Datadog 2025 Q1 Earnings Mixed Performance as Net Income Drops 42%
Daily EarningsWednesday, May 7, 2025 9:19 pm ET
4min readDatadog, Inc. (DDOG) reported its fiscal 2025 Q1 earnings on May 7th, 2025, demonstrating a mixed performance. The company's earnings per share (EPS) and revenue exceeded analysts' expectations, with both metrics outperforming forecasts for the quarter. However, Datadog's future guidance was mixed, with revenue projections above estimates but EPS outlook slightly below expectations, reflecting the ongoing challenges in predicting usage patterns amid macroeconomic uncertainties. The company continues to invest heavily in growth and innovation, contributing to elevated operating expenses.
Revenue
Datadog reported a total revenue increase of 24.6% for the first quarter of 2025, reaching $761.55 million, up from $611.25 million in the same quarter last year. This growth was driven by robust customer expansion, particularly among larger accounts, as the company continues to innovate across its platform to address mission-critical business problems.
Earnings/Net Income
Datadog's earnings per share (EPS) declined by 46.2% to $0.07 in Q1 of 2025, compared to $0.13 in the same period of 2024. The company's net income also decreased to $24.64 million, marking a 42.2% drop from $42.63 million in the previous year. The decline in EPS signals challenges in maintaining profitability amid increasing operational costs.
Post-Earnings Price Action Review
Historically, buying shares following a quarter-over-quarter revenue drop and holding for 30 days resulted in a 12.5% loss over the past five years. This strategy has proven ineffective, implying that a decline in revenue often signals weakening business fundamentals, leading to negative returns. Investors should be cautious when adopting this approach, as revenue contraction can reflect underlying challenges in the company's operations and market environment. While Datadog has shown resilience in certain areas, the historical data suggests that revenue drops are often correlated with unfavorable stock performance in the short-term. Thus, investors may need to reconsider their strategies when revenue declines occur, taking into account the broader market context and Datadog's overall business health.
CEO Commentary
"Datadog executed solidly in the first quarter, with 25% year-over-year revenue growth, $272 million in operating cash flow, and $244 million in free cash flow," said Olivier Pomel, CEO of Datadog. Pomel emphasized that the company is innovating rapidly across the platform to help customers observe, secure, and act on mission-critical business problems, highlighting robust customer growth, particularly among larger accounts with over $100,000 in ARR, which increased to 3,770. He acknowledged the ongoing investments in research and development and the focus on customer acquisition, while maintaining an optimistic outlook on future growth amidst evolving market dynamics.
Guidance
For the second quarter of 2025, Datadog expects revenue between $787 million and $791 million and non-GAAP operating income between $148 million and $152 million. For the full year 2025, the company guides revenue between $3.215 billion and $3.235 billion and non-GAAP net income per share between $1.67 and $1.71, assuming approximately 362 million weighted average diluted shares outstanding.
Additional News
Datadog recently announced the acquisition of Eppo, a feature flagging and experimentation platform, aiming to strengthen its product analytics suite with enhanced capabilities. Additionally, the company acquired Metaplane, a data observability platform, to augment its monitoring services with advanced machine learning-powered features. Datadog also revealed plans to open a new data center in Australia, marking its first data center in the region and further expanding its global infrastructure footprint. These strategic moves are designed to bolster Datadog's offerings and expand its reach in the competitive cloud observability market.
Revenue
Datadog reported a total revenue increase of 24.6% for the first quarter of 2025, reaching $761.55 million, up from $611.25 million in the same quarter last year. This growth was driven by robust customer expansion, particularly among larger accounts, as the company continues to innovate across its platform to address mission-critical business problems.
Earnings/Net Income
Datadog's earnings per share (EPS) declined by 46.2% to $0.07 in Q1 of 2025, compared to $0.13 in the same period of 2024. The company's net income also decreased to $24.64 million, marking a 42.2% drop from $42.63 million in the previous year. The decline in EPS signals challenges in maintaining profitability amid increasing operational costs.
Post-Earnings Price Action Review
Historically, buying shares following a quarter-over-quarter revenue drop and holding for 30 days resulted in a 12.5% loss over the past five years. This strategy has proven ineffective, implying that a decline in revenue often signals weakening business fundamentals, leading to negative returns. Investors should be cautious when adopting this approach, as revenue contraction can reflect underlying challenges in the company's operations and market environment. While Datadog has shown resilience in certain areas, the historical data suggests that revenue drops are often correlated with unfavorable stock performance in the short-term. Thus, investors may need to reconsider their strategies when revenue declines occur, taking into account the broader market context and Datadog's overall business health.
CEO Commentary
"Datadog executed solidly in the first quarter, with 25% year-over-year revenue growth, $272 million in operating cash flow, and $244 million in free cash flow," said Olivier Pomel, CEO of Datadog. Pomel emphasized that the company is innovating rapidly across the platform to help customers observe, secure, and act on mission-critical business problems, highlighting robust customer growth, particularly among larger accounts with over $100,000 in ARR, which increased to 3,770. He acknowledged the ongoing investments in research and development and the focus on customer acquisition, while maintaining an optimistic outlook on future growth amidst evolving market dynamics.
Guidance
For the second quarter of 2025, Datadog expects revenue between $787 million and $791 million and non-GAAP operating income between $148 million and $152 million. For the full year 2025, the company guides revenue between $3.215 billion and $3.235 billion and non-GAAP net income per share between $1.67 and $1.71, assuming approximately 362 million weighted average diluted shares outstanding.
Additional News
Datadog recently announced the acquisition of Eppo, a feature flagging and experimentation platform, aiming to strengthen its product analytics suite with enhanced capabilities. Additionally, the company acquired Metaplane, a data observability platform, to augment its monitoring services with advanced machine learning-powered features. Datadog also revealed plans to open a new data center in Australia, marking its first data center in the region and further expanding its global infrastructure footprint. These strategic moves are designed to bolster Datadog's offerings and expand its reach in the competitive cloud observability market.
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