Key Takeaways
- Datadog stock is down 36% from its October high, most recently after a fourth-quarter outlook that showed flat revenue from the third quarter.
- Needham repeated its Buy rating and $300 target on Wednesday, 59% above the close and near the $296 consensus target.
- The outlook assumes Datadog’s largest customer pays only its minimum commitment, and management raised its 2026 earnings guidance anyway.
- Datadog looks cheap against its own history, and the stock can reach $300 within a year if 2027 estimates hold and its largest AI customer’s usage stabilizes.
Datadog (DDOG) is down 36% from its October high after Wednesday’s fourth-quarter outlook showed almost no growth from the third quarter. The stock fell 14.4% on the day to close at $188.72.
Needham isn’t backing off. It reiterated its Buy rating and $300 target on Wednesday, 59% above that close.
One Customer, One Flat Quarter
Datadog was already sliding in late October, when fears about AI spending hit cloud stocks.
On Wednesday, third-quarter revenue rose 35% to $1.20 billion, above the top of management’s own range. Growth from customers outside its AI group sped up for the fifth straight quarter, to the high 20s.
But Datadog guided fourth-quarter revenue to $1.19 billion to $1.20 billion. That’s flat with the third quarter and 25% to 26% growth from a year ago. Its largest customer, an AI company, cut its usage in the third quarter. CFO David Obstler said on the call that “our Q4 guidance contemplates their revenue at their minimum commitment.”
Several big AI customers also renewed early, committing to spend more in return for better pricing, and that drags on revenue in the short term. Excluding the largest customer, the outlook implies growth in the low to mid 30s.
Needham Is Sticking With $300
Needham raised its target to $300 from $260 in August, after the second quarter, and kept it through the drop. That’s right beside the $296 consensus target. BTIG kept its Buy on Wednesday but cut its target to $260 from $289.
Does $300 Add Up?
The consensus target has climbed from $169 to $296 over the past year, with targets now running from $158 to $350.
Earnings estimates have climbed too. Analysts expect normalized EPS of $2.53 this year, up from $2.42 three months ago, then $2.98 in 2027 and $3.76 in 2028.
Management’s new 2026 guidance of $2.73 to $2.75 in non-GAAP EPS sits above that $2.53, so Wednesday’s report gives analysts reason to raise their numbers.
On those pre-report estimates, Needham’s $300 works out to 113x the $2.65 a share analysts expect over the next 12 months, above the stock’s five-year average of 104x.
That average includes 2021, when the multiple topped 500x. On the same estimates, Datadog traded at about 71x at Wednesday’s close. A one-year target is judged on the earnings a year from now, and by then those will be mostly 2028’s. Against the $3.76 analysts expect that year, $300 is about 80x, well under the average.
TIKR Tracks 47 Analysts on Datadog. How Many Say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Datadog, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Datadog’s Analyst Ratings
Cheap for Datadog, With One Catch
The catch is concentration. The largest customer can spend anywhere above its minimum, and the early renewals show the biggest AI buyers can win lower prices as they grow.
Still, I’m with Needham. Datadog raised its earnings outlook, its core business is growing faster than it was a year ago, and the stock costs less than it usually does. The selloff went too far.
The next test is the 2027 outlook, expected with fourth-quarter results in February. If that guidance shows growth through the largest customer’s cut, $300 comes into sight. Another flat start would push it further out.
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!
