Datadog (NASDAQ:DDOG) shares plunged more than 21% in pre-market trading on Thursday, even after the cloud monitoring and cybersecurity specialist reported better-than-expected second-quarter results and lifted its full-year guidance.
The sharp selloff appeared to reflect investor profit-taking following the stock’s recent record highs, rather than any deterioration in the company’s operating performance.
Revenue and earnings surpass expectations
Datadog posted second-quarter earnings of $0.65 per share, comfortably ahead of analysts’ consensus estimate of $0.58.
Revenue climbed 36% year over year to $1.12 billion, exceeding market expectations of $1.08 billion.
Commenting on the results, Evercore analysts said: “The initial reaction seems a bit extreme as the company delivered solid F2Q results and while the lack of revenue acceleration in 2H may weigh on the uber bull case, DDOG remains one of the best growth stories in software.”
Enterprise customer base continues to expand
As of June 30, Datadog had approximately 4,720 customers generating at least $100,000 in annual recurring revenue, an increase of 23% from around 3,850 customers a year earlier.
The continued growth highlights ongoing enterprise demand for the company’s cloud monitoring, observability and security platform.
Guidance raised across the board
For the third quarter, Datadog expects earnings per share of between $0.63 and $0.65, ahead of analysts’ expectations of $0.61.
Revenue is forecast in a range of $1.135 billion to $1.145 billion, also above the consensus estimate of $1.11 billion.
Management also upgraded its outlook for the full year.
The company now expects 2026 earnings per share of $2.50 to $2.54, compared with previous guidance of $2.36 to $2.44 and ahead of the market forecast of $2.42.
Full-year revenue guidance was increased to between $4.45 billion and $4.47 billion, up from the prior range of $4.30 billion to $4.34 billion and above analysts’ expectations of $4.35 billion.
AI adoption continues to support growth
Co-founder and Chief Executive Officer Olivier Pomel said: “Datadog delivered a strong quarter, with 36% year-over-year revenue growth, $316 million in operating cash flow, and $279 million in free cash flow. Our customers are building and deploying with AI, and they are using the Datadog platform to observe, secure, and act on their AI-enabled solutions.”
The company generated operating cash flow of $316 million and free cash flow of $279 million during the quarter, underscoring the strength of its underlying business despite the negative market reaction.
Datadog stock price
