Datadog (DDOG, Financial) experienced a decline in its stock price following the announcement of its first-quarter results. Despite surpassing earnings per share (EPS) and revenue expectations, and providing an optimistic forecast for the second quarter and full-year 2024, shares fell by 9%. The cloud monitoring and security platform ended the quarter with approximately 28,000 customers, an increase from 25,500 the previous year. Notably, the number of customers with an annual recurring revenue (ARR) over $100K rose to about 3,340 from 2,910.
During a recent investor conference, Datadog acknowledged the challenges of 2023, citing a tough market and cautious customer spending. However, the company maintained a high gross retention rate and saw a usage increase among existing customers, particularly its largest ones, continuing a growth trend from the previous quarters. Despite ongoing cost-consciousness among some clients, Datadog noted a decrease in optimization activities and an uptick in product adoption and usage, indicating progress in cloud migration and digital transformation efforts.
Looking forward, Datadog sees the digital transformation and cloud migration trend continuing over multiple years, with improving usage growth and less impact from optimization activities. Despite these positive indicators and a robust performance from similar tech giants, investors seemed concerned with the future outlook, possibly expecting more aggressive guidance and concerned about a forecasted dip in operating margin due to increased hiring and upcoming events.
