Datadog Stock Plummets 2.16% as Daily Volume Plummets to 261st in U.S. Equities Amid Mixed Earnings Outlook and Valuation Pressures

On August 25, 2025, Datadog (DDOG) closed down 2.16%, with a trading volume of $340 million, a 32.73% decline from the previous day, ranking it 261st in volume among U.S. equities. The stock’s underperformance follows broader market trends in the software sector, where investors are recalibrating positions amid mixed earnings revisions and valuation pressures.

Analysts highlight that Datadog’s forward-looking earnings estimates have shown recent volatility. For the current fiscal year, the consensus expects a 0.6% year-over-year decline in EPS, while next year’s estimate projects a 16.4% increase. Over the past month, these estimates have risen by 28.4% and 2.6%, respectively. However, the company’s valuation remains a concern, with a Zacks Value Style Score of F, indicating it trades at a premium to peers. This premium is juxtaposed against a projected 23.2% year-over-year revenue growth for the current quarter and 23.7% for the fiscal year, underscoring divergent investor sentiment between top-line optimism and earnings skepticism.

Datadog has consistently outperformed expectations in recent quarters, with its last reported revenue of $826.76 million exceeding the Zacks Consensus Estimate by 4.55%, and EPS beating by 12.2%. The company has surpassed revenue and earnings forecasts in each of the trailing four quarters, demonstrating operational resilience. Yet, its Zacks Rank #3 (Hold) suggests that near-term performance may align with broader market dynamics rather than outperforming, as earnings estimate revisions have stabilized after sharp recent revisions.

The strategy of buying the top 500 stocks by daily trading volume and holding them for one day from 2022 to present delivered a compound annual growth rate of 6.98%, with a maximum drawdown of 15.46% during the backtest period. While the approach showed steady growth, the significant mid-2023 downturn underscores the risks inherent in volume-driven trading strategies, particularly during periods of market stress.