Can Datadog Earnings Further Ease Pressure on Stock (NASDAQ: DDOG)?

Datadog's stock (NASDAQ: DDOG) has underperformed so far through 2025, with a 26.4% decline YTD lagging the Nasdaq's 7.45% by more than 3x. The company is set to report earnings before today's open, with all eyes on the print for clues as to what the future may hold.

The company has projected revenues between $737 million and $741 million, reflecting a 20–21% year-over-year growth. However, the consensus expectation of $741.4 million sits at the upper end of this range, leaving little margin for error. Analysts anticipate non-GAAP earnings per share (EPS) of $0.42, a 4.55% decline from Q1 2024, driven by increased investments in AI-driven features and cloud migration tools.

DDOG's latest set of numbers follows a pattern of consistent beats on both top and bottom lines. Datadog surpassed consensus estimates in each of the past four quarters, with an average surprise of 21.04%. Yet sentiment remains cautious due to the company’s full-year 2025 guidance, which forecasts revenue growth slowing to 18–19% ($3.175B–$3.195B) and EPS declining to $1.65–$1.70.

The projected deceleration has already contributed heavily towards the stock's underperformance this year.

Analysts Continue To See Upside

Analyst opinions on DDOG remain mixed. UBS maintained a Buy rating but slashed its price target from $164 to $120 in last month, citing macroeconomic pressures and tighter IT budgets.

The consensus price target of $143.21 reflects a perceived upside of ~40% from the current level, although further changes in forecasts could come as soon as we see fresh results this morning.

M&A and Partnership Activity Grows

Operationally, the firm has been making progress on multiple fronts. On May 1, 2025, Datadog announced its $220 million acquisition of Eppo, a startup specializing in experimentation and feature-flagging analytics. This marks Datadog’s third acquisition in 2025, following earlier purchases aimed at enhancing security and data governance capabilities.

The Eppo integration is expected to bolster Datadog’s observability platform by enabling developers to track feature rollouts and A/B testing metrics in real time, addressing a critical pain point in DevOps workflows.

Whilst the market reacted positively to the news, with the stock price rising 4.07% on the day of the announcement, long-term concerns persist about Datadog’s aggressive M&A strategy; particularly around integration costs and potential dilution of gross margins, which stood at 80.81% in Q4 2024.

A pivotal development in Datadog’s ecosystem strategy is its deepened partnership with Microsoft Azure, announced in March 2025. The collaboration makes Datadog a first-class service within the Azure console, streamlining procurement and configuration for joint customers.

Azure users can now leverage Datadog’s monitoring tools directly through Azure Marketplace, applying committed cloud credits to Datadog subscriptions. This integration is particularly significant given Azure’s 22% market share in cloud infrastructure, offering Datadog access to a vast customer base amid intensifying competition from New Relic and Dynatrace.

Additionally, Datadog’s partnership with Chainguard, a container security firm, introduced a dedicated dashboard for real-time vulnerability monitoring. The tool identifies high-risk containers, prioritises patches, and recommends secure alternatives, addressing a pain point highlighted in the World Economic Forum’s 2025 Cybersecurity Report, which found that 54% of enterprises struggle with software supply chain risks.

Whilst the stock comes into earnings more than 20% up from recent lows, any misstep in earnings or guidance could exacerbate the valuation contraction that has been taking place since late last year. The highs of $170 may be out of reach for the time being, but results that supports a break above $110 could help the bulls continue to build on recent momentum.