Wall Street analysts rerated Datadog (NASDAQ:DDOG) after the company reported its quarterly results on Thursday. The stock traded lower on Friday.
The software-as-a-service (SaaS) platform's fiscal second-quarter revenue increased 28% year-over-year to $826.76 million, beating the analyst consensus estimate of $790.97 million.
Adjusted EPS of 46 cents beat the analyst consensus estimate of 42 cents.
Analyst Reaction
- Needham analyst Mike Cikos maintained a Buy on Datadog with a price forecast of $175.
- RBC Capital analyst Matthew Hedberg maintained an Outperform on Datadog with a price forecast of $165.
- Bank of America Securities analyst Koji Ikeda maintained a Buy on Datadog with a price forecast of $175.
Needham
Cikos said Datadog's second-quarter 2025 results beat expectations. Stronger-than-expected usage trends from existing customers and sustained momentum in its AI-Native cohort contributed 11% of total revenue and 10 percentage points to year-over-year growth.
Enterprise usage growth remained steady, while SMB and mid-market usage improved from the prior quarter. Security surpassed $100 million in ARR, growing in the mid-40% range year-over-year.
Datadog posted revenue of $826.8 million, up 28% year-over-year, above guidance and Street estimates. Adjusted operating income of $164.1 million exceeded forecasts, with an operating margin of 19.8%.
EPS of $0.46 topped the $0.41 consensus. Gross margin improved to 80.9%, and large enterprise adoption continued, with eight of the top ten AI companies as customers.
For third-quarter 2025, management guided revenue to $847–$851 million, operating income to $176–$180 million, and EPS to $0.44–$0.46.
Full-year 2025 revenue guidance rose to $3.312–$3.322 billion, with operating profit of $684–$694 million and EPS of $1.80–$1.83.
Cikos kept his price forecast, citing Datadog's industry-leading growth, expanding AI customer base, and strong ARR potential from new products.
RBC Capital
Hedberg said Datadog delivered a strong second-quarter 2025 with 28% revenue growth, accelerating from last quarter's 25% and beating estimates by 4.7%.
AI-native customers rose to 11% of revenue from 8% last quarter, contributing 10 percentage points to growth, while core revenue grew 18%.
Billings increased 26% year-over-year, with RPO up 35%. Enterprise usage trends were stable, SMB improved, and security ARR exceeded $100 million with mid-40% growth.
Hedberg commented that management raised 2025 revenue guidance by $92 million, well above the second-quarter beat, implying 23.6% growth at the midpoint. Operating income guidance rose to $684–$694 million, with EPS projected at $1.80–$1.83.
Third-quarter guidance calls for $847–$851 million in revenue, $176–$180 million in operating income, and EPS of $0.44–$0.46.
While guidance reflects conservatism toward Datadog's largest AI-native customer after its fourth-quarter 2024 renewal, Hedberg said the cohort continues to expand, including over 80 customers spending $100K+ and 12 spending $1 million+. He rerated citing AI-native momentum, solid execution, and a strengthening salesforce.
Bank of America Securities
Ikeda said Datadog posted one of its strongest second-quarter beat-and-raise performances ever, with revenue of $826.7 million, up 28.1% year-over-year and 4.5% above consensus.
Its adjusted operating income of 7.2% was higher than estimates. Management lifted 2025 revenue guidance by $92 million, which is $55 million above the second-quarter beat, showing strong monetization of growing cloud workloads, supporting long-term growth and healthy free cash flow.
Ikeda noted sentiment is tempered by concerns that Datadog's largest AI-native customer, OpenAI, may reduce spending, potentially pressuring growth later this year or next. Still, he remains bullish, citing Datadog's leadership in observability and AI adoption.
AI-native customers accounted for 11% of second-quarter revenue, up from 4% a year ago, implying ~250% year-over-year growth.
The cohort includes more than a dozen spending over $1 million, over 80 spending $100K+, and eight of the top ten AI companies. Security ARR surpassed $100 million with mid-40% growth. Ikeda's rerating was supported by premium valuation and market leadership.
Price Action: DDOG stock is down 4.00% at $130.98 as of the last check on Friday.
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