Datadog Stock Falls 18% After a Beat-and-Raise Quarter

This article first appeared on GuruFocus.

Datadog (NASDAQ:DDOG), the cloud observability and security platform, fell 17.95% premarket despite reporting second-quarter revenue of $1.12 billion, up 36% and past the $1.08 billion analyst estimate. Non-GAAP earnings of $0.65 a share beat the $0.58 estimate, and non-GAAP operating margin expanded to 23% from 20%. GAAP operating income was just $5 million, or a 0% margin.

The business looks healthy underneath. Customers paying $100,000 or more in annual recurring revenue reached about 4,720, up 23% from a year earlier, and free cash flow was $279 million at a 25% margin.

The company raised its full-year outlook to revenue of $4.45 billion to $4.47 billion and non-GAAP EPS of $2.50 to $2.54. For the third quarter, Datadog guided revenue to $1.135 billion to $1.145 billion, which implies year-over-year growth slowing to roughly 29% at the midpoint. The stock had more than doubled this year ahead of the print, so a slower growth curve gave investors little to hold onto.