Datadog (DDOG) Stock Slumps on Disappointing Guidance

  • Datadog (DDOG) beat on earnings, but its guidance was in line with expectations and is evidently being interpreted as too conservative.
  • Also, Datadog announced it has acquired Seekret, an API observability company.
  • DDOG stock fell 3% in this morning in the wake of these developments.
DDOG stock - Datadog (DDOG) Stock Slumps on Disappointing Guidance

Source: Karol Ciesluk / Shutterstock.com

Datadog (NASDAQ:DDOG) just released the company’s financial results for 2022’s second quarter. While Datadog’s top-line growth was notable, today’s traders sold DDOG stock nonetheless.

The culprit may have been that the market felt Datadog’s forward guidance isn’t ambitious enough. Or, it might have been the announcement that the company has acquired application programming interface, or API, observability company Seekret.

Datadog provides a monitoring and security platform for cloud applications. Even during a time of high inflation and supply chain disruptions, there’s still a need for businesses to maintain a level of security in their networks.

So, it makes sense that Datadog posted Q2 2022 results that exceeded Wall Street’s expectations. The company’s revenue grew 74% year-over-year (YOY) to $406 million, while the analysts had only projected $382 million.

Not only that, but Datadog’s adjusted earnings per share, or EPS, of 24 cents showed a major improvement over the 9 cents per share from the year-earlier quarter, while also beating the analyst consensus estimate of 15 cents per share.

Why Is DDOG Stock Falling?

DDOG stock is down 5% so far this morning. This, at first glance, might seem counterintuitive in light of Datadog’s top- and bottom-line beats.

However, there’s more to the story. For 2022’s third quarter, Datadog’s executives are modeling $410 million to $414 million in revenue, along with adjusted EPS in the range of 15 cents to 17 cents. The analysts, meanwhile, expected $413 million in revenue and 16 cents in adjusted EPS.

Thus, the guidance was fairly in-line with the analysts’ expectations, but perhaps they had hoped for more a more ambitious outlook from Datadog. Moreover, the company just revealed its acquisition of Seekret. This acquisition will apparently “extend Datadog’s unified platform to deliver deeper API observability, governance and automation across the entire API lifecycle.”

However, it costs money to buy out businesses. Thus, it’s not unusual for an acquiring company’s stock to go down after a buyout has been announced. This, along with Datadog’s apparently too-conservative forward guidance, appears to be weighing on DDOG stock today.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2022/08/datadog-ddog-stock-slumps-on-disappointing-guidance/.

©2022 InvestorPlace Media, LLC