Datadog
stock fell sharply Tuesday after the provider of IT monitoring software made cautious comments about its near-term outlook and slightly reduced its full-year revenue forecast. The disappointing results were weighing on many other cloud-focused infrastructure software providers.
Datadog provides “observability” software—helping customers keep tabs on the health of their networks—and generally charges on a consumption basis, which means revenue grows as usage increases. That is the same model that the cloud computing companies Amazon Web Services and Microsoft Azure use. Better-than-expected results last week from AWS buoyed Datadog and related stocks, but those gains were reversing on fresh signs of cautious spending by cloud customers.
Datadog shares tumbled 19% to $86.16 in recent Tuesday trading.
Meanwhile,
MongoDB
(MBD) is off 5%,
Splunk
(SPLK) is 3.4% lower,
Confluent
(CFLT) is off 2.8%, and
Dynatrace
(DT) is down 2.6%.
Amazon.com
(AMZN) is down 1.7% to $139.82.
June quarter results, however, were solid. Datadog (ticker: DDOG) posted revenue for the period of $509.5 million, up 25% from a year ago, and above the guidance range of $498 million to $502 million. Adjusted operating income was $106.5 million, well above the company’s forecast of $82 million to $86 million. Likewise, adjusted earnings were 36 cents a share, ahead of the company’s forecast of 27 to 29 cents. Under generally accepted accounting principles, the company lost a penny a share.
But CEO Olivier Pomel cautioned on Datadog’s earnings conference call that the company continues to see “customers, particularly some larger spending customers, scrutinize costs and optimize their cloud and observability usage.” CFO David Obstler added that the company saw “more pressure on cloud-native businesses than traditional enterprise customers.”
For the third quarter, Datadog is projecting revenue between $521 million and $525 million, below Street consensus at $534 million. The company expects non-GAAP operating income of $98 million to $102 million for the period, and adjusted earnings of 33 to 35 cents a share, ahead of the Street at 29 cents.
For the full year, Datadog now sees revenue between $2.05 billion and $2.06 billion, down from a previous target of $2.08 billion to $2.1 billion. On the other hand, Datadog ratcheted up its forecast for non-GAAP operating income to between $390 million and $400 million, from a previous range of $340 million to $360 million. The company’s forecast for full-year non-GAAP earnings is now $1.30 to $1.34 a share, up from $1.13 to $1.20 a share.
Write to Eric J. Savitz at [email protected]
Read the full article here
