Datadog's Q1 Earnings Surpass Estimates, Revenues Increase Y/Y

Datadog DDOG reported first-quarter 2025 non-GAAP earnings per share (EPS) of 46 cents, which increased 4.5% from the year-ago quarter and beat the Zacks Consensus Estimate by 9.52%.

The company’s net revenues of $761.6 million rose 24.6% year over year and beat the consensus estimate by 3%.

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Quarter Details of DDOG

The company ended the first quarter with 30,500 customers, up from about 28,000 in the prior-year period.

In the first quarter of 2025, Datadog had 3,770 customers with an annual run rate (ARR) of $100,000 or more, up from about 3,340 in the year-ago quarter. These customers generated about 88% of the total ARR.

As of the end of the first quarter, 83% of customers used two or more products, up from 82% in the year-ago quarter. Additionally, 51% of customers utilized four or more products, up from 47% in the year-ago quarter.

Datadog’s trailing 12-month net revenue retention percentage was in the high 0.10% in the first quarter, similar to the prior quarter.

Operating Details of DDOG

In the first quarter, Datadog’s adjusted gross margin contracted 290 basis points (bps) on a year-over-year basis to 80.3%.

Research & development expenses gained 32.2% on a year-over-year basis to $225.7 million. Research & development, as a percentage of revenues, increased 170 bps to 29.6%.

Sales and marketing expenses rose 24.8% year over year to $178.4 million. Sales and marketing expenses, as a percentage of revenues, remained flat year over year at 23.4%.

General & administrative expenses increased 33.7% year over year, reaching $41 million in the reported quarter. General & administrative expenses, as a percentage of revenues, increased 40 bps to 5.4%.

Datadog reported a non-GAAP operating income of $166.5 million compared with $164.5 million in the year-ago quarter.

Datadog’s Balance Sheet & Cash Flow

As of March 31, 2025, Datadog had cash, cash equivalents, restricted cash and marketable securities of $4.4 billion compared with $4.2 billion as of Dec. 31, 2024.

Operating cash flow was $272 million in the reported quarter, up from $265 million reported in the previous quarter.

Free cash flow during the quarter was $244 million compared with $241 million in the prior quarter.

Datadog Provides Guidance for Q2 and 2025

For the second quarter of 2025, Datadog anticipates revenues between $787 million and $791 million. Non-GAAP EPS is expected in the range of 40-42 cents. Non-GAAP operating income is expected in the band of $148-$152 million.

For 2025, Datadog anticipates revenues between $3.215 billion and $3.235 billion. Non-GAAP EPS is projected between $1.67 and $1.71. Non-GAAP operating income is expected in the range of $625-$645 million.

Zacks Rank & Stocks to Consider

Currently, Datadog carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Computer & Technology sector are ACI Worldwide ACIW, Affirm AFRM and Compass COMP. While Affirm sports a Zacks Rank #1 (Strong Buy), ACI Worldwide and Compass carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

ACIW and COMP are scheduled to report their respective first-quarter 2025 results on May 8. AFRM is slated to report its third-quarter fiscal 2025 results on May 8.

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This article originally published on Zacks Investment Research (zacks.com).

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