Datadog
earned more than expected in the fourth quarter, but the software company’s financial projections for the year disappointed investors.
Datadog,
which helps clients detect and analyze malicious activity in real time, reported an adjusted profit of 44 cents a share for the three months through December. Quarterly revenue grew by 26% from a year earlier to $590 million, while the consensus call among analysts tracked by FactSet was for a profit of 43 cents a share from revenue of $569 million.
Datadog, which went public in September 2019, said it now has 42% of the Fortune 500 companies as its customers, up from 37% in 2022. The company has seen tremendous growth. In 2022, revenue rose 63%, while the year before revenue was up 71%.
Investors likely have concerns about whether that growth can last because revenue grew by just 27% in 2023, and Datadog said it expects first-quarter revenue of between $587 million and $591 million. A result at the high end of that range would represent just $1 million in revenue growth from the prior quarter.
It was a strong fourth quarter but the first quarter “looks light,” wrote TD Cowen analyst Andrew Sherman in a research note.
Adding to the concern about growth, Datadog said it expects 2024 revenue of up to $2.575 billion, lower than the $2.586 billion analysts had expected. The company expects adjusted earnings of $1.38 to $1.44 a share for 2024, while analysts were looking for $1.77.
Offsetting those downbeat comments was optimism from management about how the rise of artificial intelligence could help the business. About 3% of the company’s annual recurring revenue comes from companies that have historically used AI “but we believe the opportunity is far larger in the future,” Chief Executive Olivier Pomel said in a statement.
The stock was down 2.8% to $131.02 at 11:20 a.m. Eastern.
Write to Karishma Vanjani at [email protected]
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