Datadog Inc (NASDAQ:DDOG), a cloud-based monitoring and analytics platform for developers, will report its third quarter earnings on Thursday before US markets open, with Wedbush analysts expecting a robust performance driven by growing demand for observability and AI capabilities.
The analysts believe Wall Street’s consensus estimates, calling for revenue of $853.6 million and non-GAAP earnings per share of $0.45, “are relatively conservative.”
They pointed to the company’s growing AI initiatives and disciplined cost management. They also noted Datadog’s progress in expanding its customer base despite intensifying competition.
“Based on our recent checks, we believe that DDOG is coming away as a larger winner within the observability sector as the company improved its selling motion to win more deals across all market segments,” the analysts wrote.
They added that many competitors have experienced slower deal flow “largely in part to DDOG winning a larger number of deals,” which they wrote highlights the strength of Datadog’s software-as-a-service (SaaS) model.
AI continues to be a key driver for the company’s growth, Wedbush added. Datadog had about 4,500 customers using one or more AI-based products in the previous quarter, with spending among that group rising, Wedbush noted.
“The company is taking the AI Revolution head-on by integrating AI across its platform to enhance its customer offerings while investing strategically into new AI-driven products and features,” Wedbush wrote.
Wedbush has an ‘Outperform’ rating and $170 price target on Datadog, which traded hands at $157 on Tuesday afternoon.
The analysts see Datadog as “well-positioned to continue gaining share within the observability space” as enterprise usage of its AI and monitoring tools increases, calling Datadog “one of our favorite names to own as the AI Revolution takes hold.”