Datadog's Profit Outlook Dims as Enterprise Spending Falters

Datadog, a provider of cloud security services, forecast 2025 revenue and profit below Wall Street expectations, sending its shares tumbling in premarket trading, Reuters reports. The company cited sluggish customer spending as enterprises grapple with economic uncertainty and tighten budgets.

The New York-based company's forecast, released Thursday, reveals the impact of tough competition and high interest rates on the demand for Datadog's data monitoring services. Enterprise customers are reevaluating their spending priorities, leading to weaker demand for the company's offerings.

Datadog faces stiff competition from companies like Dynatrace, which is leveraging artificial intelligence to unify its security and data management platforms, making it easier for customers to identify technical issues and breaches within their software.

Datadog projected revenue between $3.18 billion and $3.20 billion for fiscal 2025, falling short of analysts' average estimate of $3.24 billion, according to data compiled by LSEG. The company also predicted annual adjusted earnings per share between $1.65 and $1.70, significantly below analysts' expectation of $2.05.

The first-quarter revenue forecast of $737 million to $741 million also disappointed, falling short of the analyst estimate of $740.3 million. Datadog's forecast for quarterly adjusted EPS of 41 cents to 43 cents per share was likewise below estimates of 46 cents.

Despite these forecasts, Datadog's fourth-quarter revenue exceeded market expectations, reaching $737.7 million compared to the anticipated $714.5 million. However, the overall outlook for 2025 and beyond is dampened by the persistent economic headwinds and the intensifying competition within the cloud security sector.