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Datadog stock soars after earnings beat suggests company could be ‘out of the doghouse’

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Shares of Datadog Inc. were rising 13% in morning trading Thursday after the company, which makes monitoring software for cloud applications, topped expectations with its first-quarter earnings and revenue.

The company recorded a net loss of $24.1 million, or 8 cents a share, whereas it posted net income of $9.7 million, or 3 cents a share, in the year-before quarter. On an adjusted basis, Datadog
DDOG,
+14.61%

earned 28 cents a share, while analysts tracked by FactSet had been expecting 23 cents a share.

Revenue rose to $481.7 million from $363.0 million, while analysts were projecting $469.8 million.

Bernstein analyst Peter Weed said that without the negative $5 million impact from a March outage, Datadog’s revenue would have been up 34%, not 33%, for the quarter, and even further above the 29% growth that the consensus implied. He titled his note to clients: “FQ1’23: out of the doghouse?”

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Datadog highlighted that it had 2,910 customers doing at least $100,000 in annual recurring revenue during the March quarter, up from 2,250 a year before.

For the second quarter, Datadog said it expects $498 million to $502 million in revenue, as well as adjusted earnings per share of 27 cents to 29 cents. The FactSet consensus was for $502 million in revenue and 26 cents in adjusted EPS.

Weed noted that the second-quarter revenue outlook implies roughly 23% growth from a year before, in line with the consensus view and above “worries” he’d heard over the prospect of the outlook implying more like 20% to 21% growth.

“For a company that many analysts believe tracks AWS at ~1.8-2x their growth, this could be seen as a positive signal (given AWS guided ~11% YoY growth next quarter),” he wrote, referring to Amazon.com Inc.’s
AMZN,
+0.35%

cloud-computing business.

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See more: Amazon stock gives up gains as CFO admits AWS growth rates are declining further



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