Should Datadog Stock Investors Worry About This One Number?
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Datadog (DDOG) expects its revenue to grow 25% to 26% in the fourth quarter of 2026, down from 35.2% in the third quarter. A holder should study that forecast first. The stock fell 14.4% on November 4, the day the company reported its third quarter and gave that outlook. So why does Datadog expect its growth to slow this much?
Datadog Expects Less Spending From One Big Customer
Datadog built its forecast on its largest customer spending only its minimum commitment. Datadog saw that customer’s usage fall in the third quarter, though the customer still spent above the minimum. Excluding the largest customer, management expects fourth-quarter growth in the low to mid-30s percent range.
Management named a second drag. In the third quarter, Datadog renewed several large customers, including some AI customers, earlier than it expected, at higher commitments but with better pricing for them. Management said those renewals create a short-term headwind for revenue.
Even with those explanations, the forecast is a sharp step down. Growth at the forecast level would be slower than in any of Datadog’s last five quarters. The slowest of those was 28.4%, in the third quarter of 2025.
Datadog’s fourth-quarter forecast puts revenue about level with the $1.197 billion it reported for the third quarter. Management noted that revenue usually grows less from the third quarter to the fourth than between other quarters, because usage of its products dips in late December with holidays and code freezes.
Datadog Stock Still Costs More Than S&P 500 Stocks
Datadog stock trades at 14.6 times its sales over the past twelve months, against 3.3 times for the S&P 500. The stock carries that premium even after falling 35.7% between October 7 and November 5, a stretch in which the S&P 500 lost 5.7%.
That premium sits alongside much faster growth. Over the last three years, Datadog’s yearly revenue growth averaged 28.7%, against 6.3% for the S&P 500. A price that high likely assumes Datadog keeps growing far faster than most companies, so a forecast of slower growth matters more to its holders than it would for a cheaper stock.
Where Datadog’s Business Still Looks Strong
Datadog’s contracted business is still growing fast. Its remaining performance obligations, revenue under signed contracts that it has yet to record, reached $3.85 billion at the end of the third quarter, up 38% from a year earlier. Management said growth from customers outside AI has also picked up for five straight quarters, reaching the high-20s percent in the third quarter.
The largest customer has renewed. Management said on the call that any spending above its minimum in the fourth quarter would add revenue beyond what the forecast assumes. Management also said it builds conservatism into its forecasts.
A holder has reason for concern, but not alarm. The slowdown Datadog expects is real, yet management ties it to one customer assumed at its contract minimum and to early renewals at lower prices, while growth excluding that customer accelerated in the third quarter. Growth from the rest of Datadog’s customers is the measure to watch when the company holds its year-end call, where management said it will give its 2027 forecast.
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