Datadog (NASDAQ: DDOG) has made headlines after reporting its strong fourth quarter results for calendar year 2024, which exhibited significant revenue growth and solid earnings per share, surpassing analyst expectations. The company reported revenue of $737.7 million, reflecting a remarkable 25.1% increase year-over-year, putting its software-as-a-service platform at the forefront of the cloud monitoring software industry.
The figures revealed by Datadog during its earnings call on February 13, 2025, showed non-GAAP profits at $0.49 per share, exceeding the consensus estimate of $0.43 by 13.3%. Despite beating revenue expectations, the company announced guidance for fiscal 2025, forecasting revenue between $3.175 billion and $3.195 billion, which fell short of the anticipated $3.24 billion projection from analysts. This led to concerns about potential slowing growth moving forward.
Prior to the announcement, Datadog's stock was positioned at $148.09, and the market responded sharply post-announcement, with shares plunging 10.2% during pre-market trading. Analyst remarks indicated worries surrounding the company’s future performance, particularly highlighting potential pricing pressures and the overall deceleration of its Amazon Web Services (AWS) growth. Notably, analysts from Stifel downgraded Datadog's stock rating just before the earnings were released, cautioning about the company's revenue growth and margins.
For the fiscal year 2024, Datadog achieved revenue growth of 26%, totaling $2.68 billion. The company also generated significant cash flow, reporting $871 million from operating cash flow and $775 million in free cash flow, marking positive movements within the company’s fiscal health.
Olivier Pomel, co-founder and CEO of Datadog, expressed optimism during the reflection on the fiscal year, stating, "We are pleased with our strong execution in fiscal year 2024, with 26% year-over-year revenue growth, $871 million in operating cash flow, and $775 million in free cash flow." This confidence points to Datadog's continued innovations and the introduction of new product features, particularly in areas of cloud security and AI technology.
Despite the solid financial results, investors appeared concerned about the operating margin, which stood at only 1.3% for Q4, down from 4.7% compared to the same quarter last year. While the adjusted operating income reached $179 million with a 24% margin, these figures prompted discussions on sustainable profitability and how pricing pressures could affect future margins.
Datadog also reported significant expansion of its customer base, now serving 3,610 customers paying over $100,000 annually, which is up 13% year-over-year. Among these, there are 462 customers who generate over $1 million annually, indicating strong market demand and product acceptance. This growth points to effective customer retention strategies and product enhancements datadog has introduced to stay competitive within the SaaS ecosystem.
Looking forward, Datadog projects first-quarter 2025 revenue between $737 and $741 million, echoing sustained growth relative to the fourth quarter 2024's figures. Despite this, the adjusted EPS outlook suggests earnings between $0.41 and $0.43 — below the consensus estimate of $0.47, indicating possible short-term fluctuations.
Market analysts remain cautious as they observe Datadog's position relative to larger competitors and its adaptation to longstanding market challenges. The tech industry has seen shifts, especially among cloud service providers, and analysts suggest Datadog must continue to innovate and adjust its pricing strategies effectively to maintain its growth momentum.
On the whole, Datadog's strong Q4 performance highlights the company's capacity for growth and its foundational place within the cloud monitoring sector. How it addresses market pressures amid its ambitious forecasts for fiscal year 2025 will be closely watched by analysts and investors alike.
Datadog appears poised to continue delivering innovative solutions to meet the modern observability and security needs of its customers, but the balance between growth and sustaining profitability will be pivotal as the market evolves.