Datadog Crashes 8.8%--Wall Street Rattled by Weak 2025 Outlook

Datadog, the software-as-a-service (SaaS) platform provider, saw its stock price plummet by 8.8% on Thursday morning, following the release of its fourth-quarter and 2025 outlook. The company's shares fell as much as 11.6% earlier in the day, despite reporting strong growth in 2024. The drop comes as the S&P 500 gained 0.5%, and the Nasdaq composite was up 0.8%.

The numbers

Datadog's Q4 2024 earnings report showed mostly positive numbers, delivering earnings per share (EPS) of $0.49, beating analyst estimates of $0.43, on sales of $737.7 million, again surpassing Wall Street's target. Top-line revenue grew 25% year over year (YOY). For the full year, Datadog reported operating income of $674 million and EPS of $1.82 on sales of $2.68 billion, up 26% YOY.

Despite this positive growth, the company's guidance disappointed investors. For fiscal year 2025, the company expects between $3.175 and $3.195 billion in sales, well under the $3.24 billion Wall Street was expecting. The target set for operating income -- a range of $655 million to $675 million -- means the key metric will likely fall over the next year.



What's next

The company worked to deliver new key features this year and looks to do the same in the year ahead. The proliferation of artificial intelligence solutions means the company must innovate to maintain its relevance. The weakened guidance may reflect this growing competition. With a price-to-earnings ratio of nearly 270, the company's stock carries a hefty premium. Given this and the company's stiffening competition, investors may want to consider other investment opportunities for now.

As an investor, I would be cautious about Datadog's outlook and the potential challenges it faces in the coming years. While the company has shown strong growth in the past, the weak guidance and narrowing profit margins suggest that Datadog may struggle to maintain its competitive edge in the face of growing competition and economic uncertainty. However, it's essential to stay informed about the company's progress and monitor its performance closely to make well-informed investment decisions.

In conclusion, Datadog's weak 2025 outlook has rattled Wall Street, with the company's stock price dropping by 8.8% on Thursday morning. Despite reporting strong growth in 2024, the company's guidance for the coming year fell short of investor expectations. As an investor, it's crucial to stay informed about the company's progress and consider the potential challenges it faces in the competitive cloud industry. By doing so, you can make well-informed investment decisions and navigate the volatile market landscape.