Key Takeaways
- Datadog fell nearly 12% last week on AI spending fears, but analysts’ estimates didn’t move, and Wedbush expects another beat-and-raise quarter on Nov. 4.
- The analysts look more likely to be right than the market, as long as Datadog raises its fourth-quarter outlook on top of beating the third quarter.
- Datadog’s full-year guidance implies fourth-quarter revenue growth of just 25% to 26%, and analysts already expect a third-quarter beat.
- At about 82x forward earnings, Datadog trades below its five-year average of 104x, so higher estimates would leave the stock room to climb.
Datadog (DDOG) fell nearly 12% last week as fears over AI spending hit cloud stocks. But its earnings estimates didn’t move.
And on Monday, Wedbush said it expects Datadog to deliver another beat-and-raise quarter when it reports before the open on Wednesday, Nov. 4.
So either the market or the analysts have this wrong, and Wednesday’s report will show us which.
The forecasts held
Analysts expect revenue to climb from $3.43 billion in 2025 to $4.47 billion this year, then to $5.49 billion in 2027:
That’s growth of about 31% this year and 23% next, and the 2026 figure sits right at the top of management’s own range. Those estimates already count on Datadog growing through a known hit. Its largest customer, an unnamed AI company, renewed a nine-figure contract and then started cutting its usage in the third quarter.
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A beat won’t be enough
Datadog has topped the high end of its revenue guidance by $37 million to $45 million in each of the last three quarters. Analysts already expect third-quarter revenue near $1.15 billion, which is above the top of the company’s $1.135 billion to $1.145 billion range.
So a beat is the baseline, and investors will care more about the fourth quarter.
Datadog’s full-year guidance of $4.45 billion to $4.47 billion implies fourth-quarter revenue growth of just 25% to 26%, down from 36% in the second quarter. That outlook already includes the largest customer’s cut.
If Datadog just carries a third-quarter beat into its full-year range, investors learn little they didn’t already expect. If it raises the fourth quarter too, that’s the clearest sign yet that AI spending fears haven’t reached its customers.
I’d also watch growth from customers other than AI-native companies. It climbed from 18% a year earlier to the high 20s in the second quarter. If it stays there, Datadog can keep growing while its biggest AI customer pulls back.
The multiple came down
The drop has left Datadog trading at about 82x forward earnings:
That’s well below its five-year average of 104x, though late 2021 pulls that average up: the multiple topped 558x back then. It’s also still far above February’s low of 47x. For the stock to climb from here, analysts’ estimates have to keep rising, and a bigger fourth-quarter outlook would push them up.
The business pays for its own growth, too. Free cash flow has topped $300 million in each of the last three quarters:
(Stock-based pay is the catch: it came to $750.7 million in 2025, most of that year’s free cash flow.)
I’d side with the analysts
Datadog’s core business was speeding up going into the quarter. It has beaten its own guidance comfortably three quarters running. And last week’s selloff didn’t change what analysts expect from it at all.
If Datadog raises its fourth-quarter outlook on Wednesday, I’d expect last week’s drop to look like an overreaction.
Of course, the largest customer is the risk. If its cut runs deeper than Datadog planned for, or another big AI buyer follows, it would show up first in that fourth-quarter outlook. And if AI spending fears hit software again, even a strong report may not stop the stock falling with the group.
So what is Datadog stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
