DDOG shares slip on guidance; Bounce back interrupted by CPI report

Datadog, a leading monitoring and security platform for cloud applications, reported its financial results for the fourth quarter and fiscal year ended December 31, 2023. The stock fell from $135 to $110 in initial reaction as the guidance was viewed as a disappointment. It had rebounded to recover most of its losses, however, that bounce has been put in jeopardy as the January CPI report comes in hotter than expected which will pressure long duration assets. 

The company reported strong revenue growth of 26% year-over-year, with revenue for the fourth quarter of $589.6 million, surpassing the consensus of $569.7 million. The company also reported adjusted EPS of $0.44, beating expectations by 4 cents. 

For the first quarter of 2024, the company issued guidance for adjusted EPS of $0.33 to $0.35, lower than Street expectations of $0.40, and revenue guidance of $587 million to $591 million, which was slightly higher than consensus estimates.

For the fiscal year 2024, the company issued guidance for adjusted EPS of $1.38 to $1.44, well below projections of $1.77, and revenue guidance of $2.555 billion to $2.575 billion, compared to the consensus of $2.59 billion.

In addition to the strong financial results, Datadog reported non-GAAP operating income of $166.7 million, with a non-GAAP operating margin of 28%, and non-GAAP net income per diluted share of $0.44. The company also reported operating cash flow of $220.2 million, with free cash flow of $201.3 million.

The company's strong financial performance can be attributed to its ability to help customers monitor and secure their cloud applications. Datadog's platform is designed to enable organizations to monitor their applications in real-time, detect and resolve issues quickly, and improve their security posture.

The company's stock price has slipped 10% following the release of its earnings report. This is likely due to the downside guidance for the fiscal year 2024, which falls short of analyst expectations.

In conclusion, Datadog's strong financial performance and guidance for the upcoming quarter and fiscal year are positive signs for the company's future growth prospects. However, investors should keep an eye on the company's ability to meet its guidance and maintain its momentum in the competitive cloud application monitoring and security market.