Datadog shares fell Wednesday after the observability software maker issued a fourth-quarter revenue forecast that TD Cowen's Andrew Sherman called just in line with expectations. The stock had already dropped 21% in the five days before the report.
Datadog shares were off more than 10% in morning action Wednesday after the company's financial forecast failed to impress. The stock had already fallen 21% in the five days leading up to the report.
Fourth-quarter outlook matches expectations
TD Cowen analyst Andrew Sherman said Datadog's outlook for $1.19 billion to $1.2 billion in fourth-quarter revenue was just in line with what analysts were expecting. At the high end, the forecast implies growth of just $3 million from the $1.197 billion total the company recorded in the third quarter.
However, the third-quarter figure itself amounted to 35% growth from a year before. Sherman said that was well above the high end of the company's forecast.
Datadog adds 140 large customers
Datadog disclosed 4,860 customers with annual recurring revenue of $100,000 or more, which is 140 more than in the second quarter. Sherman noted, however, that the company had added 170 of these customers from the first quarter to the second quarter.
On the earnings call, Sherman said he will look for commentary on the growth of Datadog's core business and on whether large customers are scaling back their usage.
Cloud providers play several roles
Analysts particularly view Datadog as levered to growth of Amazon's AWS cloud-computing business, and the two companies have a partnership. In a note to clients earlier this month, FBN Securities analyst Shebly Seyrafi said the biggest three cloud providers "compete with Datadog, sell it, buy it and host it" simultaneously.
The cloud companies have their own built-in observability offerings, Seyrafi noted, but they also resell Datadog's software in their marketplaces.
Source: MarketWatch
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