Datadog, the cloud-monitoring company, is set to report its third-quarter results on Wednesday, and Wall Street is watching closely. The stakes are high: shares fell about 12% on Friday as part of a broader tech sell-off, and investors are eager to see whether the company can reassure them about the strength of its business.
Wedbush, an investment bank, said Monday that it expects Datadog to deliver another “beat-and-raise” quarter—meaning it will likely top revenue estimates and then lift its own forecast for the coming period. The firm pointed to rising platform usage, driven by AI-related workloads, as a key tailwind.
What Wedbush is expecting
Wedbush believes revenue for the quarter could come in above the roughly $1.14 billion consensus estimate. That consensus is already about $5 million above the top end of Datadog’s own revenue outlook, but Wedbush called it a “hittable bar.”
The firm noted a familiar pattern: this year, Datadog has on average beaten revenue estimates by $40 million to $45 million, while management has remained conservative in its guidance. That conservatism stems partly from earlier in the year, when some large customers trimmed their usage.
Wedbush also expects the quarter to show big customers adding more products within Datadog’s observability suite—a bundle of tools that helps companies monitor their applications and infrastructure. Wider adoption can make spending steadier over time, as customers become more embedded in the platform.
Why guidance matters more than the beat
For investors, the exact revenue number for the third quarter is less important than what management says about the future. When Wall Street’s estimate already sits above the company’s own forecast, a small beat can be explained away as timing or conservatism. What tends to move the stock is the forward-looking revenue range management provides for the next quarter and the full year.
Analysts build their models off that guidance. If Datadog beats this quarter but leaves its outlook cautious, expectations may not shift much, and the stock reaction could be muted. But if management lifts its forecast, it forces investors to rethink future growth assumptions and what they’re willing to pay for that growth.
After Friday’s sharp drop, that guidance change—or lack of it—is likely to be the main driver of the post-earnings move.
What it means for everyday investors
Datadog is a bellwether for cloud spending and AI infrastructure demand. When companies like Datadog report strong usage, it suggests businesses are still investing in digital tools, even in a cautious economic environment. Conversely, a weak outlook could signal that corporate IT budgets are tightening.
For investors, the key is to listen to what management says about demand from here. Are customers expanding their use of Datadog’s tools? Are AI workloads translating into sustained revenue? These answers will shape not only Datadog’s stock but also sentiment across the broader tech sector.
As earnings season picks up, Datadog’s report will be one of the most closely watched. The company’s results often serve as a proxy for the health of cloud spending, and its guidance can influence how investors value other software names.
Wedbush maintained its outperform rating and $275 price target, but the next move in the stock depends on what management says. If the company delivers a strong beat and raises its outlook, the recent sell-off could prove to be an overreaction. If guidance disappoints, the stock could face further pressure.
For now, investors are waiting to see whether Datadog can turn AI enthusiasm into numbers that justify its valuation. The report on Wednesday will provide the clearest signal yet.
