Datadog Q4 Earnings Preview: Key Metrics, Expectations, and Market Position

Datadog (DDOG) is set to report its fourth-quarter earnings on February 13 before the market opens, with analysts closely watching for any signs of acceleration or headwinds in its cloud-based monitoring and analytics business. The Zacks Consensus Estimate pegs revenue at $711.65 million, representing 20.7% year-over-year growth, while non-GAAP earnings per share are expected to come in at $0.42-$0.44. While Datadog has maintained a solid track record of revenue growth and consistent earnings beats, investor focus will be on the company’s 2025 guidance, particularly given concerns around potential contract optimizations from key customers like OpenAI. With the stock down 16% since early December, expectations have been tempered, and a strong print with positive forward guidance could provide the catalyst for a rebound.

Key Drivers and Metrics to Watch

Datadog’s business remains closely tied to enterprise cloud adoption, AI-driven observability, and the broader trend of digital transformation. The company has consistently expanded its platform offerings, and its success in driving multi-product adoption remains a critical factor for revenue growth. At the end of Q3, 49% of customers were using four or more products, up from 46% in the prior year, highlighting strong cross-selling momentum. Customer expansion in the enterprise segment will be particularly important, as Datadog derives a significant portion of its revenue from customers with an annualized recurring revenue (ARR) of over $100,000. Last quarter, this cohort grew by 12% to 3,490, and any acceleration—or slowdown—here will be closely scrutinized.

Despite its leadership position in the observability space, Datadog faces increasing competition from industry peers such as Dynatrace (DT) and the newly merged Cisco-Splunk entity. Observability is a rapidly evolving market, and the shift toward log-centric monitoring has raised questions about how Datadog will adapt. The company has been proactive, rolling out new capabilities such as Kubernetes Active Remediation and expanding its Database Monitoring product to include MongoDB. These innovations reinforce Datadog’s commitment to platform expansion, but execution will be key in maintaining its competitive edge.

Valuation and Market Sentiment

From a valuation standpoint, Datadog trades at a premium compared to many of its software peers, with a forward 12-month price-to-sales (P/S) ratio of approximately 15.28. This high multiple reflects the market’s strong growth expectations for the company, but it also leaves little room for error. Stifel recently downgraded DDOG to Hold, citing concerns over potential revenue growth deceleration in 2025 and margin headwinds as the company increases its sales and marketing spend. At the same time, bullish analysts, such as those at Loop Capital, maintain a $200 price target, based on the company’s expanding total addressable market (TAM) and long-term free cash flow projections.

With AI-driven cloud observability becoming an increasingly vital sector, Datadog remains well-positioned to benefit from the shift toward AI software infrastructure. However, near-term investor sentiment will be dictated by its ability to sustain 20%+ revenue growth while navigating cost pressures and competitive threats. If the company delivers strong Q4 results and provides encouraging 2025 guidance, shares could reclaim their December highs. Conversely, any signs of deceleration in enterprise spending or weaker-than-expected guidance could push the stock back toward its 200-day moving average near $127.58. Investors will be watching closely for management’s commentary on AI-driven demand trends, large customer expansions, and overall cloud spending dynamics as they assess the stock’s next move.