Now, a few weeks after the season ended, HBO President of Programming Casey Bloys had this to say to Deadline, in regards of Watchmen season 2:

One thing is clear. This isn’t one of those cases where a network cancels a series for performing poorly in the ratings or anything like that. I’m guessing the higher-ups at HBO are very happy with the way the first season performed both critically and in terms of viewership. Why else would they give complete freedom to a showrunner to do as he pleases? Interestingly enough, it’s Lindelof himself who says he won’t be returning to make a second season of Watchmen. The showrunner told USA TODAY that he’s already told the story he had in mind and has no interest in taking it any further. However, Lindelof has given his blessing to HBO should the Network want to pursue new instalments with a different writer-producer. Personally, I’m perfectly fine with the series ending as-is. Would I love to see the world be explored a little more, especially with the way things ended with Sister Night? Yes. That said, season 1 told a wonderful close-ended story that continuing beyond that isn’t exactly necessary. Watchmen is currently streaming on HBO GO / ASTRO GO.

There Will Not Be a Season 2 of WATCHMEN - 2