positive Q2 results give hope for future growth.
