Datadog's stock explodes toward best day on record after earnings

By Emily Bary

Datadog 'emphatically dispelled' worries that its growth trends were disconnecting from Amazon's AWS trajectory, analyst says

Datadog Inc. shares were roaring 28% higher in morning action Tuesday after the software company, which makes tools for monitoring infrastructure and application performance, showed upside with its latest quarterly results and delivered a better-than-expected forecast.

The stock was on track for its largest single-day percentage gain on record, which would require besting the 23.7% increase it saw on May 12, 2020.

Datadog's (DDOG) third-quarter revenue came in at $547.5 million, up from $436.5 million a year before and ahead of the $524.7 million that analysts tracked by FactSet were projecting.

The top-line performance also met the elevated expectations that followed Amazon.com Inc.'s (AMZN) latest report, according to Bernstein analyst Peter Weed.

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"Into the print there was a lot of anxiety about whether Datadog would follow AWS to improving [sequential] growth and stable [year-over-year growth], or demonstrate a worried disconnect and continue to decelerate on a [year-over-year] basis," Weed wrote. "Datadog emphatically dispelled these worries, with a spot on print of $547.5 [million in] revenue, right in line with expectations implied by the AWS print."

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Datadog posted "an expanding beat" relative to its guidance for the first time since macroeconomic issues surfaced, and the largest beat since the fourth quarter of 2022, Weed added.

The company racked up third-quarter net income of $22.6 million, or 6 cents a share, whereas it posted a net loss of $26 million, or 8 cents a share, in the year-earlier period. On an adjusted basis, Datadog earned 45 cents a share, far ahead of the 34-cent FactSet consensus.

For the fourth quarter, Datadog anticipates $564 million to $568 million in revenue, along with 42 cents to 44 cents in adjusted earnings per share. Analysts were looking for $545 million and 35 cents, respectively.

Datadog's report was helping to lift shares of other consumption-based software companies sharply, with MongoDB Inc. (MDB) and Snowflake (SNOW) shares each up more than 10%.

Read: Snowflake, MongoDB shares rally sharply after Datadog earnings

-Emily Bary

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11-07-23 1028ET

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