Datadog 2025 Q1 Earnings Net Income Declines 42% Amid Revenue Growth

Datadog (DDOG) reported its fiscal 2025 Q1 earnings on May 6th, 2025. The company's revenue increased by 24.6% to $761.55 million, surpassing analyst expectations of $741.52 million. However, adjusted EPS of 46 cents slightly exceeded the consensus estimate of 43 cents. datadog raised its fiscal 2025 revenue outlook to $3.215 billion-$3.235 billion, but its EPS guidance of $1.67-$1.71 fell below the expected $1.75. The company continues to expand its AI and security capabilities, contributing to its long-term growth strategy.

Revenue

Datadog reported total revenue growth of 24.6% year-over-year, reaching $761.55 million in Q1 2025, up from $611.25 million in Q1 2024. This growth was driven by robust customer adoption and an increase in the use of multiple products within the platform.

Earnings/Net Income

Datadog's EPS declined by 46.2% to $0.07 in Q1 2025 from $0.13 in Q1 2024. The company's net income decreased to $24.64 million, down 42.2% from $42.63 million in the same quarter of the previous year. Despite revenue growth, the decline in EPS highlights some challenges.

Price Action

The stock price of Datadog has edged up 1.33% during the latest trading day, climbed 3.67% over the most recent full trading week, and jumped 12.27% month-to-date.

Post-Earnings Price Action Review

The strategy of purchasing Datadog shares following a quarter-over-quarter revenue drop and holding for 30 days has historically outperformed the market over the past five years, yielding an annualized return of 24.8%. This success can be attributed to Datadog's strong product mix and market position, which fueled a 27.6% rally year-to-date in 2024. However, it underperformed the Zacks Computer and Technology sector's return of 32.4%, suggesting that investors might consider waiting for a more favorable entry point. This performance indicates the potential benefits of strategic entry timing and underscores the need to weigh broader sector trends when making investment decisions.

CEO Commentary

Olivier Pomel, Co-Founder & CEO, highlighted the strong customer adoption and expansion within the platform as key drivers for the 25% year-over-year revenue increase to $762 million. He emphasized the successful strategy of promoting multi-product usage, noting that 83% of customers now use two or more products. Pomel also stressed the importance of strategic investments in AI observability and security capabilities, along with a commitment to optimizing cloud costs. He expressed optimism about Datadog's long-term growth prospects, particularly in supporting digital transformation and cloud migration efforts.

Guidance

For Q2 2025, Datadog anticipates revenue between $787 million and $791 million, reflecting a year-over-year growth of 22% to 23%. Non-GAAP operating income is expected to be between $148 million and $152 million, with an operating margin of 19%. For the full fiscal year 2025, the revenue guidance is projected at $3.215 billion to $3.235 billion, indicating a growth rate of 20% to 21%. Non-GAAP net income per share is forecasted to range from $1.67 to $1.71.

Additional News

Recently, Datadog acquired Eppo, a feature flagging and experimentation platform, to enhance its Product Analytics suite. This acquisition is expected to simplify AI workflows and strengthen Datadog's market presence. Additionally, Datadog announced the acquisition of Metaplane, a data observability platform, to bolster its data quality monitoring capabilities. These strategic acquisitions align with Datadog's focus on expanding its product offerings and enhancing customer value. Furthermore, Datadog is planning its 2025 DASH user conference, scheduled for June 10-11 in New York City, where it will showcase its latest innovations and engage with its growing community of users and partners.

Ask Aime: What is the impact of Datadog's Q1 earnings on its stock price and future growth prospects?