Why Datadog Stock Is Plummeting Today

Datadog Inc. (NASDAQ: DDOG) shares are taking a nosedive today, with the stock down 10.2% in premarket trading following the company's fourth-quarter earnings report. The software-as-a-service (SaaS) company, which provides a cloud-native monitoring and analytics platform, reported strong quarterly results but fell short of investor expectations with its guidance for the coming year. Let's dive into the key factors driving Datadog's stock price decline today.



1. Weak Guidance: Datadog's guidance for fiscal year 2025 missed the mark, with the company expecting revenue of $3.175 billion to $3.195 billion, below the consensus estimate of $3.24 billion. The company also projected adjusted EPS of $1.65 to $1.70, which was below the consensus estimate of $2.05. This weak guidance suggests that Datadog may face challenges in maintaining its growth momentum in the coming year.
2. Slowing Growth: Datadog's revenue growth is expected to slow down to between 18% and 19% in 2025, compared to the 26% growth it achieved in 2024. This slower growth rate may have contributed to investor concerns about the company's future prospects.
3. Margin Pressures: Stifel analysts, who downgraded their rating on Datadog from Buy to Hold, cited margin pressures as a concern for the company. They noted that Datadog's Q3 performance may have set a high bar that is difficult to match or exceed in subsequent quarters. Additionally, Stifel analysts mentioned that OpenAI's moves to optimize its usage of Datadog's services could lead to less sales opportunities for the company.