Datadog shares climbed by 20% on Thursday: here’s the catalyst

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Shares of Datadog Inc (NASDAQ: DDOG) jumped nearly 20% on Thursday after the security-software company reported strong results for its fiscal fourth quarter and gave hawkish guidance for the future.

Fourth-quarter financial performance

Datadog said its per-share earnings in Q4 printed at 20 cents on an 84% year-over-year increase in revenue to $326.2 million. According to FactSet, experts had forecast 11 cents of EPS for the recent quarter on $291.5 million in revenue. RBC Capital Markets’ Matthew Hedberg said:

Datadog’s Q4 revenue is the largest quarterly beat since Q3/19 and a record on an absolute basis. This compares to last quarter’s 9% beat and the 8% average beat over the previous four quarters.

Hedberg rates DDOG at “outperform” with a price target of $210 that represents another 15% upside from here.

Other notable figures

The U.S. company ended the quarter with 2,010 customers – an annualised growth of about 63%. Datadog now has 216 customers with over $1.0 million in annual recurring revenue versus 101 last year. In the earnings press release, CEO Olivier Pomel said:

We’re pleased with our Q4 performance as we demonstrated excellent revenue growth and continues business efficiencies. We’re proud of our strong execution in fiscal 2021 with 70% YoY revenue growth, $287 million in operating cash flow and $251 million in free cash flow.

The Nasdaq-listed company had $1.6 billion in liquidity at the end of fiscal 2021.

Guidance for the full financial year

For the full financial year, Datadog now forecasts up to $1.53 billion in revenue, including $334 million to $339 million it expects in the fiscal first quarter. This compares to analysts at $306.4 million for the current quarter and $1.40 billion for the whole year. The chief executive added:

We continue to believe we are in early days with our opportunities in observability. And we are just starting our efforts in cloud security and developer-focused products. We’re excited about what we’re doing for 2022 and beyond.

Datadog expects its EPS to fall between 45 cents and 51 cents this year. Its estimate for Q1 per-share earnings is 10 cents to 12 cents.

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