Key Takeaways
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Datadog stock fell 34% in a week, first in a software selloff that also hit ServiceNow and Cloudflare, then on a flat fourth-quarter outlook.
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That outlook assumes Datadog's largest customer, an AI company, pays only its minimum; growth from everyone else is guided to the low to mid-30s.
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Datadog's forward P/E is now well below its five-year average, and the business looks worth buying.
Datadog ( DDOG:NASDAQ )stock is down 34% in the past week after two hits: a software selloff that started with ServiceNow ( NOW:NYSE )and spread to Cloudflare ( NET:NYSE ), then its own third-quarter report.
The selloff started without Datadog
ServiceNow's subscription revenue rose 21% to $3.99 billion, beating its own guidance. But it forecast slower growth in contracted revenue, and the stock fell 27% on Oct. 29 on fears that AI will eat into software, so a beat alone wasn't going to save Datadog.
Amazon's and Intel's results hit cloud stocks next, on Oct. 30. Datadog had no news of its own, and its estimates didn't budge .
A beat with a flat finish
On Nov. 4, Datadog reported a strong quarter:
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Revenue up 35% to $1.20 billion, ahead of the $1.15 billion analysts expected
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Adjusted EPS of $0.81, well above the $0.64 estimate
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A raised full-year revenue guide of $4.515 billion to $4.525 billion
But its fourth-quarter guide of $1.19 billion to $1.20 billion was roughly flat with the quarter it just reported. Shares fell another 7.5% on Nov. 5 as AI stocks slid.
Datadog tends to guide low , though: it beat the top of its third-quarter range by $52 million.
TIKR tracks 47 analysts on Datadog. How many say "Buy"?
See the full breakdown of Buy, Hold, and Sell ratings on Datadog, along with Wall Street's revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Datadog's Analyst Ratings
It comes down to one customer
CFO David Obstler said on the call that the outlook assumes the largest customer, an AI company that cut its usage in the third quarter, pays only its minimum commitment. Excluding that customer, the guide implies fourth-quarter growth in the low to mid-30s. Early renewals at lower prices from some large AI customers also weigh on the quarter.
CEO Olivier Pomel said its AI ties run deep: "All 15 of the top 15 AI leaders are our customers." They can also pull back fast.
Cloudflare, which fell again on Nov. 5, reported that evening. Third-quarter revenue rose 39% to $782.5 million, and its fourth-quarter guide of $845 million to $846 million steps up again. Datadog's problem looks like one customer, not a cloud slowdown.
The drop looks overdone
Going into the report, analysts expected revenue to keep climbing:
That 23% growth for 2027 is below the fourth quarter's guided 25% to 26%, so the outlook gives analysts little reason to cut.
Datadog traded at 81x forward earnings on Nov. 2, already below its five-year average of 104x:
At the Nov. 5 close of $174.60, that's about 66x on the same estimates.
A company that just grew 35% and expects growth in the low to mid-30s outside one customer looks like a buy at that price.
The risk is February: if fourth-quarter revenue lands inside its own range, or another big AI customer cuts back, the selloff will look justified.
So what is Datadog stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR's valuation model and see what Datadog could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It's free to use.
